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How Productive is Your Employee Base?

posted Oct 11, 2017, 9:29 AM by Ron Sandler   [ updated Oct 11, 2017, 9:47 AM ]
Overseeing a work force and maximizing their productivity, especially in a manufacturing environment, can be very difficult. If you were to stand behind one of your employees for a week without them knowing, what % of the time do you think they are being totally productive?

"In many work forces, overtime is like an addiction. Once the worker starts receiving it, they get used to seeing the money in their paycheck, their standard of living increases and eventually they can’t live without it."

When I posed this question to several employers, the answers ranged from 60-80%, meaning that in many cases the work force was unproductive 30% of the work week. Then, I asked the employers how many people they had working for them and what the average hourly wage was. This led to a quick calculation of the number of non-productive hours and the dollar amount of non-productive labor expense. I annualized it, so they could see how much money it was costing them on a yearly basis. In some cases, the # was so high that the business owner calculated it again just to make sure. At this point, some of them were so stunned and embarrassed that they retracted their original answer, went with a higher % and defended it (or just sat there visibly agitated). This was the perfect time to transition into another subject business owners love to discuss: overtime and its necessity in the operation.

Employers don’t like to pay overtime even though they often feel they have to. In fact, many live in denial about it until their controller or plant manager tells them it’s out of control. I like to say that overtime is a premium you pay when the employees are not at their best. Their job performance tends to be much better on hour #25 as compared to hour #45. Also, in many work forces, overtime is like an addiction. Once the worker starts receiving it, they get used to seeing the money in their paycheck, their standard of living increases and eventually they can’t live without it. Before you know it, the job the employee used to do in 40 hours now takes 45 hours to complete. So back to the calculation - when you add overtime expense to the non-productive hours, you start really seeing how much money the business is losing by not having a productive work force. With some of the companies I met with, these were staggering amounts: several hundred thousand dollars. I remember one employer was spending half a million dollars a year on plant overtime as well as another $750,000 in non-productive hours totaling $1.25 million that could have easily been cut in half.

There are a variety of methods to measure and remedy the productivity issue leading to a more efficient operation. If you'd like to learn more, please e-mail marcromanow@gmail.com
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