Transcript OPEAA Expo

How to Recruit, Retain, and
Train Employees in the Outdoor
Power Equipment Distributor
Industry?
Dr. Hokey Min
.
UPS Center for World Wide Supply Chain Management
University Of Louisville
Why Matters?
• 52% of the U.S. Companies reported that their
employee turnover is increasing (Wilson, 2000)
• One in 10 (17 million) U.S. workers were
quitters in 1994, while one in 7 (6 million)
quitted in 1999.
• Cost of turnovers = 93% to 200% of the
quitter’s salary (Cascio, 2000)
• Lost time => lost productivity => lost
efficiency => “Hurt Bottom Line”
Why Matters?
• There is 58% more absenteeism in departments when
employees are dissatisfied than in those where staff
morale is high.
• Sales people are the least committed to a company
(38% plan to leave in 2 years), followed by IT workers
(31%), hourly employees (28%), professionals (25%),
and managers (11%).
• Lack of career development opportunities and
dissatisfaction with the leadership – not low pay –
were the most likely reasons for all workers to
contemplate leaving their jobs. (The Hay Group, 2001?)
The Extent Of the Impact Of
Warehouse Employee Shortages
0
1
2
3
4
6
5.64
ic e
s erv
e
s
u
reho
g wa
n
i
c
r
ou
Outs
ation
e loc
s
u
o
h
Ware
gin
t mar
Prof i
5.22
4.06
3.44
le
mora
e
e
y
o
Empl
v ity
duc ti
o
r
p
tic s
logis
l
l
a
r
Ov e
sm
nteei
e
s
b
A
r
er s e
m
o
t
s
Cu
5
3.36
3.25
3.05
v ic e
0
0.2
0.4
0.6
1 = largest impact; 7 = no impact
0.8
1
1.2
Potential Turnover Cause
• Geographic factor: Job too far; Job relocation
• Personal reasons
• Marriage
• Other employment opportunity: better pay
elsewhere; increase of pay in other industries
• Unsatisfied work hours
• Conflict with management
• To stay home
• To attend schools
Turnover Cost Formula
• For a manager or professional, the estimated
replacement cost is “1.5  the annual salary”
• For a frontline person, the estimated cost is
25% to 75% of the annual salary
• 80% of the turnover cost is hidden (e.g., 13.5
months to achieve the productivity of a mature,
accomplished performer)
-- Performance differential and low morale
(adapted from Hense Bennett of GLI)
Simple Turnover Cost Formula
1. Annual wage = employee’s annual salary  25%
2. Annual benefits = employee’s annual salary  30%
3. Total turnover cost per employee = Annual wage +
annual benefits
4. Total number of employees who left
5. Total cost of turnover = total turnover cost per
employee  total number of employees left
(adapted from Saratoga Institute and Kepner-Tregoe, Inc.)
Cost Of Employee Turnover
EXIT COSTS
• Cost of exit interview
• Cost of existing employee’s time
• Cost of administrative functions related to turnover
• Separation pay
• Increase in unemployment tax
Source: H. Bennett of GLI
Cost Of Employee Turnover
(Continued…)
REPLACEMENT COSTS
• Pre-employment administrative expenses
• Cost of attracting applicants (Job advertisements)
• Cost of entrance interviews
• Testing costs
• Staff costs (review of candidates)
• Travel and moving expenses
• Post-employment information gathering and dissemination
• Cost of post-employment medical exams
Source: H. Bennett of GLI
Cost Of Employee Turnover
(Continued…)
MANPOWER COSTS
• Cost of additional overtime
• Cost of additional temporary help
• Wages and benefits saved due to vacancy
Source: H. Bennett of GLI
Cost Of Employee Turnover
(Continued…)
TRAINING/EFFICIENCY COSTS
• Cost of informational literature
• Formal training costs (e.g., compensation of
trainers)
• OJT (On the Job Training) costs
• Productivity inefficiency during training
PERFORMANCE DIFFERENTIAL
• Differential in performance costs/benefits
Source: H. Bennett of GLI
Annual Turnover Rate
Why Warehouse Employee
Shortage?
