The COVID-19 pandemic profoundly transformed the manufacturing industry, causing a permanent shift in the workforce we once knew. Today we’re seeing a new contagion of attrition (commonly dubbed the Great Resignation) and the manufacturing industry has felt its effects most acutely with a nearly 80% increase in resignations in 2021. Though showing signs of slowing, with turnover already coming down to 17%, according to Alexander Group’s 2022 Sales Compensation Trends Survey, the lasting impacts may linger for years to come. However, what might be surprising is that sales teams likely comprise the Achilles heel of turnover in the sector, with attrition rates of up to 21% last year. Take a moment to think about that. A fifth of your revenue potentially walking out the door as sellers bid their companies adieu.
It’s essential that manufacturers look to employ a holistic culture in three ways to deflate these alarming statistics and win the battle of employee retention:
We all know from the late Peter Drucker that, “culture eats strategy for breakfast every day.” What many don’t realize is that, in winning organizations, sales, marketing and customer service eat first. Manufacturing organizations that have maintained a resilient workplace based on collaboration, purpose and vision have largely averted the crippling turnover rates being witnessed across industries.
With a mindset that everyone is in sales, manufacturing organizations can empower their teams to do whatever they need to maintain customer satisfaction while working to meet individual quotas and prioritizing company growth targets.
To target the issue, organizations should work to streamline roles. Remember the axiom: Focus drives performance. One effective tactic is to reduce non-productive sales time and restructure sellers’ day-to-day responsibilities by offloading non-value-add activities to lower-cost resources.
Alexander Group’s 2022 Annual Sales Compensation Trends Survey of hundreds of companies also found that, “fatigue” and “limited flexibility” outpaced “poor compensation” as reasons HR leaders cited for turnover in manufacturing organizations. Best-in-class organizations do not allow for fully autonomous sellers who can do whatever they want whenever they want to. Rather they embed a spirit of accountability with appropriate guidance. As a leading sales executive recently explained, “what we want are great Shakespearean actors…we don’t need Shakespeare.”
The ongoing talent churn has also impacted the way manufacturing organizations must approach their talent strategy. Manufacturers can no longer assume that sellers are “coin-operated,” where quick fixes like higher commission rates will solve the problem. Universally, higher employee experience (EX) translates to better customer experiences (CX) and companies with high EX and CX grow.
Since companies with more engaged employees have higher overall well-being and productivity, creating a sense of purpose with an appropriate dose of flexibility is essential for customer-facing teams. Purpose begins with strong executive leadership vision. Vision that connects not just what is produced, but why it’s produced. Moreover, connecting that to the value delivered to a customers’ customers demonstrates the “greater good” of the organization.
Instilling that vision comes with prioritizing frontline managers. Timely coaching and constructive feedback are essential to employee growth and today’s top-performing individual contributors seek and expect in-the-moment feedback. The quality of employee guidance and oversight can no longer be an afterthought.
Harvard Business Review has indicated as far back as 1998 that we’re living in an experience economy. Manufacturing organizations would do well to keep this in mind as they work to combat the Great Resignation and turn their gaze to employee experience as a key driver of business growth in the coming years.
Advanced manufacturers are simultaneously combatting turnover and enhancing productivity through the development or improvement of their sales operations function. Focused on data and insights with a people-process-technology (in that order) lens, next-generation Revenue Operations (formerly sales ops) are turning automation and enablement tools into $223K more revenue per rep at a 14% lower cost of selling/seller, according to Alexander Group’s 2022 Manufacturing and Distribution Productivity Survey.
With talent acquisition challenges posing a threat that’s equally as potent as that of high turnover, particularly in the face of rising inflation and the looming possibility of a recession, manufacturing organizations should continue to invest in this crucial function. In doing so, employers can determine with greater certainty which roles need to be filled, where to make investments and what can be supplemented by advancing technologies.
Alexander Group’s 2022 Manufacturing and Distribution Productivity Survey also 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. A well-established revenue operations team alleviates the impacts of staffing shortages by staying on top of potential risk areas and finding alternative solutions (e.g. automation) where appropriate. This not only reduces hiring and employment costs but improves overall organizational efficiency and return on sales.
By carefully analyzing current openings and establishing which activities are truly essential, revenue operations can also help manufacturers avert critical staffing shortages. Further, by developing enablement tools they can help support digital transformation while simultaneously reducing costs and promoting efficiency.
While the end of the Great Resignation is likely on the horizon, manufacturers cannot yet afford to operate under the assumption that we’ve returned to the “before times.” Turnover and recruitment are still key concerns for business around the globe and the pandemic of attrition still rages on. However, manufacturers can take steps to mitigate losing the race for talent by doing more than throwing money at the problem. It’s essential that employers create focus in each unique marketing sales and service role, emphasize the importance of employee experience to ensure continued customer satisfaction and, as appropriate, invest in revenue ops to drive efficiency and effectiveness. We’re not out of the woods yet, but by taking the right steps, we can certainly work to clear a path for talent success.
For more information on how Alexander Group can assist you, please contact a manufacturing and distribution practice lead.