BUILDING A SAFER, MORE PRODUCTIVE WORKFORCE

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1 BUILDING A SAFER, MORE PRODUCTIVE WORKFORCE ONE HIRE AT A TIME WHITE PAPER PSIONLINE.COM/TALENT

2 BUILDING A SAFER, MORE PRODUCTIVE WORKFORCE ONE HIRE AT A TIME 7 SUGGESTIONS FOR BUILDING A BETTER WORKFORCE Manufacturing firms are always looking for ways to improve productivity, eliminate waste, improve quality, and shave costs. One area that often gets less attention than more tangible, easy to measure factors such as the cost of raw materials or equipment, is the value of front line employees, both workers and supervisors. While many companies might say that their people are their greatest asset, it s surprising how many organizations do a less than ideal job of effectively hiring the right people for the job. One reason is that many manufacturing organizations see the hourly employee as an interchangeable and easily replaced cog in a much bigger machine. This article talks about why that shouldn t be the case and how top manufacturers significantly impact their bottom lines through effective employee selection. 1. Don t buy into the myth of the average worker 2. Know who you are what s important in your organization? 3. Develop the right profile 4. Screen out high risk candidates early on 5. Focus on things that work 6. Front line leadership is crucial 7. Measure your results 1. DON T BUY INTO THE MYTH OF THE AVERAGE WORKER It s hard to invest time, energy, or attention on something that you don t believe makes a difference. In fact, it s a good idea not to spend time on things that don t make a difference. That s one of the keys of lean manufacturing. But, hiring good hourly employees isn t one of those things. Many manufacturers operate under the myth of the average worker. Namely, that a worker is a worker and that one person is pretty much interchangeable with another. They are easily replaceable and that there is only modest variability in job performance across the entire group. If the myth of the average worker is true then it doesn t make a lot of sense to spend time thinking about how to hire a better employee. The problem is the myth is just that, a myth. It s not true. For instance, 20% of commercial truck drivers account for almost 80% of all driving accidents.1 That 80/20 pattern is similar to what is found in other industries, including manufacturing, for negative behaviors, such as absenteeism, tardiness, turnover, as well as safety violations and injuries. What types of improvements can you make through improved selection practices? Depending on what you are currently doing, it s realistic to expect that you could see: % reduction in turnover, absenteeism, and tardiness 5-20% improvement in overall productivity 10-20% reduction in quality errors, rework, scrap rate, etc. Up to a 50% reduction in workers compensation claims and work related injuries Given these types of results it s worthwhile to focus some time and effort into how to achieve them. The following six suggestions should help you get there. 2. KNOW WHO YOU ARE WHAT S IMPORTANT IN YOUR ORGANIZATION? Before you embark on the process of hiring employees and improving your selection processes it s a good idea to step back and conduct a realistic appraisal of who you are as an organization. A lot of baseball teams want to have the success of the New York Yankees. But few teams have the market size or the revenue streams, let alone the history and aura that the Yankees use to attract and keep top prospects. The point is, to beat the Yankees most teams have to do things differently than the Yankees. 1 Knipling, R.R., Boyle, L.N., Hickman, J.S., York, J.S., Daecher, C. Olsen, E.C.B., Prailey, T.D. (2004). CTBSSP Synthesis Report 4: Individual Differences and the High-Risk Commercial Driver, Commercial Truck and Bus Synthesis Program. Transportation Research Board, National Research Council, Washington, D.C. 2 Note that these ranges are based on actual results from other manufacturing firms in the United States who have implemented improved selection practices for hourly employees. Results vary by organization.

