Navigating Employee Retention in Manufacturing: A Strategic Imperative

In today’s manufacturing landscape, the scarcity of skilled labor makes retaining existing employees more critical than ever. Whether grappling with the lasting effects of the COVID-19 pandemic, addressing the exodus of the baby boomer generation, or navigating internal industry and corporate challenges, manufacturers must grasp the full scope of turnover’s impact and prioritize strategies to minimize its consequences.

Understanding the True Cost

Amidst the ongoing challenges, companies may be hesitant to invest in employee retention due to the continuous aftershocks of inflation. However, it is essential to consider the genuine costs associated with turnover. In a direct financial sense, manufacturers face substantial expenses related to replacement, administration, and severance. The Society for Human Resource Management reported that it costs a company 6-to-9 months of an employee’s salary to replace them. For instance, losing a $50,000-per-year employee could cost approximately $25,000 to $37,500. While immediate monetary impacts are evident, it is crucial to analyze the hidden costs that can snowball into future losses.

Indirectly, turnover leads to a loss of knowledge, decreased productivity and employee burnout. Exiting employees may lack the time or resources to train their replacements adequately, leading to a knowledge gap and potential frustration for successor employees. This frustration not only affects onboarding staff but can also spread to established employees, impacting workloads, overtime and overall morale. The cumulative effect results in burnout, a negative reputation and a decline in supply chain efficiency, leaving manufacturers with dissatisfied customers.

Strategies for Minimizing Impact

Once the comprehensive impact and costs of turnover are understood, employers must focus on strategies to minimize its effect. While ensuring competitive salaries and benefits is crucial, it is equally important to go beyond monetary incentives. Monitoring employee feedback through feedback satisfaction surveys and exit interviews helps identify corporate weaknesses. Anonymous surveys that are periodically reviewed encourage full employee participation and provide valuable insights.

Lastly, companies should redefine roles, creating clear career paths with ample opportunities for growth.  Companies promoting internal candidates often experience higher productivity. According to a study by the Wharton School at the University of Pennsylvania, internal promotions lead to a 12% increase in productivity compared to external hires.

Make the Commitment

Given the current shortage of skilled workers and the substantial impact of turnover, manufacturers need to urgently commit to robust retention policies. The costs associated with minimizing turnover far outweigh its devastating consequences. The manufacturing industry needs a protective approach to monitor and prevent turnover, ensuring a stable and productive workforce for sustained success.

About the Authors

Devon LaRiccia
Devon LaRiccia
Manager, Taxation Services


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