Frontline Insights: What the Data Really Says About Workforce Turnover in Manufacturing
Manufacturers in North America and Western Europe are facing significant challenges in attracting and retaining talent in 2023. For large manufacturers, it’s particularly difficult.
As predictive data rolls in, the potential for a growing gap in talent in manufacturing is becoming more pronounced as a majority of manufacturers are faced with difficulties staffing their frontlines— talent needed to keep lines running smoothly and get customers what they need.
In this episode, we’re joined by Dan Johnston, Co-Founder and CEO at WorkStep to discuss these workforce challenges, examine what the data says about turnover, and explore what you can do to attract and retain your workforce as talent density continues to drop.
Join us as we discuss:
- Using a company’s scale and strategy to improve business perception
- Top reasons for turnover and how you can reduce their impact
- Actionable tips for improving workplace satisfaction
Experiencing disruption on the frontline? We can help. Request a demo today.
Check out the episode transcript below:
Josh: Dan, welcome to the show. Thanks for being here.
Dan: Thanks, Josh. I’m looking forward to the conversation.
Josh: I am too. Now, I have to admit to everyone listening that I’ve dropped the ball when it comes to working with Dan because about a year ago we started talking about a potential episode and somehow I didn’t follow up and I pride myself on being very prompt and not dropping things but I did and I apologize to Dan before this recording and actually I’ll apologize now because this is such great information that we’re going to cover. Thanks for putting up with a year-long delay, Dan, and joining us today.
Dan: Of course. I guess now the audience knows I’m a forgiving person and I hope the episode can be worth the wait.
Josh: It absolutely will be. Let’s get into it. The reason I know that it’s going to be is because it is a topic that there’s a little bit of controversy around, I would say, as well as a lot of focus and attention. Now according to the Manufacturing Institute and Deloitte, over 2 million jobs could go unfilled in manufacturing by 2030 and the impact on manufacturing is going to be up to $1 trillion. Now manufacturers surveyed in the Manufacturing Institute and Deloitte’s report said that finding the right talent is now 36% harder than years preceding the COVID-19 pandemic in 2020. Out of those surveyed, 77% of those manufacturers say they will have ongoing difficulties in attracting and retaining workers in the years to come.
We are talking about, and dispelling today looking at data, information and why we are talking about and dispelling some misconceptions today about the difficulties recruiting and retaining the workforce within manufacturing. Now there are a lot of opinions as to why it is harder than before to retract and retain talent on the front life of manufacturing. Dan, the first question I want to throw at you, what are some of the common opinions or perspective you’ve encountered and how accurate are they?
Dan: There’s a lot of stats there that all boil down to the fact that as a manufacturer and especially as a large manufacturer in the United States, in North America, and Western Europe in 2023, it’s incredibly hard to hire and retain frontline talent and that talent that you need to keep your lines running and to get your customers the products that they need. When I think about attraction or retention, I actually think about those pretty independently. Attraction, the ability to bring talent into a space or into a company or into a role comes down to perception.
Some of these perception challenges in manufacturing today could be generational differences in opinion or expectation. “Is this a space that’s dirty or unsafe or would I be better off pursuing a career where I could leverage a four-year degree? Is this a space that pays well or could pay me well?” These are not about the actualities of the space or the actualities of the company. It’s about what people think it might be. When it relates to the data around retention, it’s much less about pay than what folks look for when it comes to talent attraction and much more about connectivity to organization and ability to grow.
Josh: I love that you broke that down, the difference between attraction and retention, because really they’re two separate problems that need to be solved but we could argue they may share a root cause. We’ll get into that a little bit later within the episode. Then I really appreciate that you got specific. Attraction being perception. Retention being the reality. What are people thinking about the environment or the opportunity versus how does it meet those expectations or how does it differ from those expectations? Ideally based off that perception that you described, it differs greatly.
I think that’s a great point to get very specific and break those two up. On that topic of attraction, really when you’ve brought up, it’s not about the actuality it’s really about the perception, I’m reminded of this quote that perception is reality. What people are perceiving, what they think, that’s going to drive their actions. In that case, when we’re talking about attraction, how do you break down or change that perception? What is actually within the control of manufacturers to do something about the perception so that they can do something about attraction?
Dan: I think that comes down to a given company’s scale and strategy. Because if you are a small manufacturer that is part of a much larger ecosystem, the best strategy around perception and attraction is probably to tell a differentiated story. Which is basically, if you are going to work in manufacturing, here is how we are different. Here is why a production operator, a machine operator, a maintenance technician role at our company is better than at the company across the street. We have a family-owned environment. Or we have a perfect safety record, or all of our machinery is updated, or we have this unique benefits program, or we have this unique internal training program. It’s mostly about, “How do I take somebody who’s interested in this career and convince them to choose us.”