3 Here are a couple of things to consider when you evaluate your organization. Where do you fall on each continuum? Low Cost Producer Typically higher turnover rates. Need to find quick and effective ways to quickly screen out high risk candidates. Employer of Choice Can attract top talent & have lower turnover rates making selecting the right person critical (because once they re hired they don t leave!). Short Training Cycle Jobs are easy to learn. Focus more on motivational fit, work ethic and positive attitude to improve retention. Long Training Cycle Jobs are harder to learn, meaning there is likely more variability in performance. Focus on ability to learn, work ethic and attention to detail. 3. DEVELOP THE RIGHT PROFILE Once you have a clear understanding of your organization then you are better able to determine what areas to focus on when you go to hire new employees. Our experience suggests that you re better off focusing on a few things that really matter than on trying to hire the perfect employee. Here are some key factors to consider in hiring new production, skilled, and supervisory level employees in your manufacturing environment. The following seven factors are described as risk factors but they could also be redefined as competencies. Either way, our research has shown that manufacturing organizations can significantly improve their quality of new hires by focusing attention on these key risk factors. SAFETY RISK QUALITY RISK IMPULSIVITY RISK DEPENDABILITY RISK ATTITUDE RISK ABSENTEEISM/ TARDINESS RISK TURNOVER RISK Individuals who are high risk are more likely to engage in unsafe behaviors and/or be involved in safety incidents. Individuals determined to be high risk in this area are more prone to make careless mistakes, and have trouble following instructions. Individuals labeled as high risk in this area are less likely to be able to handle stressful situations and stay calm in a crisis. Individuals deemed a high dependability risk are unlikely to stay on task, follow through or consistently meet performance expectations. Individuals in this area who are high risk generally have a negative attitude and tend not to have strong interpersonal skills. Individuals who are a high absenteeism/tardiness risk are more likely to be late, miss or skip work. Individuals who are deemed a turnover risk have demonstrated a history of leaving companies and are unlikely to be a stable employee. One of the ways that many organizations use these types of risk factors is to create a profile based on how an individual scores in these areas. Creating a profile can involve setting minimum cutoffs, or by averaging two or more of the areas or by using some combination of both. That profile helps you determine whether a candidate is acceptable or unacceptable for your organization. For instance, if turnover is something that your organization is trying to reduce, then placing more emphasis on an individual s turnover risk might help with that problem.

4 How well does it work? Consider the following, real world example: REDUCING JOB-RELATED INJURIES & TURNOVER Based on a group of 2,000 individuals who were hired as variable workforce, hourly-level production employees at two different manufacturing facilities for a large manufacturing firm in the U.S., we found that individuals who had a safety risk score of 1, 2, or 3 on a 10-point scale were 1.5 times more likely to file a workers compensation claim, over a 12-month period, than those who scored a 4 or higher. Keep in mind that all of these individuals performed similar job responsibilities, similar supervision, etc. Screening out those individuals (just 7% of those hired) in the first place would have resulted in: 850 fewer lost days directly associated with job-related injuries A direct savings of $269,000 and an indirect savings of over $1 million In addition, individuals who had a turnover risk score of 1, 2, or 3 on a 10-point scale were 2 times more likely to turnover within 18 months than those who scored a 4 or higher. By screening out that group of individuals in the first place this organization would have reduced their turnover by 42%. 4. SCREEN OUT HIGH RISK CANDIDATES EARLY ON The philosophy of a good selection process should be to quickly screen out high risk individuals early on in the process. How quickly? Many organizations use online screening tools that allow them to screen out candidates within 5-15 minutes. As we ve seen in the previous example, reducing high risk candidates (which make up less than 20% of all candidates) can have a significant impact on a number of key outcome variables. Make sure you focus on what is most important to your organization when you are screening candidates. Ideally you want to screen out high risk candidates early on and then screen in high potential candidates later in the process. You will want to spend most of your time and effort on high potential candidates. In order to do that quickly and cost effectively, screen out those who do not fit your profile. 5. FOCUS ON THINGS THAT WORK At the end of the day, all hiring tools come down to one thing accuracy. If something isn t accurate then you shouldn t use it. If it doesn t help you accurately evaluate a candidate against the profile you ve established then you are not only wasting your time you are introducing error into your selection process. Here are some things to keep in mind when determining how best to screen candidates in the hiring process. 1. Unstructured Interviews Don t Work. That s it, bottom line. They just are not a good tool for accurately screening candidates, period. Unstructured interviews, i.e., those that don t involve a standardized set of questions, are conducted by untrained interviewers, and that allow interviewees to ask whatever questions they like, have been around forever and are used widely. Unfortunately, they aren t very good. The simplest, biggest bang-for-the-buck thing that a company could do would be to switch from unstructured to structured interviews. The improvements in accuracy, not to mention legal defensibility, are huge. 2. Prior Manufacturing/Supervisory Experience is Overrated. When we ve done job analyses at some of the best manufacturers in the world we find that some of their very best employees, both production level as well as supervisory and managerial, had no prior manufacturing experience at all. The fact that someone has worked at a manufacturing facility has only a moderate relationship with whether they will be successful in another manufacturing job. It might be useful as a tie breaker or to give a person on the fence an edge but it s just not an effective differentiator of success or turnover. In reality, it screens out a lot of very good candidates who just may have never had the opportunity to work in manufacturing before. 3. One Size Fits All Tests Don t Work. There s an old saying, the right tool for the job. There s a lot of wisdom in that. Sometimes companies use the same test to hire everyone in the company, from hourly manufacturing employees up through senior management. Again, if accuracy is what you re looking for then it doesn t make sense that the same test would be applicable for so many positions. You could use a screw driver to hammer a nail, but a hammer works a lot better. Look for tests that are designed for helping your organization identify individuals against your profile.

