Utilize new strategies to entice and retain new workers
Labor is proving difficult to find and retain these days; job openings are going unfilled and turnover rates are sky-high. For a variety of reasons, workers aren’t interested in returning to the pre-pandemic status quo—and that means companies have to adjust accordingly. Labor retention and hiring is one of the top problems in the supply and distribution industry right now, and every company is leveraging a different strategy to entice new workers. Amazon is offering $1000 signing bonuses to new employees and is still seeing turnover rates as high as 150%. With that kind of competition, what can you do to entice and retain new workers?
Pay For Performance
The old story of the “carrot and the stick” isn’t entirely accurate. It turns out that the carrot is far more persuasive than the stick—which isn’t surprising. Worker incentive programs are a way of rewarding employees for exceeding expectations in the workplace. But you might wonder where funds come from to support a Pay for Performance (PFP) program. When done right, they are self-funded through efficiency gains. Our customers use Easy Metrics’ PFP framework to ensure success when rolling out PFP programs at their facilities.
Easy Metrics’ PFP framework is designed around these key pillars:
- Rewards tiers are based on fair labor standards backed by multiple metrics and accurate data
- Accountability through individual and small-team tracking, combined with short lock-in periods for maximized impact
- Clear and consistent communication between management and the workers
Everyone is motivated by success; 65% of employees in America prefer performance-based bonuses. From the company’s side, it results in 10-20% productivity increases on average, with outlier cases as much as doubling operational efficiency. Pay for Performance is if properly implemented, a net boon for the company. It promises fair, performance-based rewards to potential employees, consistently rewards existing ones and benefits the company directly. It’s one of the two most effective and direct systemic ways to improve retention and hiring for your company. If you want to learn more about Pay for Performance, you can visit our solutions page, or read our previous article on the topic.
When it comes to recruiting talent, Pay for Performance is a lure to attract candidates that believe in themselves, and want to be individually rewarded for their contribution to the team.
Improve Working Conditions & Camaraderie
Workers aren’t likely to keep working in a facility or for a company that’s forcing them to sacrifice their health with unreasonable demands in the name of productivity. The working conditions in those facilities are unsustainable; this can be seen in Amazon’s 150% turnover rate. Both the physical workspace and the demands on the workers should be kept reasonable; failing to do that has negative outcomes. For example, one Amazon employee developed “bulging discs. . . back sprain, joint inflammation, and chronic pain” as a direct result of the working conditions in the warehouse. During times when retention and hiring are significant concerns, it’s even more important to safeguard working conditions, and not cut corners.
Productivity metrics should be used in ways that are rewarding and that encourage collaboration. Punishing workers for not meeting productivity goals can and will backfire. Amazon learned this the hard way, when in 2019 they fired an employee for “one bad day” where her time on task was unacceptable to them. It turns out that delays outside her control caused the problem. This mistake both sparked a wave of bad press and seeded a “culture of fear” among their workers.
Harmful managerial and workplace culture also has direct consequences on retention and hiring. The New York Times reports that Amazon’s New York City fulfillment center’s internal guidelines even state, “is to create an environment not where we are writing everyone up, but that associates know that we are auditing for T.O.T.” A job with a culture of surveillance, anxiety, and intense pressure is not a job workers will apply for.
If you want to improve retention, it might be a good idea to examine the working conditions and productivity management in your facilities and see what, if anything, could be improved.
- Are you using performance metrics to enhance team camaraderie and positive feedback?
- Are you providing appropriate breaks and lunch periods?
- Are your labor standards based on realistic expectations of performance?
- Are those expectations clearly communicated and well-understood?
- Are you managing reactively, or proactively?
- Do your workers have a voice in their workplace? And are you acknowledging their feedback by mirroring what they say, so they know you heard them?
- Do your teammates feel connected to one other, and supportive of one another’s success?
These are just a few questions you can ask to determine if your workplace is attractive to new hires, and how well it treats existing employees. The previously mentioned Pay for Performance programs also play into creating a positive work environment for potential and current workers.
Eliminate Waste & Raise Pay Rates
Another way to address worker shortages, and therefore mitigate the hiring and retention problem, is to cut excess costs and waste in order to reduce the required headcount in your facilities. By focusing on reducing Missing Time (timeclock hours dedicated to no profitable or necessary tasks) and Indirect Time (time spent on necessary but non-profit generating activities), you’ll be able to accomplish more with fewer employees. This strategy can be employed along with allocating those labor cost savings to bigger signing bonuses, or hourly wages.
Cost to Serve
Eliminating waste and reallocating those reclaimed dollars for employee pay requires one thing: understanding everything about your existing labor costs. Getting visibility into your Cost to Serve by employee, client, product, and process is the first step in understanding your labor costs. Best of all, it requires no change management or costly upfront investment.
Cost to Serve exposes where waste is, so you can drive it out. If the Cost to Serve for a specific process is higher than expected, or higher than average, then you know that process can be streamlined. You will be able to identify waste and correct inefficiencies, which will also directly reduce the amount of necessary labor.
These four strategies are providing the best outcomes for operations teams today. Try them to improve your hiring and labor retention. In a post-pandemic environment, workers want to know that they’re going to be working in a place that properly rewards their time and treats them like valued teammates. If you can deliver on those expectations, you’ll be able to find, retain, and cultivate a team of employees that will build their careers alongside your company, to the benefit of everyone involved.