Use Your Best Assets To Reduce Turnover

June 25, 2007
On the line, high turnover hurts in every way.

Is your production operation losing line efficiencies? Are lost time accidents at an all time high? Is product rejected daily for questionable quality? When everything is running perfectly, is your operation still only maintaining current production levels? Is it difficult to imagine how you can achieve significant production improvements?

In a high-touch labor organization, a primary cause of these poor results must naturally point to your workforce. It's not that you don't have some good people, it's simply that continuous turnover results in too many untrained workers who don't understand the process, the quality standards, the safety concerns, or even how to properly run the equipment. It's difficult to show continuous performance improvement if over half of your work group has been on the job less than a year. Many supervisors have simply learned to accept this handicap. They are frustrated, out of time and out of ideas.

The situation is equally frustrating for employees. For new hires, acceptance by the old hands is guarded. While not always unwelcoming, longer service employees have seen so many people come and go that they are reluctant to invest time in training and developing friendships with new co-workers. Consequently, many new employees start work with a less than warm and enthusiastic welcome. And, with continued high turnover, even longer service employees begin to wonder if things aren't better somewhere else.

Company owners and executives see the impact of turnover in other ways: higher worker's compensation costs, increasing material waste, more products on hold, decreasing line efficiencies, increasing customer complaints, lost sales orders, and more. Although business managers understand that turnover is extremely costly, many don't know what to do about it. Some choose to believe that the labor market lacks an adequate supply of quality workers, preferring to accept that turnover is a necessary, albeit substantial, cost of doing business.

The Problem With Traditional Hiring Practices

In a traditional manufacturing environment, supervisors are under pressure to keep production running. This requires manpower. Therefore, that's often the only criteria: MAN + POWER. If a person can breathe, walk, lift, move, tote, sweep, mix, assemble, or drive, he or she is acceptable.

This approach doesn't identify or hire the best workers. Its strength is its ability to make the most expedient hire, for which the process is self-reinforcing. The interview is short and shallow; it over-values technical experience and fails to meaningfully verify the candidate's claims. Even more troubling, the process doesn't look for or reveal the most important attributes of a high-quality candidate.

Managers and supervisors should not accept high turnover rates. Costly turnover is a problem that can be aggressively and successfully addressed.

A Solution That Works: Employee Hiring Teams

Employee hiring teams take advantage of your best workers to identify and hire the best candidates.

If you ask a traditional supervisor for the qualities he or she is looking for in a worker, you will probably hear things like: related technical and manufacturing experience, good attendance, good attitude or "fit" and a decent work record. The supervisor wants the best people, but often believes he or she must accept the "best available."

Some time ago, service organizations realized that it was better to hire people who, as part of their nature, were polite, positive and liked solving problems for people. These people could be trained on the technical aspects of the job. This approach was much more successful in creating positive customer relations than the earlier strategy of hiring people with the technical know-how and then training them to be "nice" to the customers.

If you put together a small team of your best production workers and challenge them to define what they want in a new co-worker, in addition to related work experience, you will get a long list of additional qualities like: team player, honest, has self-initiative, learns fast, hard worker, etc. Because the current work group will have to train, trust and rely on this person for 8, 10 or even 12 hours a day, the work team's motivation for finding someone with the essential personal attributes is high, often much higher than the over-burdened supervisor's.

Given that the current work group has high criteria and expectations for performance, it follows logically that they should be involved in the selection process. Not only will they maintain that high criteria when making hiring decisions, but by owning the process and decision, they also take ownership of the new hire's success. What's more, the current work group will willingly work short-handed to avoid bringing in someone who doesn't meet their criteria. To them, a poor hire just means lost time in training when that person walks out the door, and lost time in terms of personal productivity, all of which results in having to work short-handed anyway.

Proven Results

Companies who have implemented and supported employee hiring teams experience immediate improvements. First, the caliber of new employees is significantly higher through the teams' diligent and thoughtful hiring process and decisions. This is the first step in advancing a culture that promotes trust and accountability. Second, with a higher sense of value to the organization and a continuously increasing desire to contribute, hiring team members soon start to identify obstacles to retaining people. These insights are invaluable. When this feedback is encouraged and acted upon, the hiring team process becomes the beginning of a true employee empowered culture.

While industry norms for annual turnover range between 14% and 35%, depending on manufacturing segment, turnover in a organizations that use employee hiring teams is as low as 4%*.

Estimates of turnover costs from industry analysts as well the U.S. Department of Labor can range anywhere from 25% to almost 200% of annual compensation. The one thing they all agree on is that turnover is costly -- not only in hard costs, but also in productivity, experience, morale, burnout and lost time accidents. Given the significant financial benefits and the opportunity to create an organization of trustworthy, responsible and highly motivated employees, why would a company use any other hiring practice?

*Note: For statistics on turnover by industry and job, see "Improving Profitability: Survey Report", Woodruff Imberman, Target Magazine Online, Issue 1, 2007

Sue Bingham is Principal and Founder, HPWP Consulting, LLC. HPWP Consulting helps manufacturing and service organizations hire loyal, high-performing employees using the hiring team approach in addition to offering hands-on hiring team and leadership workshops.

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