Table 1. Recruitment cost
Finding viable solutions for employee turnover is a main concern in the apparel manufacturing industry. Since employee turnover cannot be completely eliminated it's important to find out to how it can be minimized. Importantly in the present context, when labor is considered as a resource rather than a cost, the measures taken to do so may vary depending on the size of the operation. The apparel manufacturing industry is highly labor intensive and by minimizing turnover helps improvements in productivity, reduction of recruitment cost, prevent skill drain etc. Especially in a highly competitive environment: local and global, it is essential to search for more and more ways in cutting down costs that contribution from labor turnover is high among other factors. This paper discusses reasons for labor turnover and suggestions to reduce turnover & improve retention with a proactive approach.
Many people employed in various organizations tend to look for better prospects in their employment all the time. This may be due to rising cost of living and the need for various other benefits necessary for them. However, due to human nature, many people are not satisfied with what they get in their current employment and are looking for greener pastures. Most are in the lookout for other employment prospects offered by other employers. Usually, they can bargain for better employment prospects including higher salary because of the experience gained by them already, while in the current employment. This situation leads to employee turnover. Due to this situation, even though the employees may benefit, the organization has to suffer in the long run.
As a result, an organization may lose the services of personnel and skilled workers they already have trained over time. Recruiting new people and training them over a period of time may affect the productivity of an organization in a critical manner. This situation is critical in the apparel industry. Therefore, employers should make every effort to retain the existing labor force and if that is not possible, try to minimize the employee turnover as far as possible.
As this is a labor intensive industry, due to the employee turnover, the industry is facing difficulties in meeting the targets and deadlines in this extremely competitive industry. Therefore, we should carefully look into the reasons behind this phenomenon and try to minimize the turnover as far as possible.
A study has been undertaken to find out the actual reasons behind turnover and its damaging effects on the productivity of different industries in Bangladesh[Shamsuzzoha and Shumon, 2007]. They have found that higher rates of turnover are prevalent in industries where the unemployment rate is lower. It is because of the possibility of easily securing alternative employment elsewhere.
It has been identified that the turnover occurs due to various reasons. Poor relationship with the management appears to be an important reason for leaving a job rather than a higher salary offered at another place [Carsten and Spector, 1987]. Another study has suggested that providing adequate job security could help in reducing turnover [Hutchinson and Purcell, 2004].
The impact of job stress on higher turnover intention has also been studied [Chaturani and Sangarandenya ,2008]. It has been found that this situation is more common on non-managerial employees.
Another study has investigated whether human resources management (HRM) practices are related to the nonmanagerial employee’s intention to turnover [Sugeewa, 2011]. The results of this study have shown a negative relationship between HRM practices with the employee’s intention to turnover.
The turnover not only affects third world countries. Even in the developed countries, this has been a common problem. For example, in Australia, several studies have been conducted to find out the root causes and remedies. It has been found that, the continued increases in turnover flow from the practices of most HR managers [Emery, 2010]. These practices arise from a set of assumptions and beliefs of the human relations school of thought. These studies have found that the assumptions and belief bear no resemblance to the realities of employees and their aspirations.
This study is based on the experience gained at an apparel manufacturing company in Sri Lanka. The entity under study is one of two factories that belong to a medium scale apparel manufacturer. Situated in the Kandy district, Sri Lanka, it is 114km away from the country's capital, Colombo. The factory was first started in 1989 and currently has a capacity of 630 machine operators and 70000 standard hours per month. The factory is highly skilled for jackets, T-shirts, pants, leggings, blouses and certain other types of outerwear.
Research studies on turnover have identified some of the most common reasons as below [Ong, and Twentiarani], 2012].
Exit interviews are done to identify the possible causes of turnover. Table 1 comprises data collected via exit interviews. The results of these have compelled the HR team to re-look at aspects that help retaining employees and reduce turnover.
Turnover affects an organization in many ways. The cost of recruitment is one of the main losses. The following chart will give some idea about the seriousness of the situation. The data were taken from the company mentioned, over a period of 6 months (2013).
Table 1 shows the loss for the company based on recruitment cost only. Here, turnover data of Machine operators are only considered and the cost is much more when considering turnover of staff and executive. The company spends Rs. 2855 on average to recruit a machine operator or a trainee machine operator. Additional cost incurred for training, benefits & other facilities are not captured here.
Table 1. Recruitment cost
It is evident that the financial impact of labor turnover is massive. The cost incurred is a loss as well as an opportunity loss for using the finances to other projects. Furthermore, new employees need to be hired to replace the leavers adding more costs to the recruitment process.
In the apparel manufacturing industry, expertise of sewing operators is calculated in efficiency terms. An operator sewing with a higher efficiency produces more garments than an operator sewing at a lower efficiency in the same time period. Efficiency is an important measurement due to many reasons such as, resources like people raw material, machines and space are well utilized. Excess resources can be allocated for other projects. The factory is able to produce more output with shorter lead time giving a competitive advantage for the company and reducing operational cost. [Bauer, 2010].