However, if you are operating at scale, you are manufacture that employees tens of thousands or even hundreds of thousands of people globally, it might be more important to actually convince people to move into the field than convince them to work for you as opposed to a competitor. In that case, it’s more, how would I convince somebody who’s working in quick service retail to come be a production operator?
Or how would I convince somebody who’s considering going and attaining a four-year degree in a humanities field to instead consider going to a trade school to become a specific technical operator? Because at that scale, you’re operating with the macro constraints of supply and skill demand. I actually think when it comes to figuring out what part of that perception to target and to work on, it actually matters what scale you’re operating at.
Josh: I love what you broke down, and if I were to summarize what I just heard, I would say manufacturers need to market the opportunities to people because that’s really what you’re describing is doing some good old-fashioned marketing. Who are you trying to reach? What is the message that those individuals need to hear?
You brought up a great example looking at two different scale a local versus you said the more macro side, are you having to compete for talent with other manufacturers? In which case how do you differentiate the employment opportunities that you need filled but that you’re also able to offer these individuals? Is it related to the goods and products that you make and how that impacts people’s lives and the story behind it? Is it sustainability? Is it career growth? What are those different factors that are going to appeal to the people that you are trying to bring in?
On the flip side, you called out this idea of your competition is not necessarily other manufacturers. Your competition, and this is frequently the case, back to some of those callouts that you were talking about with the initial perception and attraction is other industries. What are the benefits, the pros and cons that you can address? The pros about working in manufacturing and having a rewarding career, and really tie it into some of the generational aspirations that are there as far as having a purpose and contributing to a cause that’s bigger than yourself and get people more interested in this industrial route as opposed to whatever other paths there might be. Entertainment industry, hospitality, tech, et cetera.
I think that was a great breakdown of just the importance of marketing to help target those perceptions. Now I want to bring up what you call the help with retention. Retention being the reality. Talk to us a little bit of the control or the tools that they can use to provide a workplace that provides what these workers need in order to stay.
Dan: When it comes to turnover, which of course is just the flip side of retention, every manufacturer has a turnover problem. Nobody has solved turnover. Whether it’s 10% a year or 110% a year, turnover is painful, it’s expensive, you lose your most proactive employees and replace them with newer employees who are lower productivity, higher safety risk, sometimes more expensive, and all statistically more likely to leave. This matters to every manufacturer just because it is so hard to replace talent, it takes so long to ramp that talent up, especially as roles become more technical, that everybody wants to drive turnover down.
That process starts with understanding what is driving turnover within an organization, within a building, within a role type. Now the old way of doing that is you would look across a network of factories or facilities and you would identify the facility with a turnover problem, whichever one is the highest typically, and then you go ask that GM or HR leader like, “Bob, what’s going on?” You get an anecdotal answer, which is, “Oh, well, we’re hearing that in this market pay is higher in other buildings,” or that, “Our jobs are more physical than the ones across the street,” or whatever it is. That’s just a story that is being told by somebody who’s actually probably a step or two or three removed from the actual problem itself.
The good news is that with technologies like the one that we provide to manufacturers at WorkStep, you can actually get to a data-informed view of the answer to that question, which is, “What is actually driving people in our organization to leave?” The way that software can do that is by not only automating the collection of feedback from your frontline associates in these contacts, but ultimately tying all of that feedback to actual outcomes so that you can tell not just where a worker’s happy or unhappy, but what exact points of dissatisfaction are leading people to quit or leave your organization.
For example, in a world in which a high degree of people are complaining about pay, that might mean that there’s low pay satisfaction in your building, but if the people complaining about pay aren’t the ones quitting, or they’re quitting at the exact same rate as the people not complaining about pay, that’s not a very good opportunity to reduce turnover. On the other hand, it might be the case that less people across the org are complaining about career growth, but every single person complaining about career growth quits in the next 60 days. That is a very impactful opportunity to reduce turnover.
By leveraging software that can connect employee sentiment to business outcomes, manufacturing from all scales can actually get a handle on, “Okay, what’s actually driving turnover?” and once you know what’s actually driving turnover, then you can start to talk about, “How can we solve this problem?” but it starts with the understanding of the why.
Josh: With everything, it really starts with understanding the why. When we think about a lot of the common processes in manufacturing, if you want to drive corrective actions, you have to get to that root cause. That’s essentially what you’re describing is get to the root cause of turnover. You called out some great points. Really to summarize some of what you shared is that the people may not actually know what’s driving turnover. The people that you’re turning to may not actually have a solid understanding of what is actually driving turnover and it’s not because they aren’t good at their job or they are negligent or anything, it’s hard– in fact it’s close possible to get data. There’s not a tool that people frequently have that helps drive these conversations.
