It is no surprise that the tight labor market continues to be a critical issue as manufacturing organizations try to expand and meet escalating demands head-on.
Companies can attempt to reduce turnover in manufacturing through strategies such as attractive benefits, training initiatives, and flexible policies, but for every solution, there are dozens of other questions: Where do we begin? What will truly resonate with our workforce?
Finding the right labor strategies that work for your frontline workforce can be daunting because every manufacturing organization and labor force has a different composition and different needs. Retaining your frontline manufacturing workers has never been more important, especially when you look at the actual cost of turnover. The struggle to fill critical labor gaps is real—and expensive.
UKG, in collaboration with the Workforce Institute, recently conducted research to understand the ever-evolving frontline labor dilemma. The annual industry report analyzes survey responses from more than 300 manufacturing HR leaders across the U.S. Their insights shed light on the daunting challenge of talent retention and its undeniable link to the financial health of manufacturing companies.
In this blog post, we’ll explore trends in employees leaving manufacturing roles, the direct cost of replacing frontline employees, plus five strategies to reduce turnover in manufacturing at your organization.
Download Now: A Turning Point for Manufacturing [Free Industry Report]
Turnover in manufacturing
HR leaders in manufacturing were candid about turnover at their organizations. Here's what the survey responses show:
- An overwhelming 62% of the HR leaders reported an increase in turnover year over year within their organizations. This highlights the pressing need to execute effective strategies to retain talent to limit rising turnover.
- In contrast, 16% noted a decrease in turnover, which shows that successful retention strategies are possible.
- The remaining 22% reported little to no change, indicating a need for proactive measures to begin more positive shifts in their manufacturing organizations.
The research also found that 54% of respondents reported an annual turnover rate exceeding 20%. This reinforces how prevalent the challenge of turnover is within the manufacturing industry. High turnover rates not only strain financial resources but also disrupt operations, reduce productivity, and negatively affect employee morale.
The direct cost of turnover
The cost of turnover shouldn’t be underestimated.
The data shows that it costs manufacturers between $20,000 and $40,000 to replace a skilled frontline employee, including recruiting and onboarding expenses for new employees.
For example, if a 3,000-person company experiences 20% turnover (600 employees quit) in a year, it could cost the manufacturer $12 million to $24 million to replace those skilled frontline employees. This colossal cost shows how high turnover can lead to a significant financial strain on manufacturing companies.
It costs manufacturers between $20,000 and $40,000 to replace a skilled frontline employee.
Even more worrisome, the impact of employee turnover on a company’s financial health is a cause for concern. A resounding 7 in 10 manufacturers reported that employee turnover has a noticeable impact on their bottom-line finances. Of these, 47% indicated a moderate impact, while 22% described the impact as severe. The consequences of high turnover extend beyond inconvenience, directly affecting a company’s profitability and long-term sustainability.
Further analysis of the research uncovers interesting patterns in turnover. On average, about one-third of new-hire turnover occurs within the first 30 days of employment. This rapid turnover could be indicative of underlying issues in the onboarding process, company culture, or job fit. Addressing these concerns is essential to retaining newly hired talent and reducing the substantial costs associated with early turnover.
About one-third of new-hire turnover occurs within the first 30 days of employment.
Five steps to reduce turnover in manufacturing
Considering these worrying statistics, you must recognize the need to address turnover and its associated costs quickly. Ignoring this challenge can lead to significant financial impact.
Our research suggests adopting a five-step approach to enhancing employee satisfaction and reducing turnover.
- Invest in onboarding. A comprehensive HR service delivery platform allows you to easily automate the backend, manual HR work while guiding pre-hires and new hires through the process.
- Evaluate your training and development programs. The key is to invest in tailored programs that go beyond teaching someone to perform a specific task and emphasize development to advance your employees’ careers.
- Build a positive company culture. All great workplaces have one thing in common: trust.
- Actively communicate with employees. Find the best way to communicate with your employees to understand their needs and concerns to foster a more supportive work environment.
- Offer flexible policies and attractive benefits packages. To attract and retain valuable talent, the key is to create an environment where employees aren’t constrained. Plus, flexible scheduling allows employees to have greater control over their work schedules and allows them to be successful beyond the work.
The struggle to fill critical labor gaps is costly
The research conducted by UKG and the Workforce Institute emphasizes that the struggle to fill critical labor gaps is not just a logistical inconvenience but a costly challenge that needs attention.
As the manufacturing landscape evolves, companies that prioritize employee retention strategies will be better positioned to face new challenges, strengthen finances, and gain a competitive edge in the market.
The battle to retain skilled frontline employees is not just about maintaining a stable workforce; it is about protecting a company’s financial well-being.
Understanding the substantial cost of turnover and implementing effective retention strategies can help manufacturing organizations navigate the unstable labor market and succeed in the ever-changing industry landscape.
Learn more from the annual industry report about how the sector’s labor supply is recovering from the after effects of a pandemic and how manufacturers who build effective labor strategies can succeed in the face of the industry’s daunting skills gap.
Download Now: A Turning Point for Manufacturing [Free Industry Report]