1. Rapid Growth of the 3PL Markets
(a) A gradual increase in industrial warehouse space
(e.g., total industrial warehouse space in the U.S. =
6.5 million square feet in 2000)
(b) Increasing demand for value-added services
~ Increased skill level (multi-functional skill
requirements) ~ (e.g., average annual turnover of
20% in the warehouse industry > median employee
turnover in the U.S. of 8.4%)
Expectation of demand for entry-level
employees in the future
47.40%
50.00%
45.00%
40.00%
36.20%
35.00%
30.00%
25.00%
20.00%
12.50%
15.00%
10.00%
3.90%
5.00%
0.00%
Increase
Stay the same
Decrease
Cannot predict
Satisfaction with current quality of
entry-level employee
45.00%
38.80%
40.00%
33.60%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
15.80%
6.60%
5.30%
5.00%
0.00%
Very
satisfied
Smewhat
satisfied
Neither
Somewhat
satisfied nor dissatisfied
dissatisfied
Very
dissatisfied
Why Warehouse Employee Shortage?
(Continued...)
2. Declining Labor Pool
(a) A slow growth rate in U.S. labor force
Annual Growth rate
1982-1993
1994-2005
1.40%
1.10%
Total Growth
1980-1985
1986-2000
Source: US Bureau of Labor Statistics
(b) Lack of interest in less “glamorous” jobs
31 million
21 million
Time required to find the right
warehouse employee
60.00%
51.30%
50.00%
40.10%
40.00%
30.00%
20.00%
7.20%
10.00%
1.30%
0.00%
One month or
less
Less than 6
months
6 months to a
year
Over a year
Why Warehouse Employee Shortage?
(Continued...)
3. Poor Working Conditions
(a) Demanding working hours and Higher rate of
work-related injuries
Industry
Average weekly
working hours
Industry
Frequency of work-related
injuries
Warehousing
40 hours/week
Warehousing
10.0 per 100 full-time workers
All Private
34.6 hours/week
All Private
7.1 per 100 full-time workers
Source: US Bureau of Labor Statistics (1998)
(b) Non-competitive pay scale
(e.g., $11.16/hour for public warehousing vs. $12.77 for all private industry)
Obstacles To Effective Warehouse Employee
Recruitment and Retention
1 = extremely serious; 7 = not at all serious
Work ethic
60.3
Tight Labor market
80.3
Lack of qualified labor
52.3
Loyalty
Rising pay and compensation
43.3
25.3
Increased skill requirement
9.3
Irregular working hours
23.4
34.4
Lack of job incentives
18.4
Lack of training program
Seasonality of jobs
93.5
Location of facility
15.5
6
5
4
3
2
1
0
Key Findings
1. Warehouses with a larger number of fulltime employees tend to have the higher
turnover than those with a smaller
number of full-time employees.
2. Mega-warehouses tend to have the higher
turnover than warehouses with smaller
square footage of space.
3. The severity of warehouse employee
turnover has little to do with the starting
salary of warehouse employees.
Key Facts
• Turnover is likely to be higher in rapidly
growing firms.
• Bureaucracy or autocracy increased
turnover. (Barron et al., 2001)
• Turnover is caused primarily by poor
supervision, a poor work environment,
and inadequate compensation. (Hinkin and
Tracey, 2000)
Key Findings (continued…)
4. Warehouses that stress job security for
their employees tend to have the lower
turnover than those that do not.
5. Warehouses that nurture family friendly
atmosphere for their employees tend to
have the lower turnover than those that
do not.
Key Facts
• Pay satisfaction is not significantly
associated with turnover.
• Household main-income earners would
be less likely to exhibit turnover behavior.
• Part-time employees still may leave the
organization despite being satisfied with
working conditions and jobs. (McBey and
Karakowski, 2001)
Key Findings (continued…)
6. Warehouses that use a referral bonus
program more frequently for their
employee recruitment tend to have the
lower turnover than those that use it less
frequently.
7. Warehouses that use a word-of-mouth
recruitment method more frequently for
their employee recruitment tend to have
the lower turnover than those that use it
less frequently.
Key Facts
• Rehires, walk-ins, and referred employees
had lower turnover than the ones drawn
from hiring agencies and newspaper ads.
