Reducing Employee Manufacturing Turnover with the Right Performance System

 Developing, engaging, and retaining a skilled manufacturing workforce

Manufacturers have long complained that they can’t find skilled workers to keep their plants humming. Yet they’re also having trouble holding on to skilled staff. The annual separation/labor turnover rate for U.S. manufacturers in 2017 — quits, layoffs and discharges, and other separations — was 30.4 percent(1).  How can production continuity and standardization be sustained when nearly a third of the workforce leaves each year?

High labor turnover challenges manufacturing plants in their efforts to improve, and leads to a number of negative consequences:

• Increased labor costs: Most workers who leave or are dismissed need to be replaced. The Work Institute estimates that it costs 33 percent of a worker’s annual salary to replace him or her.(2)

• Increased operations costs: Replacement labor costs don’t account for indirect costs associated with labor turnover, such as decreased productivity and expenses related to quality, safety, equipment, and customer problems resulting from skills shortages.
• Negative culture: High labor turnover is impossible to ignore for remaining employees. They often perceive colleague departures as finding better employment elsewhere (“Are they still hiring?”) or unfair treatment by the company (“Who’s next?”).
• Lost knowledge and experience: Wage and salary worker tenure was 4.2 years (median) in January 2016, down from 4.6 years in January 2014(3).  Employees learn a tremendous amount in 4 years, including tacit insights critical to operations. Depending on the role and the tenure of an employee, some operations find it hard to recover after his or her departure.

How to Reduce Employee Turnover in Manufacturing

The key to controlling labor turnover is prevention. Many employees seek better employment because they’re not appreciated, developed, or challenged. Unfortunately, two-thirds of manufacturing plants report that half or fewer of their production employees participate in empowered or self-directed workteams(5).  In these facilities, employees are being given a message — spoken or unspoken — that they’re not trusted and not capable. A quick way to change toxic workplace cultures like these is to focus on something of  vital importance to frontline workers: safety. Select employees to form a safety committee, then empower employee-driven safety teams to monitor operations, audit work practices, and report near-misses. Soon frontline teams can assume other activities, such as daily maintenance, 5S workplace organization, and production planning and control.

Performance Solutions helps manufacturers implement human-capital processes to address these issues, retaining staff and dramatically improving operations performance. Two key components are:

1. Continuous skills development (CSD): Manufacturing today demands much more than physical labor. In fact, extensive use of technology, data, and automation requires employees to be well-versed in disciplines unheard of a generation ago — process skills (safe equipment startup, operation, and daily maintenance); soft skills (teamwork, problem-solving); and technical/engineering skills (quality control, data analysis).On average, employees across all industries received 47.6 hours of training per year in 2017 — a level that far exceeds that being offered by many manufacturers(4).  Increased training is necessary, but it’s not volume alone that matters. CSD ensures that employees learn to do the right things, the right way, at the right time, shaping workforce behaviors focused on standardization, best practices, and continuous improvement.
2. Employee engagement and empowerment: Frontline workers often know much more than their managers realize. Even better, most of these employees are more than willing to share ideas and suggestions in a positive manner — if earnestly engaged. This can be as simple as asking an employee what he or she does, why, and how to do it better. In a similar vein, simply explaining to employees why practices and policies exist can create an atmosphere of mutual respect. Given the right training and education (i.e., CSD), employees in this collaborative environment can improve their own work and help others do the same — if they’ve been empowered to do so. By engaging, educating and empowering employees, your organization can see significant culture changes and work to eliminate wasted talent in manufacturing.

Fixing employee turnover requires understanding why it happens. Because while some employees leave for better opportunities, money, and benefits, most leave because of their day-to-day environment (e.g., bad boss, toxic workplace, lack of development and autonomy). By investing in culture, manufacturers can make a difference in employee lives and reduce labor turnover, developing a lasting environment of respect and continuous improvement. Learn more about the Milliken Performance System or contact us to get more information about how Performance Solutions can help your manufacturing organization.

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1 “Job Openings and Labor Turnover — January 2018,” U.S. Bureau of Labor Statistics, March 16, 2018. Annual total separations rate is the number of total separations during the entire year as a percent of annual average employment.

2 Lindsay Sears PhD, 2017 Retention Report, Work Institute.

3 “Employee Tenure in 2016,” U.S. Bureau of Labor Statistics, Sept. 22, 2016.

4 “2017 Training Industry Report,” Training, December 2017.

5 MPI Manufacturing Study, The MPI Group, March 2018.