• Bob Paden

Understanding The True Cost Of Turnover

Over the last several months, I've met with a variety of business owners talking about the difficulty in finding talent to fill their open positions. From CNC operators to engineers, a lot of manufacturing businesses are challenged in finding qualified talent in the now tight labor market.

And while this is important to focus on, what may be even more important in this growing economy with decreasing unemployment to focus on is retention - or said another way, turnover. You may have people focused on filling the bucket with water (talent), but are you looking at the holes in the bottom of the bucket and what is "leaking" from your business?

In one of those recent conversations, someone mentioned talking with a business that was approaching 50% turnover in their manufacturing business. Literally 1/2 of their employees had left in less than a year. Other local manufacturers were "stealing" their employees they said, for just a "few cents more per hour".

After hearing this, I had to ask what they thought of the business they were talking about. Quick answer: "It's a mess!".....Imagine.

So something to consider, tight labor market or not: take care of the talent you have and ensure you are leveraging the best talent within your business - and yes, pay them for it. Reward them for innovation. For thinking out-of-the-box. For helping sell to your prospects during a tour of your facility. And for promoting the culture you say you want (but may not have yet).

Some separations you can live with and maybe even desire. Wrong fit, bad actor, spoiler, poor performance...take your pick. Let them work at your competitor. How much more productive would your business be if your best staff raised their productivity by just 5%...10%? Without the distractions and waste of carrying unproductive weight? And I don't mean productivity in pure manufacturing metrics - but in attitude, in drive, in overall contribution to your business.

Is your culture a mess? If it is, you won't last long in this growing economy. Your best talent WILL leave. And they will be working for your competition. Give that some thought. Which would you rather be - a magnet for talent or the business with a drained bucket of talent and the dead weight at the bottom left over?

The true cost of turnover really isn't just retraining or more recruiting costs. Its the headwind you create for yourself and your business by allowing solid talent to "leak" out of your business. Yes, it may cost you more in salary/wages. But what will it cost you in lost productivity, poor morale and lack of energy and positive culture in your business?

If you need help addressing your culture or your turnover rate, give me a buzz. It doesn't have to be this way.


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