How do you connect those dots and make sure that the people who are responsible for driving any sort of change that would tackle turnover, actually understand what that root cause is. Then you brought up such a great qualifier, you have to be able to filter out the noise and really understand the drivers of turnover. The example that you brought up, people complaining about pay, but if they stay and they don’t quit, then that’s not really what you need to tackle.
However, that’s probably what you’re hearing the most about. That’s probably what’s getting the most noise, but I love that you called out that it has to be tied to the actual result. If people who are complaining about career growth end up leaving pretty soon after complaining, that then becomes the priority to fix. I thought that was such a great breakdown and a practical approach to really digging into turnover.
Now, one of the things that I frequently have encountered in manufacturing as far as why are we struggling with recruitment and retainment is this idea that people don’t want to work. I got to be honest with you, Dan. I take a lot of issue with that sentiment. I think that that isn’t based on reality. I think that’s based on some misinformation and fake news, if you will.
I’ve talked with a couple of manufacturers. I actually had one on the show. His name was Jim Parker. He’s from a company called Inline Plastics, and he talked about some of the issues they were having on retention in particular. Not just retention, but they saw as a leading indicator were coming back late from breaks consistently. At first they saw that as something that had to be punished, but the more they dug into it, they found that there were issues within their facility that were making people feel like this was a dirty place to work. Because of that, that was causing these issues and then leading to turnover.
Really, I emphasize this idea that there are things within our control to tackle this narrative of people don’t want to work, because in actuality, people do want to work, they may just not want to work for you. I think when you flip that perspective and really adopt that ownership, then you can really embrace getting to the root cause and really taking on some change, really implementing some change. I appreciate that you broke all that down and really took us through that.
That’s one of the reasons I was so excited to get you on the show. Your work at WorkStep has enabled you to gather data from real frontline workers on what’s driving their decisions to leave. I think it’s so important that you’re turning this into a data-backed conversation and that you’re helping the industry get away from opinions and misinformation. One of the next questions I have for you, Dan, who’s more at risk of turnover, new hires or experienced employees,
Dan: I think that anybody, Josh, who has managed a large workforce or probably even worked in a manufacturing environment would be able to tell you that on average it’s those new hires. We work with manufacturers who have turnover rates as high as 90% in the first 365 days. At an industry level, we actually track all of this and what we saw is if we look back since the start of 2021, every new hire, and we saw that of those who have since left their job, 25% left within the first two weeks. Of all those quits in the last two years, a quarter were in the first two weeks, half were in the first 40 days, and three quarters were within the first 95 days, so just a little more than a quarter. What that tells you is that only the last 25% were everything from 90 days up until when the data sample is pulled. Two years.
What that tells you is that that new hire period is incredibly critical for overall workforce turnover rates. What a lot of our customers say to us is, “If I can just get an employee to stay 90 days or 60 days, or 180 days, or 365 days, they’ll be here for life, but I churn through so many employees trying to find that person who will stay that it’s incredibly expensive, it’s incredibly time-consuming, it takes all of our managers and supervisors off the floor to work on training and it’s also a morale hit for the rest of our employees because they have this rotating door of untrained new hires, who last a day or a half a day or a week or two weeks.”
Many of these companies who might see 75% turnover, really that’s a few spots in their lineup turning over and over and over again throughout the year and the rest of their employees is their stable base. What most companies then focus on is, “Okay, well, how do I solve this new hire turnover problem?” because the new hire turnover problem, typically, is the turnover problem.
Josh: Have you seen any difference in maybe roles or functions related or is this just a blanket, “On average, if you’re hiring anybody new within manufacturing, in two weeks you’re potentially looking at losing those people, in the first 40 days, 50% of those people, in 95 days, 75% of people.” Or are you seeing differences in the roles and responsibilities?
Dan: Again, speaking across the industry, the higher-skilled roles tend to have lower turnover. Where an unskilled production associate or an entry-level production associate might see a turnover rate of 3X, a supervisor might see a turnover rate of 2X and a technician or a highly-skilled operator might have a turnover rate of 1X, and this is just ballpark numbers. That makes sense. Because on the one hand, the more entry-level the role, typically, the quicker the hiring process because there’s just less to evaluate. You’re trying to get somebody in.
