Super HR Plants make higher profits
Applying superior human resource (HR) management results in improved organizational operations and financial results, according to research from the IndustryWeek/Manufacturing Performance Institute (MPI) Census of Manufacturers. Facilities that invest in HR programs enjoy less turnover and higher gross profit margins. But in the quest for cost reductions, the study found that many manufacturers ignore the value of the organization's human capital.
The 2005 research included more than 600 U.S. manufacturing facilities. The results of the study have been released in the white paper, Super Human Resources, by MPI and Development Dimensions International (DDI). Available at www.ddiworld.com/pdf/ddi_industryweek_superhumanresources_report.pdf, this is the second white paper from MPI and DDI examining the HR practices in manufacturing facilities; the first was in 2004 and included more than 900 plants.
The report identified a group of 29 manufacturing plants from the 2004 and 2005 studies (designated as Super Human Resource Plants) that used a combination of six HR practices and reported highly effective HR programs. When compared with the other facilities that used only some or none of the HR practices, the 29 Super HR Plants reported significantly better performance in several key areas.
- Lower turnover (6% average, 2% for Super HR Plants).
- Twenty percent higher gross profit margins.
- Higher operating equipment efficiency.
Also, 50% more Super HR Plants report significant progress toward reaching world-class manufacturing status. These findings demonstrate that the single most important driver for improved business performance is a solid strategy to hire, retain, develop and reward employees, says Rich Wellins, senior vice president, DDI.
The study identified six specific HR programs that can drive the bottom line:
- Recruiting and hiring: Investments in screening and assessment contribute to employee retention as well as high levels of productivity and quality.
- Performance management: Clear goals, focus and ongoing feedback reduce the risk that employees will pursue personal agendas or lack performance goals altogether.
- Development and training: Some 69% of Super HR Plants offer more than 20 hours per year of training for each employee, and 31% offer more than 40 hours (compared to 33% and 10%, respectively, of all plants surveyed). Plants that rated their employee development and training programs as somewhat effective or highly effective spent twice as much on training.
- Leader/supervisor development and training: Leaders impact employee engagement, performance and accountability as well as business strategy. Nearly one-fifth of plants surveyed (17%) dont have a leadership development program in place, a rate that is even higher (27%) in plants with fewer than 100 employees.
- Teaming: Some 75% of manufacturing plants use teaming practices to develop interpersonal and team skills such as problem-solving and communication. Organizations that invest in these programs have better bottom lines, because strong team skills lead to higher sales per employee.
- Safety and health programs: With safety as a top priority for facilities, 97% percent indicated they use safety and health programs and that they are either somewhat effective or highly effective.