Traverse City Record-Eagle

Business

December 15, 2012

Ag Forum: Turnover's big costs

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 a dairy farm owner or manager do about it?

When an employee leaves a dairy operation, or any business, the costs are substantial. Labor experts report that we can conservatively use a figure of 100-150 percent of the position's annual wage for hourly workers and 200-250 percent of a 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.

Factors include needing to hire temporary replacements, unemployment insurance, recruiting and training new hires and lost productivity. I'm sure that you as a dairy manager could add additional items to this list.

The point is that the effects 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?

He reported that the primary reason (29 percent of respondents) 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 cited primary reason for leaving (at 14 percent) and was most typically due to a dairy employer having to or planning to sell the farm.

Tied for third were "personal, family reasons" and "working schedules, time off" (11 percent each).

Obviously managers cannot control all of these areas, but certainly we have the ability to influence 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. 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 employees in their dairy will certainly go a long way toward improving on those relationships.

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. Someone on your farm has to be focused on this area and sufficient resources — both personnel and dollars — need to be allocated toward improving employee management if you want to see turnover costs reduced.

Stan Moore is a Michigan State University Extension dairy educator.

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