Also, typically, it is somebody who is more open to jobs both inside and outside of manufacturing. You might bring somebody in for that line who decides, “You know what? I’d rather go back to driving for Uber.” Or, “I’d rather go back to working in a store.” Or, “I’d rather go back to doing whatever else I might do.” Versus when you’re hiring a supervisor or a skilled technician, if that role is coming in at $35 an hour, $40 an hour, they’re probably only evaluating that against other similar roles, and so there’s less reasons to leave because this is your field at that point.
Unfortunately, I guess, at least in most manufacturing environment, you have less and less of those total roles as they get more skilled, and so you tend to see your average turnover is blend up from your low and mid-skill roles. Even if those high-skill roles have less turnover, it’s typically less of your total population. Again, depending on what you’re producing.
Josh: I think this emphasizes some of the points you were making in the retention side of things of really understanding what’s going on and what’s leading to turnover. One of the factors that may have to be factored in is where is the turnover happening and keeping it very specific, not taking it as general turnover within the plant, but really digging into which teams are experiencing that, because then that leads into conversations of, “Who are we recruiting for this role? What are they typically doing aside from this? What are their alternatives?” That factors back into some of the marketing side of things for marketing these opportunities. I think your breakdown really emphasizes the previous point that you made. I think it’s so interesting.
Actually, this is Jim’s story as well, that we covered in a previous episode where they noticed that they were struggling to keep people within the first 90 days on the packaging line as the packaging operators. They would turn over very quickly. They had an initiative where they called up the people who have left and talked with them about what was it that drove their decision to leave and what they found overwhelmingly was that within the first two weeks, people were feeling like they weren’t very good at their job because they didn’t know what to do because they weren’t really being on-boarded and trained in a way that set them up for success. The work that they were doing, they were actually causing issues, and with those issues came stress, it came self-doubt and this conclusion of, “Maybe this isn’t for me.”
I think it’s so interesting to be able to break it up by that time frame, the two weeks, the 40 days, the 95 days, and break that up by the different departments, the different functions, the different types of jobs to really help yourself dig deeper so that you can take corrective actions. I love that you’re gathering this data directly from frontline workers so that we can have a data-backed conversation. Now, I know that some of the work that WorkStep has done has been in identifying the top drivers of turnover for frontline workers. Dan, I’d love for you to take us through those top drivers of turnover.
Dan: Sure. First of all, just to provide some context, I think you mentioned one potential route of understanding why people are leaving, which is A, you call the people up who left and you ask them why they left. Some percent answer and some percent give you a straight answer, and you try to triangulate based on that. That is an okay method. There is a couple of challenges there. One is reachability and two is functionally honesty.
We take a little bit different approach where we provide software that collects feedback throughout each employee’s journey. For example, at the end of their first day, first week, first month, first quarter, et cetera. Then what happens is when somebody leaves, it’s basically triangulating the data points along their journey to the fact that they eventually left at certain time and comparing that to the data points along the journey for somebody who stayed.
Rather than saying, “Okay, you quit on day 30. Let’s ask you on day 40 why you left,” it says, “You quit on day 30. Let’s look at what you said at the end of your first week and at the end of your second week, and then build a journey of data points that says, ‘Hey, these are the things that people are saying in their first week that is leading them to quit in their first month. That would be a great place to focus.'”
Those data points across hundreds of thousands of employees of, “Here’s what everybody’s saying,” and then what their ultimate outcome was, allows us to build these really clear pictures of what’s actually driving employee behavior in this space. Across the industry, and again, this can differ from company by company, it can differ role to role, it differs building to building. You’ll look at a manufacturer with six buildings who make the exact same thing with similar head counts, and they’ll have six totally different top turnover drivers just because each building has a different environment.
Across the industry, the top three are career growth. That’s number one. It has been every quarter we run the study. The workers who don’t understand the career growth pathways available to them at their current employer are the most likely to leave. That make sense because in a world in which there are lots of manufacturing jobs available, which there are today, the reason to stay where you are is because you believe that the future is better than the present. You believe that the fact that you’ve been there means that you can keep taking steps forward there.
Without that, if you don’t know how to move forward at your current company, there’s no reason not to just go take that new hire incentive across the street. Or try to change schedules, or try to get a better commute. It’s that I don’t want to start over because I’m building something here feeling that makes you stay.
Rounding out the top three, job expectations, again, because so much of that turnover is from new hires. Actually, the alignment of the expectations set in the talent acquisition process to the reality of the environment in the role is number two. Basically, when those expectations are miss set. Like you mentioned, “I don’t feel I’m good at this. This isn’t what I signed up for,” turnover rates are incredibly high.
