Fernando, your milking parlor supervisor, had a meeting with you yesterday afternoon. High employee turnover is among the issues he is facing. Almost 100 percent of his milking crew has turned over in the last 12 months.
Fernando has been with you seven years. He is a loyal and trusted employee who has even adopted your management philosophy over the years. It is hard on the people that stay longer. It is costly to be training people over and over while Fernando could be focusing his efforts elsewhere.
Sound familiar? It is the situation on many dairies.
In many industries, the costs associated with employee turnover are significant; they include losses in productivity, prior to turnover as well as after the turnover; safety problems; difficulty in recruitment, selection and hiring; and increased costs from orientation and training of new employees.
Our industry is not alone. Workforce experts often speak of turnover costing about 150 percent of an employee’s annual wages and as much as 250 percent for employees with managerial responsibilities.
Bureau of Labor Statistics data show turnover costs in manufacturing and construction (the industries closest to agriculture) are close to 75 percent of the highest turnover costs in any industry (found in information management) and double the lowest turnover costs of any industry (leisure and hospitality).
The high turnover costs in dairies are partly due to the nature of dairy management. Dairy production cannot be downsized temporarily in response to labor shortages, as may happen in retail or manufacturing. When a worker quits, a substitute must be found to do the work until the worker is replaced.
Labor management challenges (e.g., poorly designed pay for performance systems, ineffective supervision, interpersonal conflicts among dairy employees) may cause unwanted turnover. Dealing with these underlying difficulties can help dairy managers reduce turnover and improve worker morale and productivity.
For some workers, job dissatisfaction has to be quite high before they will seek other employment because changing jobs can also be traumatic.
The period before a worker’s separation may be accompanied by reduced productivity and increased absenteeism. This absenteeism is sometimes physical (worker doesn’t show up) and at other times mental (worker is present, but mind is somewhere else – sometimes described as “quit and stayed”).
Turnover levels
How high of a turnover rate is too high? Or how low is too low? Experience tells us it is not healthy to have zero turnover in a business. Let’s take a look at the two main types of turnover – voluntary and involuntary – meaning, respectively, the ones that left on their own and the ones you let go.
As you approach your business with the desire to have a winning, high-performing team, you might be faced with having to get rid of some people during the year due to a lack of performance or a lack of attitude or a lack of competency. I consider a healthy turnover rate to be 10 to 15 percent during the year.
Measure it so you can manage it
I find it surprising how many dairies still don’t measure turnover rate. Anytime an employee leaves your company, we define it as turnover. Employee turnover is a measurement of how long your employee stayed with your company and how often you have to replace them.
Employee turnover is equal to the number of separations in a year divided by the average number of employees. This is stated as an annual rate. For example, if you lost three employees during the year out of 18 total employees, your turnover rate would be 16 percent.
Now let’s say you have 28 employees, 16 of which work in the milking department. If you hire and fire 16 people in a year on your milking shift, your turnover rate in the milking area is 100 percent (i.e., 16 / 16). You also have a 57 percent turnover rate on your operation (i.e., 16 / 28).
But if you have 100 percent employee turnover in the parlor, and also have four out of the other 12 employees also as turnover, then you have a 71.4 percent turnover rate for your entire operation (i.e., 20 / 28). In my experience, 40 to 50 percent turnover rate is the typical rate on dairy operations today, taking into account all departments within the dairy.
If you only consider the milking center, then the rate is higher. I consider healthy organizations that retain high-quality employees and turnover jobs voluntarily because of poor performance and other issues have turnover rates of 10 to 15 percent.
How is it that we have gotten used to having such high rates of turnover in the very areas of our dairies where our product is harvested before being sent to market? You could say it defeats the purpose of all the effort made by the entire operation up until that point.
However, I also notice dairies are more aware than ever about the importance of the entire employee experience, from recruitment to selection, hiring, on-boarding, training and retention in the organization. Part of that heightened awareness about employee experience includes knowing where turnover is happening.
How much of high turnover is due to lack of a supporting management philosophy throughout the entire employee experience? We explore that next.
Your management philosophy impacts turnover rates
By now, hopefully you have read through and understood the leadership grid I discussed in my Progressive Dairyman articles last year. In those articles, I explained four different management philosophies that evolve out of the concern for people (low or high) and the concern for task (low or high).
You might also remember the stories about different managers, such as Dan, Jeff, Jared and Willie. For your our own good, evaluating your management philosophy or style and its impact on turnover is very important. Let’s look at the impact of the various management philosophies on turnover rates.
The impoverished manager
You recall how the impoverished manager places low concern on people and low concern for task. From the moment this manager, with this philosophy or management style, hires people – they are left to themselves. In the short term, employees with initiative might stay, since they are given some free range to act, but in the long run, they will lack direction and development.
If they stay, the level of engagement will be low to nonexistent. They are just there for the paycheck or waiting until the next job opportunity comes along. The lack of direction or focus on task and lack of care for people can quickly produce a culture of people coming and going as they please.
New hires will probably be mis-hires because of a lack of emphasis on the importance of hiring right, leading to employees quickly deciding to leave.
The country club manager
Remember the high concern for people but low concern for task in the philosophy of this manager? Well, the entire work experience might start well under this management style, with employees feeling and noticing the care of their manager. But sooner or later, the employee will begin to see the lack of focus on task or feel a lack of direction.
Some may stay – mainly the ones who like being treated nicely. The lack of work focus will not matter to them. Some may leave, saying, “My manager is a nice guy, but I just can’t work like this.”
The authority-obedience manager
The low concern for people and high concern for task leaves this type of management style in a quandary. Work needs to get done, no question, but from the start of the work experience and during the first days or weeks, the high focus on task and low concern for people may disengage employees right off the bat.
Some who don’t need to be too cared for or may prefer to be left alone to do their work may stay, but in the long run, there may be a feeling of emptiness or lack of humanity, impacting turnover later on.
The team manager
The team manager’s high concern for people and high concern for task may make him one with higher retention rates compared to the other managers mentioned above. This management philosophy has a balance of high concern for people and tasks.
However, in the push for high performance, some employees may still be dissatisfied with this management philosophy.
The middle-of-the-road manager
The middle-of-the-road manager in the leadership grid we have been considering does have the management skills and self-awareness to increase or decrease concern for people and concern for task depending on the situation or the person he is working with, leading to a more sophisticated management style that focuses on influencing people so they develop, engage and stay in the business for longer periods of time.
Conclusions
You may have heard already that people don’t leave jobs – they leave managers. If you consider that close to 50 percent of an employee’s engagement with their work is driven by the relationship with their manager, and you add the fact that most people, when interviewed upon their exiting the company, say they left because they just couldn’t make it work with their manager, then you realize the attention you have to place as a manager on employee turnover rate.
If you have a high turnover rate, you have to ask: What part of that problem has my name on it? To what extent is my management style impacting turnover on my operation?
ILLUSTRATION: by Corey Lewis.
