Dairy farm owners and managers know intuitively that employee turnover is expensive. But how expensive is it? What are the major causes and what can you as an owner or manager do to combat it?
We all understand that employee turnover on farms is expensive. Time, out of pocket cost and productivity are all impacted by turnover. Labor experts report that we can conservatively use a figure of 100-150 percent of the position’s salary for hourly workers and 200 – 250 percent of management position’s salary. For example if an employee is making $10-$12 per hour, the annual wage would be about $25,000 – $30,000 and the cost of turnover for that position is $37,500 – $45,000 (at 150 percent). For a dairy farm with 20 employees and 10 percent turnover per year the cost would be $75,000 - $90,000 per year.
According to labor experts, the cost of turnover can be broken up into several areas:
- Cost due to the person leaving (someone to temporarily cover the job, losses in productivity, management time to pick up the pieces, lost expertise from the farm, unemployment insurance premiums and claim processing time, etc.);
- Recruitment cost (advertising, recruitment time, interview time, screenings, etc.);
- Training cost (materials and management time);
- Lost productivity cost (lower productivity as the new person learns the job, loss of other workers productivity as they help bring the new person up to speed, management time that could be spent in other areas of the business);
- New hire cost (paperwork and legal forms necessary to bring on a new hire, manager’s time building trust and confidence in the new employee’s work).
I’m sure that you as a dairy manager could add additional items to this list. The point is that the impacts are huge on your business. As a Michigan State University Extension Dairy Educator, I am privileged to be part of an international agriculture human resource group of professionals. One of our team, Gregorio Billikopf from the University of California, recently reported on research that he conducted on turnover rates and reasons for turnover on dairy farms.
So why do employees leave dairy farms? Billikopf reported that the primary reason (29 percent of respondents) for employees leaving dairy farms continues to be “compensation and benefits” for the work performed. This category also included unfulfilled promises made at the time of employment. “Dairy economic problems” was the second most often listed primary reason for leaving (at 14 percent) and was most typically due to a dairy employer having to sell the farm, or that they would soon be selling the farm. Tied for the third most listed primary reasons for leaving were “personal, family reasons” and “working schedules, time off” (11 percent each). “Housing, transportation” (eight percent), “relations with management" (eight percent), “job duties" (7 percent), “laid off, discharged" (seven percent), “relations with co-workers" (three percent), “job injuries" (two percent) and “started own dairy" (a half percent) rounded off the list of reasons for leaving.
Obviously managers cannot control all of these areas, but certainly we have the ability to affect most of them. We can look at what other jobs are paying in our area and adjust our compensation packages. We can also ensure that we do not promise advancement in pay or responsibilities to employees, when we don’t have a clear, written plan in place to actually make that happen. It is so easy to say “The job starts at $12 per hour and will increase from there with performance,” with no real plan as to what that will look like. If you as a manager/owner are going to promise advancement, have your criteria and levels worked out ahead of time. This will help ensure that you don’t forget your promise, and that those valuable employees stay your employees.
Billikopf also reported that “relations with management” has improved from a previous study in 1953 (17 percent of respondents indicated primary reason for leaving), but has remained unchanged since their 1983 study (8 percent). Management that cares enough to know whether they are competitive on “compensation and benefits”, talks to their employees about “working schedule and time off”, regularly gives feedback to their employees and engages their employees in their dairy will certainly go a long way toward improving on their relationships with their employees.
Probably the biggest thing that you can do as a manager to improve employee turnover, is to see employee management as a critical part of your operation and one that you can improve on. Someone on your farm has to be focused on this management area and sufficient resources (both personnel and dollars) need to be allocated toward improving employee management if you want to see employee turnover cost reduced.
Source: Stan Moore, Michigan State University Extension.