Then three is feedback. People want to receive feedback from their leadership and supervisors but also have the opportunity to provide that feedback as well. Again, I think a lot of people expect safety, equipment, pay to be those top drivers, but in reality, it’s much more about, “Is this a company who’s going to invest in me? Is this a company who’s going to listen to me? Is this a company who’s creating an honest portrayal of what their roles and opportunities are?” Those are, again, across the industry, the top drivers of turnover.
Josh: This is very much what I’m hearing is, am I valued as an individual? The way in which I determine if I’m valued is if I see upward momentum in my career, if I’m rewarded for the work that I do. Is it what I expected to do, or am I having to do things that I didn’t realize, that had I known I wouldn’t have done? Are people listening to me? Do they hear what I have to say? Are they receptive to it? Are they responding to it? Are they giving me the information that I need in order to further improve? What I hear from those top three that you just described is, am I as an individual getting the investment that I feel like I deserve?
Dan: Yes, I think that’s right, and it says, Josh, these are innately human. Career growth is like, I want my future to be better than my present. Who doesn’t want that? Who doesn’t strive for something more than what we have? As it relates to feedback, who doesn’t want to have a voice within their relationships with friends, with their partners at home, within their company? Who doesn’t want to feel like a participant in the overall system? Not only that the system helps me get better, I help the system get better.
Who doesn’t want honesty and transparency, whether it be their job or a product they’re buying or what have you? This is not something unique to manufacturing employees. This is just human desires mapped to a manufacturing environment. It turns out that if you don’t meet those core human desires, that’s more important. Again, then schedule and equipment and the physicality of the role and the manager even. If you don’t meet those, that’s where the biggest turnover risk is.
Josh: Yes, because that was one of the takeaways that I had was, these top three drivers of turnover certainly don’t seem to be isolated to manufacturing. To your point, this is something that we as employees, as people, expect from just about everywhere we go. That is not a ridiculous expectation by any means. I love how you put it. As far as the growth side of things goes, is the future better than the present? There’s an optimism there, there’s a hope there, and that’s going to be something that keeps people engaged.
I also love that it helps to dispel this notion that people don’t want to work, because I’m looking at your list of the top 13 turnover drivers, and not wanting to work is nowhere on that particular list. I thought it was particularly surprising. I fully expected pay to be something that was at least in the top three. Where does pay actually rank as far as drivers of turnover?
Dan: The most recent published report, it was four, although historically, it had been much lower than that. Again, pay is very, very, very important for talent attraction. If you list a role at $18 an hour, then you re-list the same role at $25 an hour, the volume and quality of interested talent will change meaningfully. However, it’s much less impactful for talent retention. Again, once somebody gets somebody in the door, typically, they stay for other reasons.
They stay for the growth, they stay for the managers, they stay for their team. As we all know, everything has gotten more expensive over the last 18 months, two years. We’ve seen pay rise up the reasons of why people leave. Yes, still not number one, but on the margins, as bills go up, if you can go get 25% more somewhere else, that might be something you have to do in 2023.
Josh: That’s such an interesting call-out that you’ve seen pay actually rise in priority, that it was actually lowered down in previous surveys or previous reports. It was lowered down in that priority list, but now it’s seen an increase. I’m glad you drew that correlation to what’s going on in the economy because the more the cost of goods goes up, pay is going to get much more attention. Now, you called out that because pay is not the only driver.
It’s really a question of what is the whole experience that you have to provide in order to offset any sort of gaps or perceived gaps in pay. I know that employers are struggling with inflation because, not only is it impacting their people, but it’s also impacting their cost of raw materials, production costs, et cetera. It’s a tricky situation to try and address. However, I think that the fact that the data shows it’s not the top one is interesting, but the fact that it’s rising is also an interesting point to be aware of.
Dan: Yes. Listen, I think we all want to make more. It’s just a question of whether that is the most important, whether I need to make more or whether all of those being equal I would like to make more.
Josh: Now, were there any drivers in your report that surprised you or that typically surprise manufacturers?
Dan: I think the fact that pay and benefits typically rank so low is typically surprising for folks. I think as we break these things down by segment, whether that be by role or by background, gender identity, things like that, there are some surprising finding, but I think honestly, what is typically most eye-opening for our customers is not the headline takeaway, like what is our company’s overall driver, but just like, oh, wow, in that building at Boise, all the turnover is being driven by management, and in this building in DeSoto, it’s all about safety.
Across this specific role type, it’s actually all about pay and the ability to granularly understand that it’s not just one thing across those 15,000 employees, it’s six things, but they’re all very clear. They’re all very actionable. If you do a blanket policy, you’re not actually going to be able to solve that challenge as well as by identifying those specific drivers.
