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Reduce Labor Costs and Turnover With Coaching and Incentives

Reduce Labor Costs and Turnover With Coaching and Incentives

Today’s workers are in high demand — and they know it. While estimates vary, recent studies suggest close to half of all workers may be actively looking for another job. What’s more, at least one-third are comfortable quitting, even if they don’t have something else lined up right away . 

In this landscape, finding better ways to train, encourage and retain good workers can significantly reduce your labor costs. Measurable coaching and incentive programs can go a long way toward delivering these benefits, as we’re seeing from recent successes with Momentum Labor, a labor management software (LMS) offering from Honeywell Intelligrated.

The Costs of Turnover 

The costs to replace a distribution center (DC) worker are roughly 25% of their salary. That averages out to around $8,500,  if you go strictly by a worker’s paycheck. But they’re much higher when you factor in lost productivity and other costs, such as temp labor and the costs to recruit and train replacements. Anecdotal conversations with our clients and prospects suggest the actual costs are often closer to $10,000 on the low end and as high as $20,000 per employee in some cases. 

With warehouse turnover averaging around 49%  last year, the costs to replace lost workers can quickly hit seven figures — and that’s just the average. Some DC operators we’ve talked to have reported turnover rates as high as 100% per year. 

Although three out of four DC operators we consult with recognize the needs for coaching and incentives, the majority don’t have a system in place yet. And of those who do, almost none currently claim to have a way to track the effectiveness of their programs. 

The Benefits of Coaching 

Momentum Labor has been shown to deliver performance improvements as high as 88% by automating many tasks related to coaching, from identifying employees who are likely to benefit to measuring the results of individual coaching sessions.

Here’s how it works: Momentum Labor tracks the productivity performance of each employee and compares it to a productivity threshold, a customizable number that can be set by each DC. For example, say that your threshold is 75%. LMS can send out a report to supervisors notifying them when employee’s productivity falls below that rate, so that the supervisor can schedule a coaching session with the employee.

In our experience, productivity nearly always increases after a coaching session and remains higher from that point onward. Alternatively, if an employee doesn’t measure up over time, the LMS provides documentation of their performance, enabling informed operational decisions.

Combine Coaching and Incentives for Maximum Impact

Momentum Labor allows you to run coaching and incentive programs concurrently, motivating your entire workforce to achieve performance goals. In this way, you can create a culture of continuous improvement that helps you to keep top performers, inspire higher morale, increase retention, model the behaviors of your most talented employees, and reduce overtime by 3 to 15%.

Incentives don’t have to be limited to higher pay. LMS is being expanded to include capabilities that can help you determine which monetary and non-monetary benefits will most effectively reward and retain top performers while attracting quality staff. Each site, and even sub-groups of workers within each site, can be motivated by different things. 

For example, we’ve seen DCs succeed with reward offers covering everything from personal time off, four-day work weeks, pizza parties and (in one area with snowy winters) parking spaces closest to the employee entrance. One site even had success with allowing the top performer of the previous day to choose the music played inside the facility. This generated a very healthy competition — and higher productivity across the board — between newer hires and seasoned workers who had very different tastes in music.

The same incentive system can be used to improve onboarding or help existing workers adapt to new workflows. In these situations, you won’t expect employees to perform at 100% out of the gate, but can encourage faster adaptation with an incentive curve that rewards them for meeting rising thresholds. For instance, the full benefit of an incentive might be awarded for 40% performance the first week, 60% the second and 80% the third — with the expectation that full proficiency will be achieved by the fourth week. A curve like this ensures that incoming or adapting employees don’t get “punished” for being new to a skill, while encouraging efforts to master it.

Additional Tips for Success

Although you can expect average performance improvements of 15% when new incentives are launched, Honeywell data shows programs that remain active for more than a year typically improve gains over time to approximately 44%.

It’s also valuable to connect your LMS with as many systems as possible to get the most from your data. The more information your LMS has, the more visibility you’ll have into your facility. The flexibility of Momentum Labor enables it to connect to warehouse management system (WMS) software — both from Honeywell Intelligrated and other vendors — time and attendance systems, HR feeds and picking systems. 

If you’re interested in learning more about how LMS-driven coaching and incentives could reduce your labor costs and improve warehouse productivity, contact us today.

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