The True Cost of Turnover

Continuous turnover in the manufacturing industry threatens companies focused on driving productivity and profitability.

Finding talent is one of the biggest challenges in the industry, so losing employees, whether entry-level or seasoned, significantly compounds the problem.

After putting substantial effort and cost into recruiting promising team members, the industry needs to make sure newer employees — and the incumbent workforce — stay for years to come.

Keep reading to learn more about the causes of turnover in the manufacturing industry, the problems it creates and how to solve them.

What Causes Turnover in the Manufacturing Industry?

High attrition rates in the manufacturing industry come from two likely sources — new hires and baby boomer retirements and active or passive dissatisfaction.

New Hires and Baby Boomers

The first year of an employee’s tenure with a company often determines how long they’ll stay with the company. A 2018 study surveying startups shows that companies retain 88% of workers who stay past the first year. Those numbers apply to more established companies, as well. Figuring out how to get workers to stay past the first year, then, is crucial to maintaining a low turnover rate.

Baby boomer retirements pose an unavoidable problem for various companies, especially those in the manufacturing industry. Pew Research disclosed that 3.2 million more baby boomers retired in 2020 than in 2019. As such, these retirements are increasing, suggesting that we are reaching the heights of this trend.

Active or Passive Dissatisfaction

Besides new hires and baby boomer retirements, employees may also leave due to active or passive dissatisfaction.

With active dissatisfaction, the most common culprit is a toxic work environment. Employees may leave toxic work environments because they’ve suffered through unsafe, physically harmful or emotionally taxing conditions.

Under these conditions, employers are — knowingly or not — actively driving their employees away and making themselves liable for unsafe workplace claims. Other toxic work environment practices include micromanagement, verbal, physical or sexual harassment and negative group mindsets.

As for passive dissatisfaction, employees may feel complacent or that better opportunities lie with other companies. They may feel this way due to the following reasons:

• A stale workplace culture or environment
• The organization they work for lacks incentives for employees to stick around
• Other employers promote a vibrant culture, environment and employee experience
• Novelty in change and new opportunities

What Problems Does a High Turnover Rate Cause?

The cost of turnover (CoT) can be categorized according to financial loss and business impact. Financial loss refers to the literal cost in dollars of a high turnover rate. In contrast, business impact involves stunted progress and loss of embedded knowledge, along with other factors.

When calculating the total CoT, including both financial loss and business impact, it’s important to consider variables like:

• Screening costs
• Human resources time
• Onboarding and training
• Temporary staffing
• Productivity losses, such as machine downtime
• Opportunity costs, including lost business because of the employment gap

These factors cost your organization time and money as you restart from square one to fill vacant positions, train new staff and attempt to bring them up to speed in the most efficient possible. As you do so, productivity loss is an ongoing concern to navigate.

How to Decrease Your Turnover Rate

Stemming the tide of baby boomer retirements isn’t something any organization can do with sustainable success. As such, it’s more profitable to focus on employee retention strategies in the manufacturing industry.

Here are some tips for getting your company below the average turnover rate in the manufacturing industry:

• Develop robust onboarding and mentorship programs.
• Be transparent about work expectations during the hiring process.
• Demonstrate clear, well-defined progression paths that new employees can follow.
• Check in with new employees frequently to ensure they’re adapting well to their roles.
• Create cross-generational teams.
• Provide ongoing development and upskilling opportunities for all employees.
• Carefully evaluate your leadership strategy to see if it fits the culture your organization is trying to create.

Learn More About the Cost of Turnover With Mantec

In partnership with Tooling U and SME, our Cost of Turnover Report covers the sources, true cost, danger of turnover and action steps in greater detail. Let’s start the conversation on how we can help you reduce your turnover rate. Call us at 717-843-5054 or contact us today to speak with a MANTEC specialty advisor.