This Tip discusses the causes and solution for high costs of high turnover for US manufacturing.
The High Costs of High Turnover for US Manufacturing
Industry-wide, US businesses lose a total of $1.8 trillion each year due to productivity lost from employee turnover.
This is because voluntary annual employee turnover in manufacturing (28.6%) is among the highest for all major US industries. (The national voluntary turnover average is 13.5%).
Factors such as pay, benefits, high workplace demands, company culture, and a competitive job market are major influences.
Turnover Costs
Turnover costs for manufacturing firms typically reach into the hundreds of thousands to millions of dollars per year. This depends on company size, turnover rates, and employee roles.
For example, a typical manufacturing company with 100 employees and an average salary of $50,000 can face turnover costs of more than $2 million per year.
This figure includes all:
- direct hiring expenses (recruitment, screening, hiring, HR resources, onboarding, payroll and benefits costs, and training) and
- indirect costs (lost productivity, lost expertise, the poor morale of the remaining employees, and the loss of hard-to replace skills).
High Cost Turnover-Related Problems
The following four turnover-related problems negatively impact these costs:
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Recruitment Difficulties
Manufacturers are struggling to fill critical labor gaps. 61% report difficulty finding talent with the right skills and experience.
The challenge is particularly acute for roles that require technical or digital expertise as well as soft or power skills.
-
Production Delays
Manufacturers report frequent production delays due to turnover and the struggle to retain existing talent.
Frontline roles in particular experience high burnout and turnover due to the lack of flexibility and demanding conditions.
-
Skill Gaps
There is a persistent gap between the skills that manufacturers need and those that their employees possess. This is especially true because of increasing automation and digitalization.
Attracting and upskilling workers in technical and digital skills is a major HR priority.
-
Employee Engagement
50% of HR leaders report feeling that their company has two separate cultures:
- frontline manufacturing staff and
- corporate employees.
This reduces employee morale, engagement, and organizational cohesiveness.
There is lower engagement among frontline manufacturing staff compared to that of corporate employees.
The Solution
Recent surveys show that pay and benefits are not the primary reason why employees leave voluntarily.
The primary reason is low job satisfaction.
Employees leave because they don’t feel appreciated or recognized or suffer a toxic work environment.
These factors are caused by managers who don’t know how to establish and maintain a positive work environment where employees feel valued, recognized, and motivated to stay and do their best work.
These managers and supervisors need training in interpersonal communication, management, and leadership skills.
If you are the owner, a board member, or the CEO of a manufacturing company and you want to stop the high costs of high employee turnover, management training is the solution.
Schedule time to discuss your training needs with Deborah Laurel at http://bit.ly/44yLO5l
May your learning be sweet,
Deborah
#highturnover #manufacturing #productivity #lowjobsatisfaction #laurelandassociates.com
