The manufacturing industry and its workforce have both been profoundly reshaped, whether due to the shift to hybrid work or the other waves of societal change driven by the coronavirus epidemic.
These changes have triggered another pandemic of attrition, the Great Resignation, comprised of a mass employment exodus across industries. Although the Great Resignation shows signs of slowing with turnover already coming down to 17%, according to Alexander Group’s 2022 Sales Compensation Trends Survey, its impact may yet linger for years to come.
Manufacturers have felt its effects most acutely with a nearly 80% increase in resignations in 2021. Moreover, Alexander Group’s 2022 Sales Compensation Trends Survey also found that turnover in the 2021 sales organization (21%) was more than double what is seen in a typical year (10%).
To combat this trend, manufacturers must support a resilient company culture in three ways to win the battle of employee retention: prioritizing employee experience to ensure customer satisfaction; employing automation to streamline business processes from end-to-end; and decluttering sales roles to ensure focus and promote independence.
The ongoing talent churn has caused manufacturing organizations to re-examine long-held views on talent strategy. Manufacturers can no longer assume that sellers are “coin-operated,” and drive behaviors by simply increasing commission rates. Pay without morale will not cut it. Almost universally, higher employee experience (EX) translates to better customer experiences (CX) and companies with high EX and CX grow faster than those with low commercial team morale.
Since companies with more engaged employees have higher overall well-being and productivity, creating a sense of belonging and transparency with an appropriate dose of flexibility is essential for customer-facing teams. Prioritizing management selection is key here. Timely coaching and constructive feedback are essential to employee growth and productivity. Emphasizing compensation and satisfaction for management level staff has a trickledown effect, so opting for premier sales performance alone is simply not sufficient when making decisions about organizational management. The quality of employee guidance and oversight can no longer be an afterthought.
Carefully analyzing the customer engagement process and establishing which elements can only be performed by a person can help manufacturers avert critical staffing shortages. Understanding headcount deployed to activities that can be reliably automated (e.g., order tracking) allows manufacturers to allocate headcount to the greatest opportunities. Enablement tools can help to support digital transformation while simultaneously consolidating operations, reducing costs and promoting efficiency.
Manufacturers looking to streamline operations while combatting employment shortcomings must consider automation and enablement tools when consolidating tasks and filling employment gaps. With talent acquisition challenges posing a threat that’s equally as potent as those of high turnover, particularly in the face of rising inflation and the looming possibility of recession, manufacturing organizations should carefully assess the long-term need to fill vacant positions. In doing so, employers can determine with greater certainty which roles need to be filled and which can be supplemented by advancing technologies.
By prioritizing automation, employers can simplify operations while minimizing functional costs and alleviating the impacts of staffing shortages. Alexander Group’s 2022 Manufacturing and Distribution Productivity Survey indicates that for every 5 points of turnover above a “healthy” rate of 10% there is a 1.5% decrease in revenue potential due to vacant territories and an approximately 500 basis point increase in cost of selling, which directly impacts margin. Automating where appropriate not only reduces hiring and employment costs but improves overall organizational efficiency and return on sales efforts by eliminating operational redundancies and maximizing profits and growth in the process.
Simplify Sales Roles
“All hands on deck,” is a shared cultural theme across many manufacturing sales organizations. When times are tough, sellers, managers, and leaders can be counted on to step in and muscle through the issues. One downside to this approach is that sellers can often experience job creep during uncertain times. Lack of focus can lead to burnout or ineffectiveness and, ultimately, turnover. One effective tactic to address this is by reducing involvement in non-sales activities and restructuring day-to-day responsibilities for sales teams.
The key is to make sales about sales. Manufacturing organizations can empower their teams to be independent and do whatever they need to maintain customer satisfaction while working to meet quotas and prioritize growth targets. This is now more important than ever as outside to inside seller ratios are dropping from ten-to-one down to five-to-one in recent years, according to Alexander Group’s Manufacturing and Distribution Drivers Survey, due to internal selling’s increased traction across verticals. Consolidating these roles enables independence and flexibility for employees which, in turn, can facilitate success, satisfaction and retention.
Fatigue and limited flexibility outpace poor compensation as reasons that drive commercial team attrition. Sellers are particularly sensitive to heightened or inconsistent workloads and resistance to flexible work models. The solution? Enablement in the form of general support. Directing additional resources take extra work off the plates of sellers can greatly enhance workplace satisfaction and simultaneously supplement productivity and talent retention to mitigate the impacts of the Great Resignation.
Look to Culture for the Keys to Success
Manufacturers cannot yet afford to operate under the assumption that we’ve returned to the “before times.” Key concerns for business around the globe still include turnover and recruitment and the pandemic of attrition continues to rage on. However, manufacturers can mitigate losses in the race for talent by prioritizing more than just financial incentives and flexible working conditions.
It’s essential that employers emphasize the importance of employee experience. With this, companies can ensure continued customer satisfaction, leverage automation to streamline operations company-wide, and consolidate sales functions and direct supplementary resources to enhance productivity and prevent burnout. By no means can we say that the Great Resignation has come to an end, but by taking the right steps, we can certainly clear a path for talent to prevail in the future.
Andrew Horvath is a principal in the Alexander Group's Chicago office.