How to prevent manufacturing employees from quitting

Why do employees quit theirs jobs a metal fabrication shop? They might have found a job that pays more, or they might not get along with their boss. Quite often, it’s both. Getty Images

2006—the good old days. I had just joined a company and was invited to the plant floor to join a retirement celebration, and about 30 of us crowded to share best wishes. Bill was retiring after 45 years with the company, a monumental achievement. I was then shocked when the plant manager bragged that Bill had run the exact same Blanchard grinder for the last 40 years.

Bill was a craftsman as there is an art to running a Blanchard well, and the steel is beautiful when finished. I wished Bill well and haven’t stopped thinking about that day ever since. He certainly had pride in his work. How did he have such dedication and perseverance? Will we even see this again?

We once again find our industry in a labor shortage, but that has been true for most of the past 20 years. Skilled workers are scarce, and entry-level hires often are not ready for the most basic tasks. Even worse, we’re losing good veteran workers as well as younger employees with real potential. Employee turnover is very costly. A fabricator pays for it in lost production, lost knowledge, and finding a replacement. Why do hourly employees quit unexpectedly, and what can you do to prevent it?

Money Talks

Why do employees quit? The No. 1 reason they give in exit interviews shouldn’t be a surprise. The next job pays more—sometimes significantly more. It is too late to correct the pay scale when an employee resigns, unless you can accelerate a truly pending promotion, but even that is not a good practice. It’s also not wise to build up the base pay excessively for all employees when times are good.

That said, certain compensation-boosting actions can foster strategic wins over the long term and, ultimately, reduce employee turnover. These include the little things: Gift cards, company T-shirts, and baseball caps can help build a bond with the company and provide a small financial incentive.

But you also have to share the wealth. Again, money talks. Try implementing a gainsharing plan for hourly employees with payout metrics that include productivity, on-time delivery, and profit. You can make the payout quarterly so the amount is enticing and rewarding.

Most important, you need to pay for skill. The few operators who can make complex, expensive machines hum are nearly priceless. Ask your controller to calculate the hourly value (not cost) of your top machines, and compare that to the labor rate. Forty years ago plant overhead rates ran about 250% of labor, covering all plant costs fully. Now an operator paid $30 an hour runs a machine with an hourly rate (which includes the profit from it) of $500. That’s five times, or 1,500%, the operator’s hourly wage. You need to pay a premium, both for top operators and top machines.

What’s Going On?

An employee with only a weak connection to the company will find it easy to disengage and, ultimately, leave. Everyone might think they have little time and energy to do the little and big things to maintain relationships and engagement. HR is overwhelmed placing ads, screening candidates, arranging interviews, and following up to support a hiring blitz. New hires can get lost in the shuffle, and veterans can sense the chaos and frustration.

When poor communication pervades an organization, more employees quit. Concerns over company stability, employee appreciation, and work conditions ignite a fire like kindling soaked in gas. Gossip and rumors can fill a shop quickly, breaking the trust and confidence built over time.

Shop floor veterans can be informal leaders among co-workers, but such informal leadership does not carry well to off shifts or new hires. People want to know what’s really going on. They want the truth, and they want to hear it from those at the top.

Two-way communication, if done properly and regularly, builds goodwill and engagement. Hourly employees deserve a chance to ask questions and voice concerns. Of course, they can’t do this easily during daily operations, so here’s where town hall meetings can play a critical role.

Conducted two to three times a year for each shift, town hall meetings should share key company goals and metrics. They need not cover every issue in detail, but they should cover the company’s progress, challenges, and safety practices.

Update everyone on your closest competitors and show the correlation between long lead times and lost business. When lead times grow, customers start placing their orders elsewhere. Show metrics that describe the total time for orders (from quote to cash) and on-time delivery. Work the group to get questions, though the questions might not come until trust is built. Be careful of a long PowerPoint in a dark room; you might hear snoring halfway through.

Beyond the town hall meetings, birthdays and anniversaries are good times to single out employees and make them feel part of a bigger cause. Also, make sure new hires are introduced to everyone, both in person and in a special section on a bulletin board.

Recognize a good month, or at least a good quarter. A cheeseburger is a well-earned reward for company success, especially if cooked by the bosses. Baseball or amusement park tickets are a nice reward for a top department or group of employees.

Look in the Mirror

Of course, you can’t reduce turnover with just a cheeseburger and PowerPoint. You need to do more, and you can start by taking a hard look at your management team.

