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Higher Quality Leaders, Higher Return

The DDI Plant Leadership five-part series presents findings from the MPI Manufacturing Study, including survey questions developed exclusively for Development Dimensions International that focus on plant leadership and talent development.

Higher Quality Leaders, Higher Return: Manufacturing plants with higher quality leadership are more efficient, productive, and better at engaging their workforces.

If it’s all about the numbers, then plants with higher quality leadership win—across the board.

Manufacturing plants with higher quality leaders (rated “very good” or “excellent”) are more likely than plants with lower quality leadership (rated “poor,” “fair,” or “good”) to:

  • Be more efficient: Plants with higher quality leaders report annual inventory turn rates of 12.5 (median)2.5 turns more than plants with lower quality leaders. More turns are indicative of better, more streamlined plant processes running from the supply dock through production and to shipping.
  • Be more productive: Plants with higher quality leaders report sales per employee of $184,000 (median). In a plant with 500 employees, that’s $3 million more in sales each year. What’s more, two-thirds of plants with higher quality leaders increased productivity in the past year, vs. 52 percent of plants with lower quality leadersi.e., the competitive advantage continues to grow.
  • Retain and leverage workforces: Plants with higher quality leaders report annual labor turnover rates of 5 percent (median), a full 50 percent lower than plants with lower quality leaders. Since it costs $6,443 to just recruit a manufacturing employee1 (not including time and costs to train them), the labor-turnover gap represents a dramatic profit drain. In addition, employees working with better leaders also are more likely to be engaged and driving higher productivity and efficiencies: Plants with higher quality leaders also have 75 percent (median) of employees fully engaged in their improvement methodology vs. just 25 percent at plants with lower quality leaders.

Better quality leadership matters, and it’s possible to:

  • Define the leader success profile.
  • Assess leader competencies and attributes.
  • Accelerate their development.
  • Measure their performances.

What financial impact would higher quality leaders have in your operation?

The MPI Manufacturing Study was conducted by the Manufacturing Performance Institute (part of the MPI Group) in November and December 2014. The MPI Group received study responses from 319 manufacturing plants, encompassing a range of industries (e.g., 17% computer and electronic products, 14% fabricated metal products, 11% machinery, 10% chemical) and sizes (31% with fewer than 50 employees and 17% with 500 or more employees).

1 Lauren Weber, “For Smaller Firms, Recruiting Costs Add Up,” The Wall Street Journal, Nov. 28, 2011.


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