Josh: Yes, really getting back to how can you have that data back conversation, no assumptions in the process, really being clear on what is actually driving turnover. I think what you just shared further emphasizes that point. We’ve talked a lot I should say at this point around the importance of getting data about turnover and really understanding and filtering out the noise versus the actual drivers of turnover.
When we look at that report that you put out with those top 13 turnover drivers, when you see each of those, like you mentioned the first three; career growth, job expectations, feedback, and then number four being pay, and then there’s a further list, we’ll link the article that you put the report out in the show notes, each of these categories in order to do something about it, it seems like it would require its own initiative on a per-category basis.
Like an initiative for driving the perception and the feeling of career growth, an initiative for ensuring that job expectations are being set appropriately, an initiative for making sure that there’s healthy feedback from the frontline to management, from management to the frontline, an initiative for examining pay. It seems like a lot of hard work is required to do something about this. Based on the data that you’ve collected, what do you think can be done about turnover?
Dan: Boy, Josh, that’s such a big question. Of course, my answer is it depends on what the challenges that your team is facing. Globally, the most important thing you can do is get to the root cause by collecting continuous feedback at scale in a quantifiable way from your workforce, tying that feedback to business outcomes so you know it actually matters. Then once you’ve gotten to the root cause, you have to take action.
Actions can be all the way from the most micro possible to extremely macro. On a micro level, that could be, hey, one employee on the night shift at this one facility said what’s preventing me from doing my job well is there’s broken pallets scattered across the floor, or somebody said this one specific supervisor on this one specific team is harassing this one specific group of employees. These are isolated things.
It’s not like your corporation globally faces a broken palace problem or necessarily a night shift supervisor harassment problem, but solving these individual challenges is actually super meaningful to the overall employee experience and ultimately the retention of your teams. Actions can be incredibly micro. What is the problem? How do we solve it for you? How do we ensure that you felt heard and know that you solved that problem for you?
Also at the macro level, career growth is the driver of turnover across our North American population by far. How do we improve workforce satisfaction with that specific theme? What are the programs that we could put in place across all of our buildings, across all of our supervisors, across all of our trainings to work on that? For example, a global manufacturer, hundreds of thousands of employees saw that in one specific region, it was all about job expectation alignment.
It was that the employees who were coming in who didn’t feel like the expectations were being aligned properly, and this happened because of how TA and TM were operating two totally different worlds with two totally different goals, so they invested in realistic job previews. Just how do we build job preview packages at every step of the talent acquisition funnel that shows exactly what the role is to somebody who’s before they apply, after they apply, when they come in for an interview, so facility tour, all of that, and immediately that new hire turnover dropped?
Again, get to the root cause, take action, micro and macro, measure the results of those actions, and then move on to the next root cause. Because once that realistic job preview has been implemented, job expectation alignment drops as a reason for turnover, something else is number one, it’s starting to work on that.
Josh: That’s totally fair. It’s a very general question of what can be done about turnover. Because to your point, it depends on what’s driving turnover at your specific company, within your specific department, at your specific site, in all numbers of variables that go into that. I think it’s totally fair to say, no, what you could do really depends on what’s happening. I like that you brought up this idea of, are these incidents isolated or are they systemic.
Either way, something needs to be done about them. Really, if we take it at a higher level, solving both the isolated incidents as well as the systemic breakdowns that really is establishing that we hear you, we are doing something about it in response to what you shared because we value you. That ultimately, to me, stands out as a culture in a setting of priorities by leadership. We want to hear from you and we want to do something about it. That’s something we see in our work with manufacturers to really drive improvements.
Actually, someone who joined the show, his name was Tom Shorma, he’s the former CEO of WCCO Belting, he told a story about how they had some very, very pressing business goals, and they didn’t really have the resources, the workforce to accomplish that. They approached their workforce and they said, “We’re going to ask for 20% more from you because our goals are essentially to produce 20% more.” They started first by giving their people 20% more. They didn’t wait until the goal was accomplished. They said upfront, “We’re going to ask 20% more of you, so we’re going to give you 20% more.”
The secret to their success, they ended up accomplishing their goals within three years. Originally, they were setting it for five years. What they found led to that success was driving better engagement from their frontline workers, hearing the ideas that they had to make improvements, implementing those ideas no matter how small or minute or even in some cases insignificant they seemed, because those small ideas and responding to them led to another idea being proposed by the employee, being shared, being acted on, which led to another idea, which started to change the culture in one that really focused on empowering people.
A byproduct of that was not just that they were able to achieve that 20% additional throughput at multiple facilities, it was the fact that retention was going up and it was like all of their new recruits were referrals and they weren’t struggling on the recruiting front because people were saying, “Hey, this is a good place to work,” to their connections and inviting those people in, and those people were experiencing the same thing.
