It's a fact that high employee attrition and turnover have a negative effect on production. But how significant an impact—and what can you do about it? Those are two key questions we’ll explore in this article.
But first, here are some definitions to help provide clarity.
Employee Turnover vs Attrition
When a worker leaves, we call it turnover if someone else takes the job. We call it attrition if the job remains unfilled. Attrition is sometimes beneficial if your workforce is in need of reorganization, but turnover is never a good thing.
How to Calculate Employee Turnover
A “good” turnover rate varies widely by industry, and it’s best to compare your rate with your competitors. As of 2023, the average turnover rate for manufacturing was 28.6%. This is down from the COVID-19 era, but there is definitely room for improvement, as many industries target 15% or less.
To find your company's employee turnover, divide the number of employees who left by the average number of employees. Use the same time period for both numbers. Multiply the result by 100 to express it as a percentage.
Turnover Rate = [Number of employees who left/Average number of employees] x 100
How Does High Turnover Affect Production?
Turnover creates vacancies, and vacancies inevitably lead to higher overtime costs. Production volume is likely to fall while your cost per unit and number of units shipped will suffer. Aside from this, there are less obvious factors that can and do affect the bottom line:
- Gaps in knowledge transfer that occur when experienced employees leave. This can lead to a temporary drop in productivity as new hires need time to get up to speed. And when it happens again and again, the situation can quickly get out of hand.
- Lowered morale amongst remaining employees
- Inability to reach company goals
- Costs associated with recruiting, screening, and onboarding a new worker. The average cost per hire in manufacturing, for example, is $5,600.
- Potential decline in product quality
Turnover Effect on Product Quality
This factor may be difficult to quantify but could be devastating to an organization. When skilled talent leaves and new workers step into position, they, at best, will face a learning curve and are likely to make errors. If management gives more work to the remaining employees to cover for absent workers, those employees might become overworked. This could lead to more mistakes.
A three-year study looked at data from a Chinese phone maker. It found that for every 1% rise in weekly sales, product failures increased by 0.74% to 0.79%. Also, failure was 10% more common in the two weeks after payday. This is a time of high turnover compared to the two weeks before payday. The costs associated with these failures amounted to hundreds of millions of dollars.
Frequent Causes of Turnover
Knowing your turnover rate is just the beginning. To get to the reasons for high turnover, start by asking these questions:
Who are the employees that are leaving? Is it the new hires or the senior ones? If it’s the new hires that are leaving, it’s possible that the job was not what they expected. You might need to rework your job description and/or training. If senior employees are leaving, maybe you need to develop an upskilling or career development program to retain them.
Is there any pattern in their departure? If more employees are leaving around annual reviews, they might not be happy with the process. They could also be unhappy with the pay raises. Be sure to pay attention to the employee experience.
Unfortunately, there are many more reasons for high turnover:
- Intense workloads with inadequate breaks
- Poor management including lack of communication
- Substandard pay or lack of transparency about pay rates
- Lack of employee recognition
- Little or no possibility for advancement
- Limited schedule flexibility
Identifying Root Causes
One of the most valuable tools in the manager’s arsenal is the exit interview. This is a golden opportunity to ask key questions of departing employees in an atmosphere of honesty and anonymity. This feedback will help the company improve policies, processes and overall culture.
If exit interviews aren’t feasible for your organization, a confidential survey could provide similar information. These surveys provide an easy, effective way to regularly poll your employees and keep them engaged. The results will help you understand their goals, plan career growth, and find issues to improve the workplace culture.
Another data-based method is in-depth analyzing of patterns and trends in turnover numbers. For example, did turnover increase when the team rolled out a new process? Did it coincide with a change in management?
Turning Turnover Around
Once you know about the causes of excess turnover in your organization, it’s time to act.
In an industry study of retention, most manufacturing workers said they stay in their jobs because they like what they do. An outstanding 83% of participants reported enjoying what they do, and 79% expressed that they feel safe in their jobs.
Here are some tips for making the work more enjoyable:
- Provide opportunities for career development. This may include career pathing, training and upskilling opportunities. Adding career development programs will help the organization. These programs will prepare workers for future jobs. Read our recent blog, 8 Steps to Building Your Own Skilled Technical Workforce, for tips on creating an upskilling program.
- Recognize and reward employee contributions. In an employee engagement survey, 90% of the respondents said that recognition motivates them to give more effort. Recognition can be through a formalized program with awards or just a “thank you” and a shout-out in a meeting.
- Survey workstations. A well-designed workstation is paramount. It should provide your employees with the tools and resources necessary to do their job with comfort and ease. Designers should create them for maximum productivity, which for the manufacturing industry means limiting wasted motion.
- Improve Work-Life Balance. One of the most important benefits job seekers want is flexibility. They want to control their own schedule. This helps them manage family and personal commitments. Mental health and wellness programs also add to work-life satisfaction.
- Offer competitive pay. This is the most obvious option on the list, but many employers are reluctant. Higher wages make it easier to recruit workers and retain them. Turnover rates go down, job satisfaction goes up, and productivity rises.
Tips for Implementing Changes
Once you identify strategies, you’ll need an action plan to put them in place.
- Set measurable goals and benchmarks
- Make sure all parties, including leadership, are onboard
- Review and adjust strategies as needed
Get Assistance
Reducing employee turnover is a tough problem. It might help to get professional assistance.
Gathering the right data can be challenging. Manpower can help you find the best combination of pay and benefits to offer for your specific area. We can also show you how to make the most of your workforce. This way, you can reach your full capacity.
Career development programs can be one of the toughest, yet most important, strategies to initiate. Your contingent talent provider may have a ready-made program you can take advantage of. Additionally, consider implementing mentorship programs within your organization. Pairing experienced employees with newer team members can foster a sense of belonging and support. This not only helps in skill development but also strengthens workplace relationships, which can lead to higher job satisfaction and retention.
Foster a Positive Work Environment
Creating a positive employee experience is crucial for employee morale. Encourage open communication and feedback, allowing employees to voice their concerns and suggestions. Recognizing and celebrating achievements, both big and small, can also boost motivation and loyalty.
Moreover, promoting work-life balance is essential. Flexible work hours or remote work options can make a significant difference in how employees perceive their jobs. When employees feel that their personal lives are respected, they are more likely to stay committed to the organization.
Regularly Assess Employee Satisfaction
Conducting regular employee satisfaction surveys can provide valuable insights into what your workforce values most. Use this feedback to make informed decisions about changes or improvements in the workplace. Addressing issues promptly shows employees that their opinions matter and that you are committed to their well-being.
Invest in Training and Development
Investing in training and development not only enhances employee skills but also demonstrates that you value their growth. Offering workshops, online courses, or tuition reimbursement can motivate employees to stay with your company as they see a clear path for advancement. Also, don't overlook the importance of a positive and comprehensive onboarding experience.
In conclusion, reducing employee turnover requires a multifaceted approach. By ensuring leadership support, seeking professional assistance, fostering a positive work environment, regularly assessing satisfaction, and investing in development, you can create a workplace where employees feel valued and motivated to stay. At Manpower, we provide a full program of learning, assessments, and career guidance. These options are available at no cost to our associates.
