For decades, manufacturing has faced a people problem, but it is now more pronounced than ever. As developed economies approach full employment and offshoring goes into reverse, employees find themselves in great demand. And that means the sector is experiencing rising levels of staff turnover.
A recent survey found that two-fifths of US manufacturers report turnover rates of over 20%. And Forbes recently reported that the average cost of replacing an employee ranges from half the salary of an entry-level role to 125% for a mid-level position. Replacing a senior executive costs double the often significant salary.
Back in 1913, the workforce producing the Model T Ford was turning over at a rate of 400%. Henry Ford solved this problem by introducing the $5 wage, which almost doubled the daily amount workers were earning. Better pay saw the rate fall to 56%.
In today’s world, retaining employees is about more than just money. Engagement and the opportunity to upskill or reskill play an equal if not even more critical role in the turnover tale.
The latest annual survey of US employees by Gallup found that levels of engagement are rising, with 34% of employees reporting they felt involved in, enthusiastic about and committed to their work – the highest level since 2000. But that still leaves almost two-thirds of people in varying degrees of disengagement. So how can leaders address this challenge and prevent mass erosion, not just of people but also of the value they bring to the business.
From motors to mobility: opportunities to grow
For many employees, understanding and believing in the company’s purpose and being offered an opportunity to participate in programs outside of their traditional role boundaries is a far more compelling reason to stay than a bigger salary or bonus promise.
General Motors is a great example of a company where an engaged workforce is central to the success of its transformation strategy. GM CEO, Mary Barra says she wants to transform the culture at the company from a legacy automaker to something akin to Google and Uber.
As part of a program called GM 2020, the company has introduced what it calls Co:Labs, workshops in which groups from all areas and levels of the business can work together to innovate or solve problems, in areas ranging from project design to performance management.
A consequence of increased engagement has not only been reduced staff turnover but an impressive rate of employee development. Last year 3,750 employees were promoted to new roles, 56% of the company’s total new hires.
As well as promoting work-life balance, the company offers development programs in partnership with academic institutions such as Harvard, Stanford and the University of Michigan focused on emerging trends in the industry.
GM’s approach to employee engagement is simple: “Generate a positive work environment to drive long-term success by creating a place where employees feel inspired to do their best work and feel valued for doing it.”
The company also has a policy of telling employees the true reasons behind business decisions and strategy rather than trying to shelter them from change.
Investing in people by investing in technology
Often, employees feel disengaged because they see their daily tasks as monotonous and laborious and they do not feel stimulated or challenged. This is especially true of employees working in production. For many manufacturing enterprises and leaders, the purpose of technology is to solve this problem, with digital technologies and innovations offering businesses the chance to rethink processes across the enterprise.
To put people first in the process, companies are adopting a Machine FirstTM approach, which gives technology the first right of refusal to perform a task. Freeing people from routine and repetitive tasks to use their talents for more sophisticated jobs is helping push the boundaries of human potential. Companies can develop human potential by giving workers new possibilities for career growth, developing new skills and enjoying smarter work.
As companies spend on technology, it’s vital they also invest in developing their people too. Relying on technology alone to bring about digital transformation will not deliver positive change.
“We are at a point in history where there’s virtually nothing that technology cannot do,” says Çağlayan Arkan, Vice President, Manufacturing Industry at Microsoft. “As important as the technology transformation is cultural transformation.”
Microsoft’s recent study The Future Computed: AI and Manufacturing found numerous examples of how technology can improve staff retention and job satisfaction.
For example, food packaging firm TetraPak has used HoloLens augmented reality technology to enable workers at its plants across the globe to resolve problems with the help of specialists from headquarters who can show them how to complete the task using AR. TetraPak on-site service engineers are now able to work “alongside” the company’s global experts who specialise in the problem they are trying to resolve.
The report’s author, Greg Shaw, a senior Microsoft director, said digital transformations could be disruptive. “How do we make sure that this is not a forced march towards something [people] don’t really understand?” he asks. The answer is engagement at all levels.
Developing people, not just business
Global engineering group EnPro Industries has gone even further, giving human development equal status with growth and profitability. To that end, it describes itself as a “dual bottom line company”.
“We see no trade-off between financial performance and human development. These joint objectives work together in pursuit of growth, for the company, our shareholders and for each colleague,” says CEO Marvin Riley.
EnPro offers employees over 200 training and development programs each year and all staff take part in “Co-Creating EnPro” sessions, each of which is facilitated by a member of the senior leadership team.
The technology-driven company says automation and human development go hand in hand to create financial performance, which in turn creates new opportunities for empowering people.
It’s a great illustration of how the purpose of technology can help solve manufacturing’s people problem by increasing efficiency at the same time as driving staff engagement, making the rapid turnover of staff less likely.