The Employee Turnover Butterfly Effect

July 17, 2019

Most people are aware of the Butterfly Effect—the concept of small events resulting in much larger consequences. Like the flap of a butterfly’s wings in Brazil causing a hurricane in Texas, employee turnover results in catastrophe across an organization.

“For the want of a nail the shoe was lost; for the want of a shoe the horse was lost; for the want of a horse the rider was lost; for the want of a rider the battle was lost; for the want of a battle the kingdom was lost; and all for the want of a horseshoe nail.” 

 Benjamin Franklin

Suppose that ABC Logistics—an imaginary third-party distributor with several dozen facilities across the country—loses a forklift driver based in ABC’s Pittsburgh warehouse. What will happen to the organization at large?

The immediate effect is small.
 

When the forklift driver leaves the company unannounced, the Pittsburgh warehouse’s management has to scramble in order to complete the day’s orders. Because a finite number of the workers are certified to drive forklifts, they work several hours of mandatory overtime each day for the remainder of the week. Now, the entire shift is disgruntled.

Suppose that ABC Logistics cannot find another forklift driver in Pittsburgh for several weeks. After all, the United States is facing a frontline labor shortage. As a result, management must continue with mandatory overtime, reroute shipments through the Cleveland warehouse, pay for another employee to earn a forklift license, or find some other temporary solution. Inevitable costs arrive in the forms of time, money, headaches, and crippling inefficiency.

The aggregate effect is massive.
 

Now that ABC Logistics is scrambling to fill positions, they are less selective about who they hire, exacerbating the problem. Many employees are not a good fit for the job; the company starts to churn employees daily. Even though more holes are frequently appearing in the workforce, managers are constantly placing their fingers in the proverbial dike.

The issue faced by ABC Logistics fits with a broader trend: annual employee turnover as high as 99% in the 3PL industry. In other words, the average distributor loses the equivalent of its entire workforce every year.

Hiring is a lengthy process. Mandatory overtime is an expensive and unpopular solution. Rerouting simply shoulders the burden onto another facility. So, what is the long-term solution to employee turnover?

Continuous employee feedback is the solution to runaway turnover.
 

According to Gallup, 78% of employee exits have nothing to do with wages. Therefore, a significant percentage of employee turnover is avoidable.

By listening to employees and creating a two-way dialogue through technology, management can address dissatisfaction, disengagement, and high turnover in one fell swoop. Furthermore, they can replace their outdated methods of listening to employees—which may have been contributing to worker churn in the first place.

The employee turnover butterfly effect is getting worse.
 

The turnover trap will not end any time soon. Supply Chain Dive reports that the demand for warehouse services is growing by 6% annually. In addition to keeping their existing employees, ABC Logistics must now worry about increasing the size of their workforce at a sustainable pace.

If ABC Logistics fails to address their employee turnover problem, inefficiency will rise, workforce relationships will erode, customers will churn, and the bottom line will suffer.

“For the want of a warehouse worker the shift was lost; for the want of a shift the order was lost; for the want of an order the customer was lost; for the want of a customer the quarter was lost; and all for the want of a warehouse worker.”

Learn how Qlicket increased employee retention from 8% to 25% for a customer.

Check out our recent appearance in G2Crowd’s blog.

Share this post:
Share on facebook
Facebook
Share on linkedin
LinkedIn
Share on twitter
Twitter