5 6. FRONT LINE LEADERSHIP IS CRUCIAL One of the largest and most well respected manufacturing companies in the world believes that the front line supervisor is the most important position within their plants. Why is that? It s because that position serves as the direct link between management and the production workers. They are the ones that management turns to in order to translate the company s vision and culture and the ones that workers turn to for guidance and leadership. Because of that, they devote a great deal of time and attention to the selection of those individuals. There s an old saying, People don t leave companies, they leave supervisors. While it s not always the primary reason, our experience has shown that in many companies, manufacturing or otherwise, this is true. On multiple occasions we ve been called in to fix the turnover problem by looking at the profile of the hourly, production employee, only to find out through interviews and other analyses that the primary driver of employee turnover is one or two bad supervisors. If you re having problems with high turnover, it might not be because you ve hired the wrong production employees but that you ve hired or promoted the wrong supervisors. To give an example of the influence that front-line leaders have on a broad range of outcomes consider the following example: A group of 43 group leaders for one of the world s largest manufacturers of explosives were assessed against 11 leadership competencies. Data regarding safety incidents for their individual teams were collected over an eight year period. Teams whose leaders were lacking in three or more of the 11 competencies had on average 7.17 documented safety incidents per year. On the other hand, those teams whose leaders who were deficient in only one or two areas had 0.44 safety incidents per year, on average. That s a huge difference! Make sure you spend the time and effort to understand who your best leaders are, identify characteristics that tend to define them, and then evaluate prospects against those characteristics. 7. MEASURE YOUR RESULTS It s good to perform routine maintenance on your equipment and to ensure that your machines are operating within the expected tolerances. It s also important to evaluate how well your selection processes are working. No solution is perfect. There will be errors. But, if you can improve your odds of making a good hire, or more importantly, avoiding a bad one, by five or 10% then you are ahead of the game. The value of systems and structure is that you can evaluate the progress and make changes systematically. If your primary focus is on reducing turnover, then once you have come up with and implemented a plan for hiring employees who are likely to stay longer, evaluate those results after a reasonable period of time. What a reasonable period of time is depends on the number of people hired, the types of variables you re looking at, as well as a number of other factors. Usually a year is a minimum time period to start seeing results. Check to see if individuals that you ve hired with the new process tend to actually stay longer than those who weren t. Are there any particular variables or characteristics that tend to pop up for the group that stays vs. those that leave? If so, you might want to give more weight to them in the hiring process. Ultimately, the goal is to constantly improve and refine the process. FINAL THOUGHTS Hiring the right people, and not hiring the wrong people, makes a big difference. As manufacturers continue to operate on ever shrinking margins it s important to seek out any way possible to make improvements, eliminate waste, become leaner and more productive. One of the cost effective approaches likely lies in your selection process. Nobody writes a check for turnover but it still costs the company a lot of money, both directly and indirectly. It s not unrealistic to see double digit increases in productivity or reductions in rework by improving your hiring processes. One final thought, longer selection processes are not necessarily better, they re just longer. Focus on evaluating the most important things and doing it well and you will reap significant rewards.