Reducing Employee Turnover in a Large Multi-site Manufacturing Company

THE ISSUE

A large North American production firm with over 10,000 employees in 50+ locations across the U.S. and Canada had been experiencing a turnover rate of about 30% per year. The company was very decentralized not only by business lines and geography but also by culture. Employees had little knowledge of or loyalty to the overall company.

Since the total cost of replacing an employee was estimated to be around $10,000, turnover was costing them $30 Million per year. Turnover was also having a negative impact on customer satisfaction.

WHAT WE DID

The company came to us to help them determine the key drivers of turnover so that they could develop targeted action plans. But the company also needed a way to quantify the impact that these plans were having on the company overall, so we designed a statistical model linking key survey data with key business metrics over time.

Knowing that having committed and engagement employees was critical to stemming the exodus, we knew that it was imperative to build employee engagement at the grass roots level. They needed to have specific actionable information not only for each location but also for every work group. Action plans had to be designed and implemented by first-line supervisors.

An employee survey focusing on supervisory leadership and the local work environment was designed and deployed to all locations so that results could be distributed to each supervisor with 3 or more employees.

THE RESULTS

The initial employee survey generated results for nearly 1,000 work groups across the organization and allowed the first-line supervisors to work with their teams to improve the local work environment and increase employee engagement levels in teams. For most groups, the key drivers of turnover were not pay and benefits. Supervisory work facilitation, communication, and teamwork were generally more salient issues.

A follow-up survey administered one year later allowed us to measure changes in the survey scores. By linking these to changes in key business metrics – production efficiency, customer satisfaction, and turnover rates – we were able to quantify the effect that action plans were making.

In one year, turnover was reduced by 2.7 percentage points resulting in a savings of $2.7 Million per year. Just as importantly, customer satisfaction and production efficiency also showed significant gains. Convinced that the survey was providing a valid link to reducing turnover, the company decided to incorporate the survey results into their managers’ bonus calculation. They wanted to ensure that every manager understood their role in employee retention and that they were rewarded for improvements.

The company has continued to use the survey on an annual basis for several years. While most organizations take a top-down approach to organizational improvement, this company showed that a bottom-up approach was more effective for a decentralized work culture.