(Gannon, 1971)
• Employees hired via referrals tended to
have long tenure and recruits hired via
newspaper ads and employee agencies
tended to have the shortest tenure. (Decker
and Cornelius, 1979)
Frequency of Use of Warehouse
Employee Recruitment Methods
Word-of- mouth through employees
94.2
Assistance from local employment agency
91.3
Advertising in newspapers
84.3
Referral bonus program
Advertisement in professional magazines
42.5
3.6
7
6
1 = frequently used; 7 = rarely used
5
4
3
2
1
0
Potential Solutions
1. Employee = “Internal Customer”
(a) Personalized attention
• Determine What motivates each warehouse employee
• Figure out What are important to each warehouse employee
• Key immediate supervisors into their workers
(b) Reward managers/directors for their people
management skills
Potential Solutions (Continued...)
2. “Hire Tough, Manage Easy”
(a) Realistic job previews: Identification of “dedicated”
workers (Recognition/Reward for work ethic)
(b) Target “non-traditional” recruits
•
The labor force with an age group of 45-64 will grow faster than
other groups over the 1998-2008 period.
•
The women’s share of the labor force will increase from 46% in
1998 to 48% in 2008.
•
The Asian and Hispanic labor forces are projected to grow faster
than other groups, 40% and 37%, respectively during the 19982008 period.
(c) Ensure job security
(d) Multi-functional training for value-added services
What is a Realistic Job Preview (RJP) ?
RJP gives a prospective employee accurate,
unbiased and honest information about the job
so he/she can make a better job choice and
reduce subsequent dissatisfaction and turnover.
What is a Realistic Job Preview (RJP) ?
(Continued…)
Main Objectives
1) Stimulate “self-selection” among job applicants
who are most likely to withdraw
2) Change the expectations of new employees to be
more congruent with what they encounter later
3) Prepare individuals to cope with the unpleasant
aspects of the job
4) Provide more complete information about the
job
(Reilly et. al , 1981)
Four Key Issues…
1) How to present the negative aspects of the job?
2) When to present the negative aspects of the job?
3) How to clearly convey job descriptions to
applicants instead of ambiguous terms open to
individual interpretation?
4) How to lower job expectations for newcomers?
RJP Tips
• Present the positive aspects of the job first
• Provide a moderate degree of negative information
(e.g., amount of time on the road, hours of work,
physical working environments, boredom)
• May show how current drivers deal with the negative
aspects of the job and how the company will help them
cope with such aspects
• Provide RJP during recruitment, not during orientation
RJP Tips (Continued…)
•
Install RJP as a component of the company’s
normal recruitment process (“Make it policy”)
• Use multimedia (e.g., brochures, audio-visual
methods, descriptive materials) for RJP (“Talk is
cheap”)
• Provide specific information on starting salaries,
fringe benefits, hours of work, hours on the road,
career advancement opportunities, degree of
supervision, etc.
Potential Solutions (Continued...)
3. Minimize “Role Stress”
(a) Assign tasks to your employees with adequate
equipment and resources
(b) Clarify the criteria for pay raises and promotions
(c) Ensure clear policies and guidelines
(d) Switch schedules to accommodate employee’s
family duties
(e) Permit personal phone calls to check on family
members
Potential Solutions (Continued...)
4. Motivate Employees through Training
(a) Offer cross-training opportunities that lead to career
development and personal growth
(b) Train both supervisors and floor-level workers
immediately when new technology (e.g., RFID) or
systems (e.g., WMS) are implemented.
(c) Adopt standards and methods derived by employees
to enhance employee participation in the decisionmaking process.
Potential Solutions (Continued...)
5. Conduct “Thorough” Background Checks
(a) Perform a criminal check.
(b) Check the visa status for foreign nationals.
(c) Check into academic claims (as many as one third
of claimed college degrees are false).
(d) Do not skip background checks at the executive or
manager level (Beware of white-collar crime).
Potential Solutions (Continued...)
6. Leverage Labor Standards to Increase
Productivity
(a) Guesstimates: An educated guess at how long it
takes to do a particular job.
(b) Historical standards: A measure of how long it has
taken in the past to perform a particular task.
(c) Engineering standards: a scientific measure of
how long it should take to do the job with the goal
of discovering the way to do the job with the least
amount of effort in the least amount of time without
compromising safety or quality.