If you are a manufacturer who desires high efficiency with high-quality products and services for your customers, then you know you need good employees to deliver them. Many claim that employees are the most important part of their business. So, it should not be a shock that poor productivity and quality issues are caused by too few employees and too many new employees. How can a company be at its most productive when constantly hiring and training new employees? I know what some of you are thinking at this very moment: “Oh, Todd, we treat our employees very well, and it’s not the company’s practices causing these issues.” But it is all about the employees if you truly want to resolve production and quality issues in any department. High turnover disrupts workflow and hampers the development of a skilled and experienced workforce, leading to lower productivity and compromised quality.
When Comparing to the Industry Net Profit Averages, Companies who have:
Best Employee Practices are Consistently 10% Above the Average.
Poor Employee Practices are Consistently 10% Below the Average.
TDC has Witnessed this Again and Again without Fail.
Industrial engineers are taught that most workers in semi-skilled positions take an average of three years to reach their full potential. Typically, a worker with three years of experience is twice as productive as a new hire. But don’t take my word for it, go ask any production manager how much more productive and higher quality the work of shop employees is when they have three years versus three months. Experienced workers also produce more units per hour at a higher quality standard with fewer mistakes. So how can any department within a company reach maximum output if they have a high percentage of new employees with very little experience? The answer is simple, they cannot.
I have heard my clients say all too often: “Oh, but Todd, how difficult is it to cut lumber or assemble trusses?” To focus on that deceptively simple question ignores the bigger picture. Let me give you an example to illustrate the hand-eye skills needed in the truss manufacturing process. If I am working on my house, adding a new room, or fixing the roof shingles, my wife will know this simply by seeing me at the end of the day. I do not have to say a word to her. Now, why is this? It is simple because, at some point in the day, I will have injured my hands in some way. That’s right, I will have smacked my finger or cut myself. I do not use my hands like this every day, so my hand-eye coordination is poor compared to any shop employee assembling trusses all day. Now, I consider myself a semi-intelligent individual who knows how to perform the different tasks involved in the truss manufacturing facility. (I teach how to do this faster and better for a living!) But do you honestly believe that I, or maybe even you, would be as fast and as competent as your experienced truss assemblers? The same thing applies to your design staff. How much faster and of higher quality standards would component designers with years of experience be compared to someone who barely knows the design software? One should know that it takes a long time to be competent in using design software. If I cannot convince someone that they need to retain competent personnel for the highest quality and efficient output possible, then I truly pity their employees. By far and away, the worst companies I have witnessed with the most problems are always the ones that cannot find and keep the “right” employees or hire enough employees. The “right” employee is a common client term, which refers to the inability to attract and retain highly skilled and dependable employees because their company’s employee practices are less than optimal (and I’m being kind in using the term “less than optimal”).
Here is an exercise everyone should perform within their company: Choose a department, such as manufacturing, and add up the number of positions it would take to be fully staffed. Let us assume it requires 40 different positions, from the lumber pickers to the truss stackers. Now, here is the typical scenario in the USA: Approximately 1/3 of the group has been with the company longer than three years. Approximately 1/3 has been with the group for about one to three years. And the remaining are constantly being turned over because they only last weeks, let alone months. So, this would mean they have 40 x 0.33 = 12 new employees every year. But when you look at the actual hiring, you will most likely see 24 or more new hires per year. So, purely by the numbers, you have a greater than 50% turnover rate. Most companies in the USA have a 100% turnover rate, while in Canada, they have less than 30%. Have you ever stopped and thought about all the time being wasted trying to teach new people how to do their jobs correctly? How about just trying to catch all the mistakes the new hires are making? Any production manager will tell you it costs the company far more than most realize. If you retained just four new hires per year, you would be fully staffed with long-term employees within three years.
If you have a high turnover ratio, you have two problems:
- Recognizing the right employees to keep.
- Actually keeping them happy enough to stay with you.
If you have high new-employee turnover numbers, then it might be that you do not even recognize good employees when they cycle through your manufacturing area. And to top it off, even if you do recognize them, you are unable to retain them.