That’s one of the takeaways I had from what you shared about really understanding is this an isolated incident, is it a systemic incident, and regardless, demonstrating in either case that you’re hearing your people and that you’re doing something about it. The best way I think we can describe that is culture. Dan, based on your experience, how does culture impact employee engagement?
Dan: It’s an interesting question, and I think that actually in my mind, at least culture in employee engagement is a loop. It’s not that culture impacts employee engagement, it’s the culture which impacts employee engagement, which impacts culture. A great culture that encourages employee feedback, encourages employee well-being, cares about their associates, leads to a higher engagement, a higher likelihood to refer your friends or family members, a higher intent to stay, a higher connectivity to the overall company’s mission and to your coworkers and leaders, which ultimately then drives a healthier culture.
Because now I’m referring my friends who also feel more connected to the organization and will have better retention. Because I’m now, again, more engaged as an employee, I’m more likely to retain. Less turnover creates less dissatisfaction, creates less safety risk, creates higher average productivity, creates more profitability, which allows wages to go up. It’s not like a good culture creates good employee engagement. A good culture creates good employee engagement, which creates a good culture, and round and round it goes.
Obviously, that’s the upside of the cycle. The downside of the cycle is also very real, where a poor culture drives poor engagement, drives high turnover, drives morale down, drives profitability down, drives wages down, drives turnover up, drives overtime up, drives temp usage up. You can have that cycle work for or against you, but it’s always a cycle in one direction or the other.
Josh: I can totally appreciate the idea that culture and engagement are really two sides of the same coin at that point. By focusing on one, the impact should be felt in the other, thus driving that continuous loop that you described. I totally agree with that. That makes complete sense to me. Now, for manufacturers who are seeking to reduce turnover rates, I’d love for you to talk to us about explicit steps that you would recommend they take based on your work with manufacturers. Is there a process that you see people commonly go through as far as discovery to figuring out something? Just talk to us about what people can actually do to reduce turnover rates.
Dan: I think the first step for a manufacturer of any size is honestly just to decide that you care. Not just, oh, we care about turnover because it’s expensive, but like, we care about being a better place to work because that’s what would be right for our people, which is also what’s right for business for sure. It’s a really good double-bottom-line opportunity in that sentence. The first step is to decide that you care, decide that you want to be their employer of choice, you want to be a great place to work, and you want to do right by the employees who are putting in their livelihood to make whatever it is that you’re producing and selling.
The second step is to understand their problem. Now, this could be asking every GM what’s going on. It could be implementing a platform like WorkStep that automates that process and provides database answers. It could be something in the middle like, let’s go do town halls around the country and just collect the feedback and then make some guesses based on that. Decide you care, understand their problem, and then take strategic action, whether that be on the most important thing that impacts everybody or whether that be, hey, there’s actually 18 small things that impacts almost everybody, and it would be easier to knock those out.
Then, honestly, you just keep going. That’s actually, fortunately, or unfortunately, a never-ending loop which is you care, you understand their problem, you take an action, you measure whether that action is working, and you go right back to understanding their problem again because you’re never done here with being a better place to work just like you’re never done improving your processes and your plans. You’re never done trying to grow.
You’re never done trying to improve profitability or improve safety. These are always on-processes, and employee engagement and satisfaction is the same way. It’s a loop that you’re always investing in because you always have the opportunity to be better.
Josh: That was such a powerful statement, you’re never done being a great place to work, and then you compared it to the continuous improvement process that is always applied. Well, not always, I shouldn’t say, frequently applied to improving processes or really understanding here’s the result that we’re getting. Why are we getting this result? Let’s dig into the factors contributing to that result. Let’s take action to improve that result. Let’s measure the fact– You’re really talking about that whole Plan-Do-Check-Act, the PDCA lifecycle type approach.
I always appreciate it when people can tie these topics to the things that people are already doing. That’s exactly what I’m hearing from you. You really are just continuously improving your place of work, and you’re doing that by understanding what is the problem. What is the action that needs to be taken? Is the action having the expected impact? If so, great, how do we do more? If not, then what do we need to change to make that happen? Again, it goes back into that circle of action.
I really love that you broke that down. Now, I’m curious if you’ve seen if there’s a difference between a realistic expectation for the amount of change you can make as quickly as you’d like to make it. What I mean by that because I know that was a terrible way to phrase the question that I’m trying to ask. You broke down earlier in the conversation that for new employees in particular, 25% are leaving within two weeks, 50% are leaving in 40 days, 75% are leaving in 95 days.