The impact on productivity is also substantial. Losing a skilled sewing operator directly affects company's earnings. Employee turnover can harm the overall productivity of an organization and is often a symptom of other issues too. Productivity measures the extent to which the organization achieves its targeted production with the use of workforce, strategies, machinery and assets. Certain other internal problems may arise due to turnover. The replacement process takes time and the employee should follow few formalities before being introduced to the sewing line. Within that time period production is disturbed and having a high turnover percentage will be a never ending problem for production lines.
The newly replaced worker may not be efficient as the previous one since it takes time to adapt to the new system, get to know the co-workers, to be habituated to the new environment etc. During the time of replacement the other workers in the production line face problems due to loss of a worker. Also, after the replacement the coworkers have to use a certain amount of their time helping the new worker. In addition potential leavers tend to give up the effort on the current job, again causing loss of productivity.
There is no doubt that we cannot eliminate turnover altogether. This has never happened anywhere in the world. But, we should be able to minimize turnover by some intelligent practices. Also, it may be possible to minimize the effect of turnover so that the productivity of the company is not adversely affected.
The following suggestions will be made with the hope that the implementation of these would improve the situation.
Table 2 shows the model used in identifying potential leavers. The data are collected via mostly informal discussions. Here, potential leavers in the following 3 months are identified.
Table 2. Potential leavers identification
After the identification actions are followed as to how the impact can be minimized. This is done by one to one discussion between the HR representative and the employee. Solutions for reasons for the potential turnover are agreed and implemented. For example, the day care center maintained by the company is able to look after the children of employees with such concerns. In each month data is captured on successful attempts of retention.
A new initiative was implemented by the Human resources department. That is to restructure the interview panel. Experienced machine operators are included in the interview panel so that their expertise is used to check whether the interviewees are suitable for work or not. This way, the exact requirement of skill is understood at the very moment of interviewing.
Further, a HR representative conducts discussions with one of the family members to gather data on how other members would support themselves while the employee is at work. Then the recruitment team carefully selects the best set of interviewees to proceed to the next stage. Analyzing family details is very important during the selection process since turnover due to family problems has been one of main reasons according to past data (Table 2).
Data in Table 3 were taken from the company over a period of 6 months hence, top 6 reasons are identified. Here, “marriage, family problem and look after own child” are family related problems for turnover and by careful selection of candidates with such problems will enable to reduce turnover in the future.
Table 3. Reasons for turnover and numbers
Onboarding helps new employees adjust to their jobs by establishing better relationships to increase satisfaction, clarifying expectations and objectives to improve performance, and providing support to help reduce unwanted turnover.
On boarding is the process of helping new hires adjust to social and performance aspects of their new jobs quickly and smoothly and helps new hires adjust to the social and performance aspects of their jobs so they can quickly become productive, contributing members of the organization.
Figure 1. Top 6 reasons for Turnover
Organizations that engage in formal onboarding by implementing step-by-step programs for new employees to teach them what their roles are, what the norms of the company are and how they are to behave are more effective than those that do not.[8].
The HR personnel in the organization under study have revisited the existing onboarding process. This starts with an induction program of one week where the new employees are given basic knowledge about the organization. Mentoring is introduced to guide the trainees towards achieving expected results. Examples are taken from the current workforce who have worked
their way toward excelling their duties. Arrangements are made to meet them in person, discuss their experiences and efforts in a structured manner. Additionally guidelines on the leave procedure, opportunity for additional earnings such as performance incentives & attendance allowances, welfare benefits etc are also provided. Often new entrants lose earning opportunities due to lack of knowledge of same. Such guidelines facilitate minimizing intension to turnover and labor turnover. The progress of the new employees are recorded daily and reviewed weekly, monthly and upon 3 months completion.
The impact of employee turnover is substantial especially in the apparel manufacturing industry which heavily depends on skilled labor. There will always be an unavoidable amount of turnover which needs to be maintained at a minimum level. This study shows the possible actions that could be implemented to reduce future turnover. Retention of labor is useful in many ways. It helps retaining the skill that benefits the organization by reducing rework, recruitment and training cost and the overhead costs. By maintaining a low turnover percentage the number of trainees recruited per month can be reduced. This is because during the training period they do not contribute to the company's performance and having an additional head is a cost. It was discussed that certain applicants have been screened based on the restructured recruitment process. This enables the HR personnel to find solutions for other reasons for turnover while some of the main causes have been already taken care of. The full benefit of above initiatives is yet to be experienced. Turnover, according to some, is seasonal. Currently work is on progress on how above forecasting methods could be further extended to identify the seasonality.