First, ask yourself this: Do you have to advertise for new hires and put the word out to get new applicants to apply for vacant positions, or do you have a stack of applications already to choose from? If you have to advertise, contact a temp agency, and maybe go to the local unemployment office to seek new hires, then you have problems. On the other hand, if potential employees are constantly asking about open positions within your company, this is a very good indicator that you’re a good employer to work for.
Now you should be asking yourself what are the most important things that employees desire from a company. If you think money is the number one issue, you would be mistaken.
Human resources surveys performed year after year have shown the same results: When asked what the most effective motivation is to keep employees satisfied with their employment—
(From the most important to least from the employee’s perspective)
- Appreciation of Work Well Done
- Being Part of the Discussions
- Help with Personal Matters
- Job Security
- Good Wages (Note that this is not first)
- Interesting Work
- Promotion and Growth
- Management Loyalty to Employees
- Good Working Conditions
- Tactful Discipline
Yes, there are some minor differences when dealing with employee age or gender. For instance, older employees and women rate job security higher in the ranking. Women also rate tactful discipline much higher. As with any survey, this only reveals the results of large groups of people, so individuals may have different priorities depending on their particular wants and needs. For instance, promotion and growth for some employees is paramount when they are seeking higher status and responsibilities. But, notice how good wages are positioned in 5th place in this survey? Survey after survey all find the same results that wages are normally the 4th or 5th in a list regarding employee satisfaction of employment. However, if your company has a high turnover rate and high employee vacancies, the number one reason is usually that you are not paying the correct market wages for the given positions. For more about employee pay issues, see my last article, “Increase Profits and Lower Labor Costs with an Effective Incentive Program for Every Group.”
Okay, now we can recognize all the other things that make for a happier and more content employee. In a nutshell, the best way I can describe the best managers and companies to work for is that they act more like coaches than military drill instructors. A coach is encouraging and focuses on good communication, while a drill instructor is an uncompromising my-way-or-the-highway kind of person. As a rule of thumb, you should be a coach 80% of the time and, when need be, a drill instructor less than 20% of the time. If you review the first two most important things employees want from the employer (appreciation of work well done and being part of the discussions), you will begin to understand that they want the manager to actually take time and let them know how they are doing and what is going on. So, to put it in as simple terms as possible: communicate the good work they do, communicate what is good work, and communicate what the company is doing overall. You may be very surprised that when you talk about future investments in equipment and other mundane things you normally would never discuss with employees, they will respond with great satisfaction because you took the time and appreciated them being part of the discussion. In fact, the aspect of letting others be part of the discussion is normally the one thing most managers fail to do the most. I cannot emphasize this enough: communicate, communicate, and communicate! A daily walk-around while saying a few words with all the employees goes a long way to improving morale. If they are part of a team, then start treating them like a team by talking with them daily.
Believe it or not, what was described is actually part of lean manufacturing because lean manufacturing is all about a team effort to get the work done faster and better. Time and again, I have had many clients actually improve their productivity in every department while reducing overall manufacturing costs. People who have been in our industry for many decades are truly surprised by the improved bottom line when they implement my lean manufacturing suggestions. I hope you have found this informative. Drop me an email and let me know your thoughts.
The TDC team is your best source for learning about proven and practical lean manufacturing best practices combined with industrial engineering principles to keep your company at the leading edge of competitiveness. No one is better at providing your team with proven results for good employee practices, pricing, truss labor estimation, and so many other best-in-class practices. TDC’s tailored solutions are for the client’s specific needs. Go beyond the typical software and equipment vendor recommendations for your operations and do what many have dared to do. Embrace the Drummond Method, and your company can experience cost savings, and net profit gains that usually take months or years can be accomplished in weeks or months, resulting in an average of 3 to 6 point net profit gains for CMs. All areas are addressed, not just manufacturing. Please do not take my word about TDC’s services, though. Read the public testimonials many current and past clients with decades of expertise and experience have been willing to give: https://todd-drummond.com/testimonials/.
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