Employee Engagement – How Manufacturers Tackle the Labor Shortage.



After reading this article, you will understand employee engagement at a deeper level.

I will share statistics about employee engagement in manufacturing with you. You will learn about the labor challenges for the manufacturing sector.

We will explore the benefits, both tangible and intangible, of high employee engagement.

These benefits will help you see why manufacturers should leverage employee engagement.

Improving employee engagement costs much less than most improvement initiatives.

I will share statistics about the labor shortage in manufacturing. These statistics will help you see how important employee engagement is for manufacturers.

These statistics help us understand the gap between business growth and labor shortages.

You will also learn the key drivers of employee engagement.

These drivers will help you impact employee engagement in a positive way.

As I mentioned, employee engagement is a complex concept. The good news is employee engagement is measurable.

I’ll give you several metrics to help you understand your employees’ engagement level.

We will also share a process and strategies to increase employee engagement.

Finally, we’ll share a case study from a manufacturer.

You’ll learn how they improved employee engagement and reduced employee turnover.

Did You Know?

  • Disengaged employees are 60% more likely to commit mistakes.
  • Disengaged employees have 37% higher absenteeism rates.
  • Disengaged employees are 49% more prone to work-related injuries.
  • 61% of American employees say they are burned out at work.
  • 33% of employees say they don’t trust their employers.
  • Between $450-500 billion is lost annually because of low employee engagement.
  • 83% of manufacturers cited attracting & retaining a quality workforce as a top challenge.
  • 45% of manufacturers surveyed turned down business opportunities because they lacked workers.

Key Takeaways

Definition Employee engagement reflects the level of investment your employees have into the success of the business.
Employee Turnover According to the U.S. Bureau of Labor Statistics, manufacturing had a 44.3 percent turnover rate in 2020.
Bottom Line Impact Here are the most notable consequences of low employee engagement, which can lead to; Higher Insurance costs (injuries), Government fines & penalties (injuries), Cost of poor quality (scrap & rework), Higher taxes on excessive inventory, Employee staffing costs, Lower sales, and Lower margins.
Labor Shortage There is an estimated 57% increase in manufacturing enterprises entering the U.S. industry, but only a 0.31% growth in available labor.
Engagement Drivers The most notable employee engagement drivers include: Empowerment, Trust in leadership, Growth Opportunities, Pay & Benefits, Work-Life Balance, Psychological Safety, Recognition, Resources, and Safety.
Measuring Employee Engagement We provide several metrics to help manufacturers measure employee engagement: Employee engagement surveys, employee turnover, employee retention, Internal Promotions, Employee Absenteeism, Employee Tardiness, and Average hours/week per employee.
Improving Employee Engagement We share a process to help manufacturers improve employee engagement: Start by building a cohesive leadership team, build a cultural identity, and Deploy that identity into your human systems.

Every day, U.S. manufacturers are feeling the pain of the labor shortage in the sector.

Whether it’s…

  • employee absenteeism,
  • employee turnover,
  • or active employees at work that are disengaged,

….many studies on employee engagement show that only ~35% of employees are engaged in their work.

A whopping 67% are not actively engaged in their work.

Read this infographic to learn more about the cost of employee disengagement.

On the surface, this statistic may seem inconsequential. But, consider that disengaged employees:

  • Commit 60% more mistakes.
  • Have 37% higher absenteeism rates.
  • Are 49% more prone to work-related injuries.
Watch this video to learn more about how manufacturing leaders create engagement.

This puts manufacturing executives in a tough position.

Some of the questions I hear are:

  • Where can I find good employees?
  • How do I retain my top talent?

I’ve heard several executives say that increased pay is the solution to the problem.

Increased compensation only goes so far.

For example, consider Maslow’s hierarchy of needs:

Employee engagement and Haslow{s Hierarchy of needs.

Once employees have fulfilled their most basic needs (safety and physiological needs), they no longer need material things.

Employees are looking for what I call community-related needs: love and belonging, esteem, and self-actualization.

“The Company Culture is always a reflection of the leadership team. Period.”