Most companies have one or two leaders (and no more, we hope) who make us cringe with their personnel practices. They can be rude, difficult, or just lousy supervisors. They fight goal-setting and performance reviews. Employees know to avoid them, and no one comes to them for career guidance and support. We know they are a problem but hope they will get better. Even worse, we justify their approach as being tough or firm.

I knew a production supervisor who was a legend within the company, starting as a machine operator and working long hours and odd shifts for years. After years of service he was rewarded for his dedication with a promotion to production supervisor. The transition was quick. He could run a machine like no one else, so he should be able to run the department, right? Company leaders assumed that 15 years in the plant would automatically prepare him for a leadership role.

At first he seemed effective. He helped operators set up machines and solve problems. Then personnel issues arose, especially with new hires or employees transferring to his department. He had a short temper and verbally abused the people he supervised. Over the years a few operators quit and others asked to be transferred. The problem peaked when he actually threatened to kick the ass of an operator who disagreed with him.

On the verge of firing him, I personally worked with him on his behavior and approach, and he improved enough to keep his job. But so much damage had been done over the years, and I wish we had acted sooner.

An interesting footnote: Bill the Blanchard grinder worked with him and for him and never raised a concern. You might ask why more employees can’t be like Bill. But it’s not as if the shop 40 years ago was full of Bills, all focused on their craft and indifferent to hard-driving bosses. Regardless, focusing only on the past—complaining and wishing for the good old days—just wastes time. Instead, ask what managers can do to make their teams more successful today.

Metrics for Management

Years ago I worked at a Midwest tool builder that unfortunately needed to downsize after a sales downturn. The division president, whom I consider to be an outstanding engineer and leader, offered a short list for review. At the top of the list was his maintenance supervisor who had been with the company more than 20 years. Why was he let go? While that supervisor knew how to maintain machines, he was a lousy manager, and his employees didn’t like or respect him. I questioned why he was still with us and the response was familiar: “He has been with us a long time and is probably going to retire in five years.”

When we finally let him go, the feedback was clear: Maintenance employees were more productive and much happier. I wonder how many more years we would have continued with him if we were not forced to cut back?

You might measure throughput and machine efficiency down to the second, but do you measure the quality of leadership? Try force-ranking your managers and supervisors on how they motivate, direct, and develop their teams. Who has gotten promoted, and how often do promotions take place within the group? How have employees’ roles changed? Conduct employee satisfaction surveys annually to highlight company- and department-level results. You can also review the exit interviews for the last year and group them by cause, seniority, and department.

I am not suggesting that you follow Jack Welch’s lead and “rank and yank,” terminating a few bottom performers. Still, you need to make sure those at the bottom still follow good leadership practices, both for the groups they lead and others in the company. Some will improve with training and coaching, but others who deny their status and resist counseling may be better suited working for another company.

Company Values

When leaders perform strategic planning and establish company values, they normally keep the list moderately short. Some lists might include overall values like integrity and trust, while others might focus on employees. Those employee-centered values often describe what the company expects from them, like dedication and hard work. That’s fine, but the best values describe what the employee can expect from the company. Safety, of course, comes first, but other values might include mutual respect, employee development, and recognition. Are you living up to them? Are you working diligently to honor them?

If your company has not developed a list of core values yet, get the senior management team together for a couple of hours and start with the employee-focused values. How do you want to treat your team members? The values should be clear, honored continuously (not just when convenient), and never compromised.

Leadership Leads

In recent years Eric Borman, president of Ferndale, Mich.-based Progressive Metal Manufacturing—a longtime member company of the Fabricators & Manufacturers Association (FMA)—has been leading his team in adopting numerous employee engagement programs. These include a gainsharing plan, an enhanced new-hire orientation, even a mentoring program. He also dedicates a significant portion of his day to walking the plant floor, being visible, and talking with his production employees.

“It comes down to leadership,” Borman said, “showing that we care and know the employees.”

Such leadership has never been more important. After all that shops have been through during these past two years, they now are fighting to keep employees from being poached. Strong leaders meet big challenges head-on and build practices that make their company better.

Hiring and retention challenges aren’t going away anytime soon. Fabricators that improve their compensation and communication practices will attract and keep the best talent. And in this seemingly never-ending tight labor market, companies with the right talent will have the edge.