How do we maximise our people power without driving costs through the roof?

 

People maximisation is a key component of any successful business, leading to added value without the added cost.

In today’s small and medium sized companies more and more owners and managers face challenges like this on a daily basis. You start the company with good intentions, you are making good money, you had great relationships with your employees, you had money coming in hand over fist and now you feel like your workforce issues are causing you unrelenting problems.

 

These problems can completely drain you and your desire to succeed, especially in a difficult economic and social environment. You feel like the only way out is to give up and quit, but that’s not the only solution.

 

Here we look at 5 areas to review to make sure we maximise the use of our people without driving costs through the roof.

 

Review permanent, part-time, casual and contractors

As definitions of employment categories and compliance are continually tweaked we need to assess our people structure to ensure we have the best fit for today. This is not only to ensure we minimise cost but stay compliant and maintain the focus for the staff.

This will uphold the quality of our service and ensure it aligns with the vision and values of the company.

 

Market Alignment on Pay

Costs need to be align with the market and the cost of doing business. If we are in a heavy recession and we are paying excessively above market we are not going to be competitive for long. We need to find that happy medium but also ensure staff value the organisation not just for their pay check. In doing this we need to broaden our incentives for staff.

 

Reward based on value-add to the business and outcomes not functions

Making rewards based on fundamental functions of the business is ultimately a flawed model. In an ever-competitive market we need to align rewards with performance and outcomes that are important to the organisation. This will drive sustainable long-term value.

 

Create a flexible workforce that is dynamic

A flexible workforce that is creative and dynamic can add value across many areas of your business. Staff are willingly to step outside their comfort zone and backfill a gap in the business you just need to give them a chance and empower them to meet the needs of the business. This ultimately means you will be able to reduce external labour costs as you will no longer require the short-term hires or breadth of contractors.

 

Create an Employer of Choice

I have spoken about creating an employer of choice model in my previous articleHow do you Become an Employer of Choice’. It is a continual work in progress that will ultimately be helped if you create a table like the one below:

By sharing these employee/employer values we provide clear direction to the whole organisation about what we as the employer will do but also outline the expectations of the employees.

Now let’s look at how we implement the above whilst not increasing our labour costs.

Reviewing Labour Costs

There are three main components to labour costs;

  1. the ongoing costs including the salary, wage or casual rate plus applicable superannuation, payroll tax (where applicable), Fringe Benefits Tax, Leave Costs etc.;
  2. the additional administrative costs of recruiting and human resource actions including management time;
  3. The cost of an unhappy or inefficient workforce.

Point 1 is usually recognised in full, point 2 partly and point 3 is rarely recognised but can cost the business the most.

We think that reducing our ongoing labour costs is all we need to focus on but it’s the other areas of the business that will cost the business at the end of the day.

The administrative costs of people management will change depending on the level of satisfaction within the business. Ongoing job losses in some sectors and strong labour force growth are pushing the unemployment rate higher. This is hurting consumer and ultimately business confidence so we need to get it right.

Let’s look at 7 solutions to reduce labour costs in the business.

 

Labour Cost Reduction

1)      Review your Procedures

You always have to circle back and check yourself. Are you doing things, right? Have new technologies developed that may streamline your procedures and make your employees’ time more productive? Are we undertaking tasks for the sake of it or are we doing it for a specific value-add purpose.

2)      Train & Guide People from the Start

If they get it right the first time, they don’t have to do it again, right? When onboarding employees, make sure that you train them – thoroughly. When implementing new technologies, make sure everyone has a grasp of them. You’ll save yourself headaches down the road, and you’ll have a more efficient workforce. Don’t wait for staff to be with the company for a certain amount of time before you invest in them. Yes, you may lose out on the odd occasion but they are adding value from the start.

3)      Tweak your Layout

Production layout whether it’s a factory or office floor needs reviewing. This means we can achieve the most efficient layout as possible and make it as flexible and transportable as practical. This will ensure that it can be changed in the future to meet current needs. Even if it’s just a matter of where a printer is, making adjustments to optimise your space and layout will improve productivity. Improved productivity will reduce labor costs- it’s as simple as that.

4)      Keep management cohesive and on point

Whether you’re managing a team on your own or you have a management structure, make sure that you’re all on the same page about how you communicate and encourage people. Nothing can drive direct labour costs up faster than irregular and erratic management who convey mixed messages to the team.

5)      Outsource when it makes sense

There is a whole world of resources out there for your business. Sometimes you just have to do some research and find out what’s best for your business whether it’s a local or overseas resource. It could be looking at casual or contract and someone that brings a dedicated expertise that your business requires a focus on.

Don’t get stuck on the idea that you have to throw your full-time employees into overtime to get a job done.

6)      Cross-train

Your employees are smart— let them show you how smart. There really isn’t room in business these days for maintaining narrow employee categories. See what your people can do and get everyone working across the company instead of in a box, exchanging ideas and pulling their weight wherever they can.

7)      Try 4-day workweeks

Four-day workweeks may be a hard idea for a lot of us to get used to, but it’s an idea that’s catching on more and more. You would be surprised at how many of your employees would sacrifice a bit of pay to have a bit more time to themselves and with their friends and family. Ask around and see who would be interested in taking on a 4 day a week.

By undertaking the above steps, we can maximise the use of our people without driving costs through the roof.

If your business needs guidance on people maximisation, contact the Cashflow Tech Systemz team at info@cashflowtechsystemz.com.au.

 

This article was created from several blogs and originally published at cashflowtechsystemz.com.au

About the author

Over the last decade Deane has held senior roles within small and large organisations by partnering with the business to maximise value.

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