1. What is Employee Engagement?

Employee engagement is how much an employee feels identified with the organization. Also, how invested they are in the organization’s success. Employees show a high level of engagement when they display, among others:

  • A high level of commitment to their work and the organization.
  • High interest in the company’s goals.
  • A sense of ownership of their work.
  • A sense of pride and connection towards their employer and their co-workers.
  • A high level of initiative and desire for promotions.

An engaged employee will serve as an advocate for your brand. They will help recruit like-minded individuals. These individuals will make good employees.

Watch this video to learn how a toxic culture affected my health.

Engaged employees will:

  • Provide your customers with excellent service, and
  • Serve as evidence of your leadership to your customers.

2. Employee Engagement & Turnover Statistics in Manufacturing.

The manufacturing sector is projecting a workforce growth of 0.31% between 2023 and 2030.

Employee retention will become one of the most important challenges for manufacturing businesses.


Watch this video to learn more about how company culture contributes to employee turnover.

Let’s explore other relevant stats:

  • According to a Workday employee engagement report, the manufacturing industry’s employee engagement rate is one of the lowest, at 34%.
  • A study compared separation manufacturing turnover rates from 2016 to 2020. The study found that turnover rates grew from 27.2 percent to 44.3 percent.
  • Manufacturing is one of the top four industries hit hard by employee turnover.
  • According to the U.S. Bureau of Labor Statistics, manufacturing had a 44.3 percent turnover rate in 2020.
  • According to a 2018 workforce report, 99% of respondents said finding new skilled hires was a top priority challenge.

As you can see, these statistics don’t paint a positive picture for the manufacturing sector.


Watch this webinar to learn more about How Manufacturers Overcome Employee Retention Challenges.


3. Benefits of employee engagement and Impact on Manufacturing Performance.

Employee engagement is hard to connect to specific outcomes. Also, there are many benefits. According to Manufacturing Digital, an engaged workforce will lead to the following benefits:

  • Productivity rates 70% higher than disengaged colleagues.
  • Safety record 78% higher than disengaged colleagues.
  • Employee turnover 70% lower than disengaged colleagues.
  • Customer satisfaction 86% higher than disengaged colleagues.
  • Business profitability 44% greater than manufacturers with disengaged colleagues.

Repetitive manufacturing work can often lead to boredom, disengagement, low productivity, and distractions. These lead to mistakes, injuries, lower productivity, and lower customer service.

Watch this video to learn more about how you ensure you have the right people in the right seats.

Engaged employees will help your business’s bottom line avoid:

  • Higher Insurance costs.
  • Government fines & penalties.
  • Cost of poor quality (scrap & rework).
  • Higher taxes on excessive inventory.
  • Employee staffing costs.
  • Lower sales.
  • Lower margins.

An engaged workforce will want to understand the sources of these issues and eliminate them. Remember, they are highly committed to the business’s success.

4. The Importance of Engagement in Manufacturing.

Employee engagement is of high importance for the manufacturing industry. The U.S. manufacturing industry is currently in a battle due to the labor shortage.

Watch this video to learn more about how manufacturers can manage the talent shortage.

Look at the charts below.

Statista estimates a 57% increase in manufacturing enterprises entering the U.S. industry.

Employee engagement in manufacturing and U.S. manufacturing growth.

Statista estimates the U.S. manufacturing workforce will grow marginally.

Employee engagement in manufacturing and employee labor growth.

As I mentioned earlier, some estimates say this number will be 0.31% by the year 2030.

Watch this video to learn more about how manufacturers win the talent battle.

Some U.S. manufacturers are using automation to reduce or replace labor. This is a smart and proactive approach.

Many U.S. manufacturers are failing to seize the largest opportunity. The opportunity to reduce employee turnover and increase employee retention.

Watch this video to learn more about how manufacturers lose the talent battle.

Both metrics, employee turnover and retention, can improve by increasing employee engagement.

Here lies the importance of improving employee engagement. Picture these current scenarios:

  • Employees are leaving your organization constantly.
  • The baby boomer generation continues to retire.

