Lowering Labor Costs and Preventing Layoffs

Increase Profits by Re-engineering Staff

Minimize conflicts or problems within the company by avoiding layoffs, which can be accomplished through staff re-engineering. Increase productivity by pairing each employee with enough work to keep them busy without overextending their responsibilities. A company needs to have just enough employees for the amount of work that is available.

Employee morale and satisfaction rates decrease as they worry about layoffs, become frustrated with management, and are overworked. Companies are quick to make layoff decisions without consulting employees or supervisors working in the field or production environments. More often than not, managers layoff a productive worker who happens to hold a lower-level position.

Businesses are dynamic and complex enterprises that need to be optimized and improved in order to ensure a sustainable future. Your business executes several processes before the end result is achieved. However, efficiency between the various processes decreases over time. Business process improvements lower labor costs by accomplishing tasks more efficiently, reducing skilled laborers and task completion times. The processes, and steps to complete them, are outlined in strategic planning documents that ensure that the various processes complement the company's vision.

Lower labor costs by streamlining work flow management. This can be done by providing clear and thorough direction each step of the way. A work flow in itself outlines a repeatable procedure that is used to manufacture intangible and tangible products. Business processes utilize the work flow model to increase accountability and productivity in the workplace by defining roles. Work flow processes are documented and easily learned by employees, which reduces training and labor costs.

Workflow management became popular in the quality movement as it is used primarily as a quality control mechanism to ensure that employees stay on task. Workflows minimize human interaction, lower labor costs, and optimize processes by keeping the tasks simple. Each workflow contains an input (information or material), rule (transforms the input), and output (the transformed product). The output is carried to the next level where it becomes the input, repeating the steps until all processes of the workflow are complete.

Reduce labor costs by optimizing the workforce within your organization, restructuring employee job descriptions, re-engineering work levels, and removing wasteful tasks and unproductive employees, including managers. If your company was hit by the recession and work is slow, consider matching the employees to the available work.

Analyze the amount of work the business receives on a daily basis, quantifying the information into a spreadsheet or table for analysis. Quantify work levels by interacting with customers, talking to workers, observing the floor, and collecting static data to lower labor costs. Consult forecasters and business strategists to predict possible spikes in business, as you do not want to be left with more work than your employees can handle.

Monitor the floor and lower labor costs by determining the maximum amount of work an employee can effectively produce in a given day, week, and month. Gauge work levels by the number of units produced per shift, consulting past work history in addition to your observations. Interact with the people who complete the tasks, asking them if they have any improvements or suggestions for management.

Sketch the overall work flow your company utilizes, creating a process for each step of the work flow. Analyze the amount of time each process takes to complete and identify how much the process costs (wages, materials, energy). Can you eliminate, combine, or shorten any process to reduce labor costs or operating expenses? Consider how to streamline the operation and reduce human interaction (wages) by automating certain procedures.

Waste is a natural byproduct of your business. However, you can reduce or eliminate the intangible waste produced by your labor force. Review and analyze your business processes, identifying areas that can be combined or merged. Optimize employee workloads if certain positions receive more work than others, ensuring that everyone takes part in profitable tasks. Are your quality assurance programs increasing profits or wasting revenue?

Identify mundane, clerical, and administrative tasks in relation to the business objectives. Can you automate, streamline, or remove the process from your organization with minimal consequences? Consider using manufacturer or vendor services rather than your internal workforce to order supplies or manage inventories. Wasteful tasks are those that do not complement or directly affect the company's vision or mission statement.

Implementing process improvements creates noticeable change within a short period of time. Labor costs can be reduced by 10 to 15 percent using proven work flow management and business process improvements. Business strategists achieve reduction rates in excess of 25 percent. However, the simple and straightforward approach does not require expert knowledge. While it may be impossible to avoid the pink slip blues, ensure your remaining employees can complete the work without feeling overwhelmed or burdened. As a last resort, find a cheaper alternative to the laid off employee(s), keeping the work levels manageable for everyone else.