How to Drive Employee Retention
Post pandemic, the job market has been very strong in most of the US. Many companies are having difficulty attracting and retaining enough labor to meet their output demand, and recruiters have become aggressive going after potential targets. While the frenzy has calmed a little, at the height of the hiring boom I saw starting bonuses in 5 figures for hourly employees and some companies even offering to support relocation for entry level production labor positions – a benefit previously reserved for very select management candidates!
In this environment of labor shortages, it is critical that leadership teams look hard at employee retention to minimize the amount of recruiting needed and to keep operations stable.
The Cost of Poor Retention
The cost of employee turnover is higher than apparent on the surface. Every person that leaves a workplace is
one more person to try to recruit (at great cost),
one more disruption to on-going activity that can cause delays (at great cost),
one more opportunity for a domino-effect of employee moves causing prolonged inefficiencies (at great cost),
and the accumulated training for all of those domino moves will extend the recovery time (at great cost!).
Putting this altogether, it is far more economical to drive retention than to engage in cage fights with other employers to try to steal existing employees – who are only targets because they are either disgruntled or lured away at great expense. Further, as you retain more employees, the news gets around, and it becomes easier (and less costly) to recruit.
An unfortunate truth is that too many executives have never fully analyzed how devastating employee turnover can truly be to the bottom line. They look for quick answers to performance challenges when instead they needed to be looking at how to improve engagement to drive better retention, to first stabilize and then improve performance.
Poor retention is a symptom of low engagement. Poor engagement, and the consequential turnover, will cause performance issues.
Injuries will rise.
Avoidable errors will rise.
Process times will become erratic – leading to service issues.
Productivity will plummet.
Costs will trend higher and higher.
All of these will undermine the business! Poor engagement, and the resulting turnover, must be solved!
Case Study
I recently became involved with one company that was dissatisfied with performance at their largest manufacturing site. The performance results in the areas of safety, service, and productivity, were very definitely terrible – indeed some of the worst I’ve ever seen in their industry.
In digging into the operation, it became quickly apparent that employee turnover was killing results, and hindering recovery efforts. Turnover on an annual basis was running >50% amongst the hourly manufacturing and distribution employees. Overtime was consequently running at over 30% in many departments, and had been that high long term! Training new employees was challenging due to the inherent process hazards involved, and therefore took as much as 6 months for a new employee to gain full proficiency – and most new employees didn’t last the 6 months. Supervisors were also turning over very rapidly. The business was not staffed or structured to handle this turnover load! The turnover had created a long-term situation of instability.
Sadly, the executives applying performance pressure on the management team did not possess an understanding that the high overtime, poor productivity, terrible safety, and erratic service were all related. Through a quick data analysis we were able to demonstrate that the departments with the highest injury rates were also the departments with the highest overtime. These departments also had the highest employee turnover! To solve the performance issues, the most important factor was to understand the causes of turnover, and solve them!
There was far more to be gained by driving retention and engagement, versus the traditional pressure approach of reducing costs that was being attempted by the executives. Clearly a major effort around retention and engagement was critical.
Start by Understanding the Problem!
How does a leadership team go about improving retention? It is entirely possible to reverse long-standing turnover trends. Generally, it takes willingness to discover the underlying reasons, empathy to build trust, and perseverance to solve the underlying issues. Any good problem-solving methodology, coupled with an empathetic leadership style, can be utilized to improve the situation.
Good problem-solving methods generally start with defining the problem and underlying causes. It is important to have a reliable source of turnover data over an extended period of time – at least a year. The data should include inputs such as the date of turnover, the employees’ departments, their job classification, their Supervisor’s name, their tenure in the job and tenure with the company, their stated reasons for departure, and whether the departure was voluntary or involuntary. Note that involuntary turn, may have similar root causes to the voluntary turns – so do not dismiss that segment of the population as just ‘bad apples!’
Once the data is collected, it needs to be analyzed. Are there trends? Is turnover occurring amongst mostly new employees, or tenured employees? Do departing employees often have awful attendance records? Do some departments, shifts or groups sharing a particular supervisor have higher turn percentages than others? The data may point you in a starting direction.
During this ‘define’ stage is also a great time to try to quantify the impact of turnover on performance (particularly cost). Ultimately, being able to point to the impact will provide justification to expend resources (time, money), and will buy the leadership team breathing space to solve the underlying causes!
