Stop the Churn
Stop the Churn
Have you ever thought about the impact employee turnover has on your business? The financial costs can be significant when you consider sourcing and training additional workers, lost productivity, over-time paid to remaining employees to get the work done, missed deadlines, and so on. I would argue the resources expended churning through bodies in low-wage production roles is not a “cost of doing business” you should just accept. Here’s why.
A recent SBCA survey found the industry-average turnover rate for production employees was 20 percent for new hires who lasted less than six months and 50 percent for those who made it to the seven month mark but were gone before their two-year anniversary.
Business Results (my company) often helps clients calculate their specific company turnover costs per job. One client found that the cost of high-turnover for their minimum wage production laborer role totaled $3,583.70 per person. This cost included paperwork, the manager’s time, scheduling, interviewing, background checks and testing, and the training period (it can take three months or longer to get a new employee up to the proficiency of a high-performance worker). That may not seem like a lot, but for that company it totaled more than $70,000 spent on people walking out the door each year. That’s money you can’t get back, and it doesn’t even include the other detrimental costs to the bottom line cited above.
A recent SBCA survey found the industry-average turnover rate for production employees was 20 percent for new hires who lasted less than six months and 50 percent for those who stayed less than two years.
In the SBCA survey, people indicated that the most common reasons for leaving included low wages, the physical environment, hiring the wrong person (i.e., someone likely not suited to the behavioral, cognitive, and other competencies required in the role), an unclear job description, inadequate onboarding including little or poor training, insufficient supervision, and having a “bad” boss.
Ideally, you want to conduct an exit interview when possible to find out more specifically what’s going on in your company. However, employee engagement surveys of current employees are another excellent way to diagnose underlying problems before they lead to bigger issues and drive more employees toward the exit.
Reality-Based Job Expectations
Fortunately, there are solutions you can employ to stem the turnover tide. Start by reviewing your job descriptions. Be sure to list critical tasks more prominently than others and weave in behavioral language and competencies that truly get to the core of what the job really requires. Business Results recommends clients use O*NET OnLine, a free database of detailed job descriptions you can tailor to your expectations of the work you need done in your organization. Keep in mind that this is just a good starting place, so don’t copy and paste. Really investigate your needs, the business case behind your jobs, and how those jobs impact individual goals, team goals, and organizational goals.
There are solutions you can employ to stem the turnover tide. Start by reviewing your job descriptions.
Margaret Welliver, HR manager with Shelter Systems Limited in Westminster, Maryland, has found that people coming from certain industries tend to do better than others, including agriculture, framing, concrete, and the restaurant industry.
“If they work five shifts a week at the restaurant, like a server or a bus boy, have good attendance, they tend to a good pace,” says Margaret. “Any farmer has been successful. People that have agriculture backgrounds typically have the pace we are looking for. It’s physical, so we need people who have been in jobs where they are on their feet and are used to a physical environment.”
If your organization uses assessments, make sure you are interviewing around the fit and/or gaps that a person has to the expectation.
If your organization uses assessments, make sure you are interviewing around the fit and/or gaps that a person has to the expectation. You can also interview around the physical conditions of the work. It’s useless to just tell someone how much physical work a job requires or how extreme the temperatures might get; they need to have experienced something similar firsthand. For example, Business Results helps companies craft specific interview questions around situations where applicants have experienced severe cold in the past, such as, “Tell me about a time when you had to be outdoors for long periods in really cold weather.” They may share a time when they played a sport, went hunting, or attended an outdoor festival. Listen for positive or negative indicators as to how they handled it.
“We always take a tour of the production floor, and I’ll say, ‘Look at the stairs you’ll have to climb and look at the production floor and notice the activity,’” says Margaret. “We go through the process with them: ‘Watch that guy. Do you see how he’s bending, moving? Notice how it can sometimes be very hot or cold.’ I point out the environment and the clothes people wear.”
Augment Pay with Morale Boosting
As is the case with many physically demanding jobs, pay for production roles across the industry tends to be on the lower end. However, in order to be competitive with other employers in their area, the starting wage at Shelter Systems is three dollars above the Maryland minimum wage.
Bear in mind that a company’s culture will beat out money for people who truly feel their employer values them. “Most of my role is devoted to post-hire needs,” says Tony Acampa, design team lead with Shelter Systems, of his work on the company’s culture initiatives. “Most of our people don’t want to leave. They want to stay, and it isn’t just about the pay. We’ve tried to create a positive culture. They say they love working here. It’s taken a few years to make that happen but it’s been worth it.”
In addition to more high-visibility programs like the company’s annual award recognition program, they do daily cultural reinforcement tasks. For example, bringing together cross-functional teams—a blend of production, IT, design, and safety employees—to solve problems collaboratively. “We want to get the guy on the production side to feed information back so they know their opinion matters,” says Tony. “When things they bring up get addressed, it makes them feel good about their contribution to the company.”
A company’s culture will beat out money for people who truly feel their employer values them.
Assess to Tailor Onboarding & Training
Remember that onboarding and training make a significant contribution to whether employees stay and develop loyalty. Onboarding should be tailored to the individual’s behavioral and learning ability and followed by regular training to reinforce processes, protocol, and company expectations.
Employee appreciation events are another easy thing to do (once COVID-19 is gone). For example, Southern Components Inc. in Shreveport, Louisiana, hosts Family Day for their employees. “We want them to know they mean something in the shop; that they are not just a worker,” says principal owner Scott Ward.
Onboarding should be tailored to the new hire’s abilities and followed by regular training to reinforce processes, protocol, and expectations.
Scott points out that turnover in higher paid roles also has costly implications for the organization, not just the production level workers.
“We used to spend a lot of money and waste training, time, and effort trying to prepare someone to be a designer,” he explains. “Finally, we had enough. My focus with initially using the Predictive Index (PI) tool was to stop trying to train employees to be designers when they weren’t a good fit for that role. As a result, we completely changed how we hire and onboard designers. Since we started using PI, we’ve had 100 percent retention in our design department.”
Southern Components uses the behavioral and cognitive assessments to create a preferred list of candidates to interview based on the ideal model associated with each of the different roles. They use that data post-hire for best management practices and employee development opportunities.
“Our focus was the front office and the managers, the lead key roles, the supervisor piece,” says Scott. “We had turnover in plant supervisors and the office employees, admin, and those with a technical focus, and other areas including sales, inside sales, accounting. We were suffering; turnover at its peak was 50 percent as a whole. We have reduced that rate to ten percent, even including people leaving because they are moving or something else personal, not related to job fit and experience.”
This should give you some quick insights into things you can easily do that will have a significant impact on your company’s employee turnover rate. In my next article, I will explore in greater depth strategies for incorporating employee feedback into your company’s management style.