Now ask yourself these questions:

  • How will you be able to support the business’s growth?
  • Who are the baby boomers going to hand over their knowledge and skills?

The U.S. manufacturing sector may be in a precarious position. Unless we find the answers to these questions in the coming years.

5. Key drivers of employee engagement in Manufacturing.

Employee engagement is a large opportunity to counter the labor shortage within manufacturing.

Increasing employee engagement does not need large capital investment. But, it requires a large investment of effort and alignment.

Read this infographic to learn more about the cost of poor leadership.

You will need to make your employees think twice before deciding to leave your company.

“If you tolerate a competent jerk, you’ll eventually regret it. Guaranteed.”

Here are the highest drivers of employee engagement:

  • Empowerment – Allow employees to make decisions about their work environment and their outcomes.
  • Trust in leadership – The single most important driver of employee engagement. Remember, “Employees don’t quit on their organizations; they quit on their leaders.” For this reason, I’ll break it down further:
    • Living the values – Leaders must be a living example of the company values. I can’t emphasize this enough: if you mess this one up, you lose trust, and it’s very hard to recover from it.
    • Communication – Inform employees of important events for the industry, company, and them.
    • Respectful treatment – All employees contribute to the success of the business. Treat them as fellow colleagues. Including situations where there is conflict or disagreement.
    • Follow through – Leaders must show a high level of integrity. Otherwise, they start losing what I call TCR (trust, credibility, and respect). If leaders break TCR, employees immediately become disengaged.


“Trust takes years to build, seconds to break, and forever to repair.”


  • Expectations & Accountability – Manufacturers should predominantly hire high-accountability employees. Equally, leaders must provide clear expectations and hold employees accountable.

Holding everyone to the same high standard fosters ownership, accountability, and also engagement.

  • Growth Opportunities – Employees use this driver as one of the main ones in deciding to accept a job offer. But, employers can misunderstand this one as a higher position. Growth opportunities for your employees can be many things. A special project, cross-training to a different job, department, or product. Even delegating tasks or decisions that will challenge them and keep them engaged.
  • Pay & Benefits —This driver is the go-to for many leaders because it requires the least effort. As I mentioned above, but, this driver only goes so far. Strive to be competitive but avoid putting all your eggs in this one basket.
  • Work-life balance —This is Important for employees with families, accomplished, or lower career aspirations. They value having flexibility in their schedule, work location, or time off. Employees want to feel you value their life outside of work and that they are more than a number to the organization.
  • Psychological Safety — Employees want companies to accept them for who they are. They want to voice their opinions and admit mistakes and weaknesses without fear or worry of retaliation.
  • Recognition — Recognize your employees’ performance, work ethic, and accomplishments. This will keep them highly engaged.
  • Resources – Employees become frustrated when this driver is lacking. Ensure employees have the proper resources to be successful. When these are present, employees feel valued and become engaged.
  • Safety – One of the most evident drivers of employee engagement. Show your employees yu value them by improving working conditions. This will make them more engaged.

6. How to measure employee engagement.

As you know, employee engagement is not a tangible measure we can directly calculate.


Watch this video to learn more about what culture is for manufacturers.

Understanding employee sentiment and behaviors can help gauge their level of engagement.

Use the following measures to gain a thorough understanding of employee engagement:

  • Employee engagement surveys – Conducting annual surveys will help you uncover how employees feel. Also, how likely they are to leave your organization.
  • Employee turnover— Try to understand how many people are leaving on their own. You can analyze it at a deeper level and look for patterns. Analyze variables such as department, shift, office vs. shopfloor, leader in charge, etc.
  • Internal promotions – Internal promotions reflect your team’s bench strength. Also, the growth opportunities given to employees.
  • Employee retention – Measures employees’ commitment to staying for the long term. This can be a sign of engagement.
  • Employee absenteeism— Absenteeism can show employees’ desire to be at the workplace. Can also be a sign they are looking for employment elsewhere. Both represent low levels of engagement.

