Reducing employee turnover in manufacturing is a big focus for companies these days considering the tight labor market, labor shortages, and skill gaps. When employees quit and temps don't return it's not only costly, but it can decrease productivity, customer satisfaction, and overall company morale.
A report from Tooling U-SME, a leading provider of manufacturing training solutions, indicates that voluntary turnover costs companies hundreds of thousands if not millions of dollars each year. Understanding turnover causes and costs are the first steps toward creating a company of long-term and productive employees.
What is Turnover Rate?
Employee turnover rate is a percentage calculation used to measure the number of employees that separated from a company during a specific time period. The average yearly turnover rate within a company's labor force is about 18%, which can be a costly burden when trying to replace workers. The turnover rate is a key statistic to help companies determine the reasons workers are leaving and develop strategies to boost employee retention, which in turn will save money in the long run. This calculation takes into account the following types of employee turnover:
- Voluntary Separations (Retirements, Resignations)
- Involuntary Separations (Performance dismissals, Downsizing, Layoffs)
- Internal Transfers
How to Calculate Turnover Rate
Whether you choose to calculate the turnover rate monthly or annually, use the following equations to see where your company turnover rate stands:
Annual employee turnover rate
Equation: [# employees departed in a year/(starting # of employees + ending # of employees/2)] x 100
Determine the # of employees who left your company throughout the year
Add # of employees you had at the start of the year to the # of employees at the end of the year. Then divide by 2.
Divide the above calculation by the # of employees who left throughout the year.
Take that total and multiply by 100.
Example: In 2021, your company had 200 employees at the start of the year and 196 employees at the end of the year. In that same year, 10 employees left the company.
Calculations: [10/(200+196/2)] x 100 = Employee turnover rate for 2021 = 5%
Monthly employee turnover rate
Equation: (# employees who departed in a month/average # of employees in a month) x 100
Determine # of employees that left in a selected month and the average # of employees your company had in that selected month.
Divide the average # of employees by the # of employees who departed throughout the month you selected.
Multiply this number by 100.
Example: In July, your company had an average of 100 employees. In that same month, 1 employee left your company.
Calculations: (1/100) x 100 = July employee turnover rate = 1%
Take into consideration the following strategies in order to help your company reduce employee turnover and increase the retention rate at your manufacturing plant:
1.) Set Employment Expectations
It's important that expectations are set properly during the hiring process and that you have a strong onboarding program for new production employees. Develop strong mentors and trainers that will support these employees throughout their training period and beyond.
Make sure that your new employees know exactly what is expected of them. Beyond a basic job description, your new employees should also be aware of:
- The expected quality of work
- Depth of knowledge that should be exhibited
- Boundaries of their specific role and responsibilities
It's important that these types of expectations are not only clearly communicated but mutually agreed upon as well.
2.) Invest In Employee Training
When a new full-time or temp employee starts, significant time and resources should be dedicated to their training and ramp-up phase. This can include training in a classroom setting as well as training on the plant floor. Try to reduce the stress during their training period and make sure they have the tools and mentors they need to succeed.
3.) Open Lines of Communication
Open communication with your employees can make them feel more invested in their positions and the company as a whole. Involve employees in decisions that affect their jobs. Make sure your production workers know their opinions are valued and foster an environment where they feel comfortable sharing what they like and do not like about their jobs.
4.) Make Employees Comfortable
Manufacturing can be a tough and demanding industry to work in which is partly why employee retention can be a challenge. Long hours on your feet, hot conditions, production deadlines, and required overtime can put a lot of pressure on employees, so do what you can to make them comfortable. Offer work boot reimbursements, purchase anti-fatigue floor mats to reduce the strain of standing, and provide employees comfortable seating in break rooms and rest areas.
5.) Proactively Address Safety and Job-Related Risks
Focus on finding the hazards at your manufacturing facility and develop plans for preventing and controlling those hazards. It's important that both Management and employees take part in identifying these hazards and ensuring they're addressed.
Manufacturing workers face increased safety risks, so proper PPE (Personal Protective Equipment) is a must, as is being proactive about injury prevention. OSHA (Occupational Safety and Health Administration) recommends being proactive with injury and illness prevention programs that are effective at reducing injuries, illnesses as well as fatalities.
6.) Create Employee Recognition Programs
Create a recognition program and award employees for going above and beyond, for being safe, and for being productive. Share positive metrics and celebrate company successes. Little things such as public recognition, bonuses, or earning additional time off can go a long way towards making your employees feel valued and appreciated.
7.) Reduce Overtime With Contingency Staffing
Work-life balance is important to full-time employees, especially when they have families. Plus, tired and overworked employees increase safety risks, so if your full-time employees have been working a lot of overtime then consider using temporary staffing and contingency staff.
If you can hire enough experienced and skilled temporary labor from your local staffing agencies then that's probably the best solution. With unemployment so low, however, many temp agencies are having the same trouble you are at finding experienced talent around your manufacturing facility because there simply isn't anyone available to hire, making contingency plan development so crucial.
If you're having high turnover with local temps because they're unskilled and not experienced in industrial environments, then you may want to consider a national contingency staffing provider that has experience staffing in different manufacturing sectors. Contingency staffing agencies like MADI draw experienced manufacturing talent from across the United States and they aren't limited to the talent available in your area. That means they're able to deliver more experienced workers and larger numbers of workers than your local staffing agency and can help you develop a contingency plan for staff shortages.
8.) Conduct Exit Interviews
Conducting exit interviews is invaluable; make sure to gather information from employees when they're leaving so you begin to identify areas for improvement. The Society for Human Resource Management (SHRM) recommends asking some of these exit interview questions:
- How did you learn about the job opening for your new position?
- Were the duties and demands of your job here described accurately during the interview process?
- Describe your work environment.
- What improvements can you suggest to your department or to your job?
- Were you and your supervisor able to work together effectively?
- How would you describe your supervisor's management style?
- What did you like least about working here?
- What did you like most about working here?
- Would you consider returning to this company if a position were available in the future?
Understanding WHY your employees are leaving is the first step in making changes to reduce employee turnover. The next step is evaluating the feedback to see what changes should be made to existing procedures or policies.
Multi-Site Manufacturing Companies
High employee turnover at multi-site manufacturing companies with thousands of production employees can cost companies millions of dollars annually. A coordinated approach across all sites to survey employees on supervisory leadership and local work environments can provide Executives with insights about what's happening across the entire company. Once collected and analyzed, this data can be turned into concrete action plans for front-line supervisors to implement.
How To Reduce Turnover by 20% or More During The Great Resignation
We recently interviewed Dick Finnegan, The Turnover Expert, on our Podcast about how he helps manufacturers reduce turnover by 20% or more. Dick walked us through his approach of driving retention through first-line leaders, how a one size fits all approach doesn't work, and how he helped Caterpillar cut turnover by 47% at one of the plants. Listen to the full interview and review the show notes here.