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nGROUP Performance Blog

Understanding the Situation: Employee Impact on Your Business

Posted by David Hair on Dec 3, 2018 4:39:00 PM

Your employees are the backbone of your business. Satisfied, engaged, and high-performing employees can help your organization advance. On the other hand, an unhappy, unengaged, and underperforming workforce can hold you back and have an adverse effect on your competitive positioning. By understanding the current labor landscape and assessing its impact on your business, you can determine what steps you need to take to maximize the potential of your workforce.

employee impact

The Current Labor Landscape

Due to the labor shortage and the fact that the workforce is younger and better educated than ever before, the power is in the hands of the workers. With an unemployment rate of only 3.7 percent in September 2018, workers have the flexibility to move between jobs as they see fit. What’s more: The number of years the average worker stays with an employer remains low at 4.2 years in January 2018, according to the Bureau of Labor Statistics.

One of the reasons for this low tenure is that Millennials want their work to be fulfilling. They challenge the status quo and look for better ways to do things. Think, for example, of the traditional Monday morning meeting that all too often lacks an agenda and accomplishes little to nothing. Millennials prefer structured, effective meetings with leaders, set agendas, and clear objectives. If they can’t improve the situation and a job doesn’t offer fulfillment, they simply move on to the next opportunity.

 

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In the past, employers have been able to tap into the immigrant workforce as a low-cost solution. Today, however, the immigrant workforce is more educated than ever before. As The Economist reports, almost 50 percent of immigrants who entered the U.S. between 2011 and 2015 were college educated. This means that new immigrants are on average better educated than the rest of the population. As a result, they can be more selective when it comes to where they want to work.

These factors make it increasingly challenging for employers to attract and retain talent — and that in turn can prompt organizations to make workforce decisions that aren’t in their best interest. For example, one of our clients maintained a small workforce in order to avoid high turnover. During peak times, workers enjoyed plenty of opportunities for overtime, which allowed them to earn overtime wages. Unfortunately, the business suffered, as it was paying higher wages to workers who were overworked and therefore less productive.

The Impact on Your Business

It should be clear that to attract and retain talent, as well as to maximize the potential of your workforce, you need to adapt to the current situation.

It all starts with evaluating your employee retention rate. If you have high turnover, you need to determine what’s contributing to this attrition. Ask the following questions:

  • Are your workers engaged? Engaged workers are almost twice as likely to stay with an organization than workers who aren’t engaged. Measuring engagement levels is the first step towards developing strategies to retain your current workforce. Leveraging annual engagement surveys will allow you to empower employees by providing them with constructive feedback and clear expectations to help them succeed.
  • Do you pay competitive wages? It should come as no surprise that remuneration is a critical factor in acquiring and retaining talent. As stated before, workers are more flexible than ever and will move for a wage increase of $0.03 per hour. While federal and state minimum wages are the same for each individual, a living wage is a minimum wage a worker must earn in order to maintain a normal standard of living for him- or herself and his or her dependents. As such, it may be helpful to consider a living wage when determining remuneration.

 

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  • Do you actively foster your organizational culture? Your organizational culture comprised the values and behaviors that are unique to your company. Foster an organizational culture that reflects the values of your company so it attracts and retains the type of hardworking talent you need.
  • Do you provide a welcoming work environment? Providing a work environment where employees feel welcomed and supported is key to retaining talent. Management can play an important role in this endeavor. Note, however, that management mistakes— such as daily walk-throughs that focus on minutiae — can result in a hostile, unsupportive work environment that’s likely to drive up attrition.

If any of these factors are out of balance, it can adversely affect the performance of your workforce, which in turn impacts your business. For example, one of our clients experienced high labor costs combined with a culture where overtime was the norm resulted in lower output.

The Solution

So how can you acquire and retain employees, manage labor costs, and increase productivity?

Bob DuronnGROUP’s Chief Operating Officer, Bob Duron, determined that tying production quantity into the cost of labor in a fixed cost-per-unit (CPU) model was the best solution. This involves creating engineered standards that define what a realistic output is. It also involves thinking outside of typical labor standards and keeping the following two points in mind:

 

  • Offer incentive pay. It’s important to create a structured incentive program so employees know what objectives they need to attain in order to be rewarded. In addition, offering employees the ability to know their individual production data motivates them to achieve more.
  • Energize your employees. Build engagement by energizing,motivating and training your employees. These factors combined will result in increased trust in your organization’s leadership, a greater commitment to your objectives, enhanced organizational pride and more enthusiasm for work.

At Taylor Farms, we expanded the full-time workforce and implemented these strategies. Now, the workforce is motivated, engaged, and responsive. Output has increased, and Cost Per Unit (CPU) has decreased from 1.41 to 0.47 per unit.

In short, acquiring and retaining an engaged and capable workforce isn’t just about offering competitive pay — it’s about giving workers control over their own wages and creating a place where they want to work. When you pair these tactics, the results are astounding.

 

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Topics: Increase Productivity, Improve Efficiency, Employee Impact, reduce labor costs, warehouse efficiency, labor shortage, Labor Management, Energize Employees