See below a chart showing where U.S. manufacturing ranks in this category:

Employee engagement in manufacturing and absenteeism.

  • Employee tardiness – Engaged employees show up on time. High employee tardiness can signal disengagement.

Average hours/week per employee— A high workload:

  • Affects work-life balance.
  • Increase employee burnout, and
  • Cause disengagement.

Below is a chart from the Bureau of Labor Statistics showing the average employee weekly hours for all U.S. manufacturing. Visit the page to explore your specific industry.

Employee engagement in manufacturing and employee hours per week.

There are other metrics, and leaders can even develop new ones creatively. But for ease of time, these are the biggest banks for your buck.

7. How to Improve Employee Engagement in Manufacturing.

Improving employee engagement is a demanding pursuit for manufacturing businesses. The good news is that is very much worth it.

“Transformational leadership requires high levels of psychological stamina.”

How do we improve employee engagement in manufacturing? By building a culture that activates most engagement drivers. Also, creating an environment that creates the best employee experience. This will help you:

  • Create high-performing teams and…
  • Attract and retain the best talent in the industry.

The next logical question is, how do we build such a culture? Now, we’re getting to the meat and potatoes of transformational change. Let’s dive in.

The first step is to build a cohesive leadership team. The business owner or senior leader must build their direct reports into a well-integrated unit. This team will help you create the culture you envision. To build such a team, you must remove or reassign leaders who don’t align well with the culture you want to create.

The culture of an organization is a direct reflection of the leadership team. Period.”

Ensure you have the right team members for your leadership team. Next, it’s time to build the foundation for your culture. Work with them to:

  • Eradicate dysfunctional behavior among team members
  • Building strong working relations, and…
  • Developing vulnerability-based trust.

The leadership team must become the primary support system for each member.

The next step involves building your company culture’s fabric— its identity.

Watch this video to learn more about the long-term leader mindset.


Selected a group of employees who are good stewards of your desired culture and develop or revise:

  • Company purpose
  • Company values
  • Strategic anchors

Use this foundational building block as input to increase employee engagement by:

  • Creating a safe environment for employees to commit mistakes and have tough conversations without fear of retaliation.
  • Reward the Behaviors that align with your culture.
  • Punish the Behaviors that are unacceptable in your culture.
  • Modify norms and rules to create empowerment.
  • Delegate decisions to the lowest level possible.
  • Create rituals that celebrate your employees for their achievements and their identity.
  • Create opportunities for your employees to use their creativity and grow.
  • Evaluate your compensation structure at all levels and make adjustments as needed.
  • Incorporating the leader’s role as that of a supportive mentor for their employees.
Watch this video to learn more about how manufacturers leverage the power of culture.

Incorporate these measures into your human resources systems:

  • Recruiting
  • Screening
  • Hiring
  • Onboarding
  • Promoting
  • Dismissing, and…
  • Retiring


“Always hire character over competence. Always .”

The team needs to use their creativity to incorporate your unique cultural identity. Successful manufacturers build a high-performance culture that achieves and sustains profitable growth.

As a final note, each member of your leadership team must become a steward of the culture. They must model, enforce, listen, observe, and learn to nurture the culture and increase engagement.

“The actions of every senior leader are directly reflected on the leadership team. Guaranteed.”

8. Case Study.

An automotive battery charger manufacturer had experienced a change in senior leadership. The company relocated its headquarters to a different state. This resulted in increased employee turnover and new team member additions. The new management created a new company atmosphere.

Read this article to learn more about 5 signs manufacturers have a declining culture.

The CEO of the business wanted to improve the organization’s health. The process started with a culture change of the senior leaders.

Watch this video to learn more about what a healthy culture looks like.

The start of this culture change was establishing organizational clarity. We helped the senior leadership team develop a cultural identity where we established:

  • Company Purpose
  • Company Focus
  • Strategic Anchors
  • Company Values

We helped roll this message throughout their organization. The team implemented changes to their human systems. The result was improvements in employee retention, engagement, and employee turnover.


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