Find the Root Cause
Some root causes of turnover will be quickly identifiable from the data available – or will be obvious to a new observer. Other causes will be more challenging to flush out. Here is where you can create value through servant leadership, and utilize your empathetic listening skills.
Let the data tell its story. If trends are apparent in the data, there is a story to discover! If one Supervisor or Manager has abnormally high turnover in their area – dig in and find out why.
Get out amongst the team members. Walk the floor and casually talk with the employees. Do not have ‘an agenda’ on these walk-abouts. Be approachable. LISTEN to anyone who will talk to you. Purposely seek out the employees who are the most pessimistic. I’ve found that a tenured employee who is visibly disgruntled will have a lot of great input. I will always try to find these people. Think about it – these employees, despite being so jaded, are still coming to work for only one reason – and that is because they truly care! If they didn’t care, they would have left, or they would have gone quiet and ‘retired’ on the job. You may have to listen for a long time, but you will gain great insight.
Conduct focus groups to discuss specific reasons for turnover. The discussion may need to be generalized to an overall engagement discussion. The focus group discussions must be confidential and psychologically safe for the employees to participate. The groups may need to be facilitated by a third party to accomplish this safe environment. Ask them ‘what causes you frustration?’ and ‘what should be done about it?’ LISTEN! Try to confirm input with multiple groups, or against the data.
Most importantly, put yourself in the employees’ shoes. Would you honestly stay in their job? Why not? What would make you more likely to stay? Better equipment? A cleaner environment? A Supervisor with better people skills? Less overtime? Less ‘mandatory’ Saturdays announced at the last minute when you had plans to visit your grand-kids? Putting yourself in your employees’ shoes will help you to feel the frustrations that they feel every day.
Once the root causes are determined, an action plan must be defined and executed.
Take Action
Some problem-solving methodologies encourage testing of hypothesis in order to see if you’ve found the correct causal factors. For engagement improvements, I generally recommend having a disposition towards action – in other words, try something! You can pilot changes in individual departments, but often that unnecessarily extends the time to recovery. If the causes identified feel like they are factors – take action! Doing so in these types of situations is often low risk, and time is of the essence – so act! You are most likely directionally accurate if you’ve done the root cause identification process well. Further, employees will see and appreciate the effort, which in and of itself will improve their engagement and willingness to help.
In the case described above, many needed actions were attempted. Actions to improve the situation included;
Efforts to reduce overtime in every department so that the overtime worked would be more productive.
Efforts to reduce reliance on ‘mandatory’ Saturday overtime by being more targeted on the crewing required to accomplish specific tasks.
Changes were made in the way training was conducted in order to speed up the process of replacement and manage the disruption of training.
Equipment issues were defined and plans put in place to resolve common equipment frustrations.
The work environment was cleaned up and awareness was increased as to how that environment was viewed by new employees (versus those who had become numb to the filthy environment).
Better Daily Management System tools and programs were put in place to gather employee input routinely – and to act on it!
Focus groups were initiated on engagement topics to try to flush out more issues.
Capital re-investment priorities were reviewed and recommunicated in an effort to gain upper management financial support.
Layered audits were created to encourage more purposeful interaction on the floor between the leadership team members and the hourly employees.
Some of these actions were successful, others were not as successful, however, after a few months, these actions, as well as many others, collectively started moving the needle in the right direction. Turnover gradually fell. Injuries gradually were reduced. Service levels were drastically improved. Overtime levels started coming down.
Although improvement has been evident, to really solve the issues at this site will require long-term commitment to continue working on the root causes – and there is a long way to go!
Conclusion
Improving employee retention takes willingness to discover the underlying causes, empathy to build organizational trust, and perseverance to improve the issues. Any good problem-solving methodology, coupled with an empathetic leadership style, can be utilized to improve the situation.
Improvements take time and will not be linear. The leadership team needs to resist derailers and keep working the retention problem. Remember that retention is generally a symptom of poor engagement, and can be directly correlated to injuries, poor productivity, and avoidable errors – which drive up cost and deteriorate service. Improvements that address underlying causes of poor retention will absolutely improve overall operations performance metrics!
Need help tackling your retention issues? Contact me for support.
