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Upinder Singh

The Cost of Losing Gen Z Talent in Manufacturing



As Generation Z (Gen Z) enters the workforce, their influence on various industries, including manufacturing, is becoming increasingly significant. However, companies that fail to attract and retain this talent may face substantial financial repercussions. Understanding the costs associated with losing Gen Z employees can help businesses make informed decisions about workforce management and retention strategies.


Recruitment Costs

Recruiting new talent can be a significant expense for manufacturing companies. According to the Society for Human Resource Management (SHRM), the average cost per hire is approximately $4,000. If a company loses several Gen Z employees, these recruitment costs can quickly accumulate. For instance, if a company loses five Gen Z employees, the recruitment cost alone could amount to $20,000.


Training Costs

Once new employees are hired, companies must invest in training to ensure they are productive and effective in their roles. The Association for Talent Development (ATD) reports that organizations spend an average of $1,299 per employee on training annually. Losing multiple Gen Z employees translates to further expenses; for five employees, this would add up to about $6,495 in training costs.


Productivity Loss

Employee engagement plays a crucial role in productivity. Gallup estimates that disengaged employees can cost businesses approximately $3,400 for every $10,000 in salary due to lower productivity levels. If several Gen Z employees become disengaged or leave, this can lead to significant productivity losses, affecting overall operational efficiency.


Turnover Costs

Turnover can be one of the most costly issues for any organization. The cost of replacing an employee can range from 50% to 200% of their annual salary. For a manufacturing worker earning $40,000, losing them could cost the company between $20,000 and $80,000. If a company loses five employees, this could represent a staggering cost of $200,000 if we consider an average turnover cost of 100% of their salaries.


Innovation and Revenue Loss

While hard to quantify, the impact of losing Gen Z talent can also affect a company's innovation capacity and potential revenue. A 2020 McKinsey report indicated that businesses that fail to innovate in response to changing market dynamics risk losing up to 20% of their market share and revenue. Gen Z brings fresh perspectives and a deep understanding of technology, which are crucial for driving innovation.


Example Calculation

To illustrate the financial implications, consider a manufacturing company that loses five Gen Z employees earning $40,000 each. Here's a breakdown of the potential costs:


Recruitment: 5 employees × $4,000 = $20,000

Training: 5 employees × $1,299 = $6,495

Turnover (assuming 100% of salary): 5 employees × $40,000 = $200,000

Total Estimated Cost: $226,495 (not including lost productivity and potential innovation costs).


The costs associated with losing Gen Z talent in manufacturing are substantial and multifaceted. From recruitment and training expenses to productivity losses and turnover costs, companies need to recognize the financial implications of high turnover rates. By investing in strategies that attract and retain Gen Z employees, manufacturers can mitigate these costs and foster a more engaged, innovative, and productive workforce.


 

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