If I were a manufacturer and I wanted to do something about that 25% in two weeks, what’s a reasonable expectation to make an impact? Is taking that down to zero reasonable, or are we talking taking it down to 24.5%?
Dan: First of all, it depends on where you’re starting from. If you are starting from a place of 8% annualized turnover, to make large improvements is going to be more difficult than if you’re starting from a place of 180% annual turnover. When we engage with companies who want to invest in being a better place to work, we typically see annualized turnover rates reduced by in the sort of 20% range. Of course, that can be as wide as 10% to 40% turnover reduction.
We’ve even seen as high as 50%, but again, if 50% turnover reduction could be 8% goes to 4%, it’s not going to feel as meaningful than if you go 180% to 90%. Again, in every case, that’s going to help your company operate more efficiently and more profitably and also be the right thing for your employees. It depends how bad the turnover is to start with. The good news is you either have a low turnover or you have a really great opportunity to be a better place to work. There’s always good news.
Josh: Well, in those results that you brought up, anywhere from 10% to 40%, even a 10% improvement is a significant improvement. To your point, it depends on scale, size, starting point, et cetera, but being able to get anywhere from a 10% reduction in turnover to a 40% reduction in turnover, or on average, a 20% reduction in turnover year after year, that’s a pretty impressive feat.
Dan: Yes, at the end of the day, while we at WorkStep would love to take all the credit in the world for the success of the partnerships we build with our customers, it’s not the software that ultimately decreases turnover or increases productivity or increases employee NPS or referrals. What software does is, it ensures employees feel heard. It ties feedback to outcomes to show what feedback matters. It helps supervisors and leaders engage with feedback to ensure that people feel heard.
It ultimately helps them take action and measure the impact of those actions. It’s the companies themselves, the manufacturers who are driving that turnover rate down by addressing management concerns or career growth challenges or safety concerns. At the end of the day, it’s the customer who deserves the credit or the manufacturer who deserves the credit for becoming a better place to work.
Josh: Completely agreed. I think that that’s such a strong statement. The tools are there to help speed it up, in this case, like we talked about. Without the right tools, you can still get to the bottom of your turnover problem. If you are willing to commit the time and the resources and the effort to get that information, you absolutely can. Tools help speed that up, but at the end of the day, just gathering data is not enough to change anything. The people have to take the action.
I think that was such a spot-on call-out and such a great one to really set appropriate expectations. No single tool is going to solve this problem for you. It has to be your intention as an employer to really get to the bottom of it and do something about it. Tools can help, but they’re not going to solve the problem. Such a great call-out. Dan, I’d love for you to tell us how our listeners can continue the conversation with you.
Dan: Absolutely. They can always reach us online at workstep.com or anybody can reach me personally at email@example.com.
Josh: Great. Are you active on LinkedIn or any social media channels?
Dan: Certainly. WorkStep is active across all of the normal social media channels, but I can be reached on LinkedIn as well.
Josh: I like how you clarified that WorkStep is active on social media. Are you not a social media guy?
Dan: Not really. No. Not more so than I need to or should be to serve the dues of my job.
Josh: [chuckles] I feel that. I am also one that’s not one for social media, so we’re very like-minded there. Now, we talked about a lot of great data points. A lot of this data you have available with information on your website, is there any other resource you recommend our listeners following to get these types of data-backed insights that you shared on the show today? Any recommendations for how to get that information?
Dan: Well, as far as WorkStep’s insights go, we publish them all on our blog, which is just at workstep.com/blog. We also push them out when updated via our email list and our social channels.
Josh: Okay, great. Speaking of WorkStep, how can WorkStep help?
Dan: WorkStep helps large manufacturers of all types better understand employee sentiment, their turnover drivers, ultimately take the right action at the right moment to improve the employee experience, which as we’ve discussed, drives turnover down, productivity up, safety risk down, and ultimately, profitability up.
Josh: Awesome. Great. Well, Dan, thanks so much for joining us today.
Dan: All right. Thanks a lot for the time, Josh. I enjoyed it.
Josh: Same here. A huge thank you to Dan from WorkStep for joining us today and for his yearlong patience in making his way onto the show. Now, what I found surprising about the data that Dan shared was that pay was not the top driver of turnover. What about you? What did you find surprising about the data that Dan shared? Dan also dropped this truth bomb that’s worth repeating, you’re never done being a great place to work.
In manufacturing, we dig into the root cause to take corrective action, and we work to continuously improve many different aspects of the business. Why would this be any different? Like Dan said, tools can help manufacturers engage their workers, but the tools aren’t what make the actual improvements, people do. Really, when it comes down to continuously improving your place of work, all you really got to do is empower your people.What the data REALLY says about turnover on the frontlines of manufacturing!