Why labor management is the linchpin holding it together
According to Harvard Business Review, an organization’s long-term success hinges on enterprise alignment, while an article in Forbes proposes that strong cultures are built on organizational alignment.
Whether you call it an enterprise or an organization, your company will benefit from everyone rowing in the same direction. In other words, your company’s purpose should be aligned to (and reflected in) your strategy, operations, resources, and management systems.
The goal is to prevent any two (or more) parts of your business from conflicting with each other, thereby causing the entire effort to fall into chaos. When two separate teams, divisions, or projects start running at cross-purposes, something has gone terribly wrong.
Achieving alignment is foundational, but that doesn’t mean it’s easy. It is, however, worth it. One of the most critical components within your operation — your labor — is especially important when it comes to whether your organization is in alignment. How you manage your workforce can determine whether you sink or swim, especially in a post-pandemic world.
As labor performance experts who help clients achieve maximum production efficiency, nGROUP has witnessed all sorts of labor management approaches. We’ve seen what can happen when labor management starts to get in the way of running the best, most profitable company.
Since your labor is so vital to your operation, this kind of mismatch can be devastating. Here are a couple examples of what we mean. Interestingly, these examples expose two sides of the same problem: headcount. Because as it turns out, less is not always more, and more can often equal less.
Labor Management Conundrum #1: Less is Not More (The Veteran Workforce)
A few years back, one of nGROUP’s clients experienced this problem. It was a large electronics distributor with multiple operations around the United States. Their cost-per-unit (CPU) at one of their distribution centers was significantly higher than at other similar locations. When nGROUP was brought into the situation, we immediately analyzed labor cost and performance.
As it turned out, the workforce at this particular distribution center was small and mostly composed of veteran workers. That meant the per person labor costs were much higher, thanks to these employees’ years of service and raises over that time.
What the electronics distributor was doing made sense, from a certain standpoint. They were retaining a highly-trained and competent workforce at a critical job site. Unfortunately, without detailed performance analysis tools in place, there was no good way for the company to determine just how well this workforce actually served the purposes of the entire enterprise. Without realizing it, they had created an instance of misaligned purposes within the organization.
nGROUP went to work to restore costs to their expected place and to help re-establish alignment across the company. We used our production engineering tech to determine units-per-hour expectations, then analyzed every team member against those calculations. We isolated the top performers and bottom performers, retaining the former and using more flexible labor to replace the latter. That more flexible labor helped to lower costs during periods of decreased demand.
After that, we used our productivity measuring tools to develop meaningful efficiency figures. We conducted time analyses of workers, introduced new standards, and coached the team to the needed performance levels. Finally, we tied incentives to overachieving against expectations, encouraging both employee buy-in and maximum possible effort.
The results? The major electronics distributor saw labor savings of over $2 million at this one location within the first year. Over the first three years, the total savings added up to $5 million.
Labor Management Conundrum #2: More is Actually Less (Bigger Workforce = Bigger Savings)
Another nGROUP client discovered that sometimes it’s more cost-effective to pay more people. Sounds counterintuitive at first, doesn’t it?
Our client employed a modestly-sized workforce most of the year. Inevitably, there were seasonal spikes in demand. Unfortunately, the tendency to keep the workforce small meant that it was difficult to staff up to meet those spikes. That caused our client to rack up significant extra costs in the form of overtime for their hard-pressed team.
When nGROUP entered the picture, we first performed an in-depth analysis of the operation, which was using a CPU pricing model. One of the results of that analysis showed that, when combined with certain process improvements, a larger workforce could actually result in a lower cost-per-unit.
By enabling our client to stop staffing up on relatively short notice (and thus at increased expense), and at the same time stop paying so much overtime, the addition of the extra labor would help right away. Thanks to the tech-enhanced engineering insights that produced optimized processes, every team member would then be operating at peak efficiency much more easily.
At the time nGROUP began making these process improvements, as well as expanding the workforce, the client’s CPU sat at $1.41. With streamlined processes and more hands on deck, we upped the daily production total by 10,000 units — and CPU plummeted to $0.47.
Labor innovation that brings about enterprise alignment
One of the most dangerous obstacles in any enterprise’s path is the status quo. Inertia, as well as natural (or exaggerated) fear of change, often keeps both people and companies on a set path. Unless we re-examine ourselves and our plans regularly, we risk doing things “the way they’ve always been done,” instead of the way that makes the most sense.
That’s why nGROUP believes that innovation lies at the heart of staying in alignment. Constantly looking for opportunities and once-hidden advantages forces you to stay true to your organization’s overall purpose. Continue to ask the question, “What can we do better?” When you do so, you have to remind yourself of what that purpose is, and how you can get closer to it.
nGROUP offers customized labor performance innovations to our clients to help them make sure their labor is always driving them toward success, never holding them back. Every organization is unique, and therefore, there is no one-size-fits-all solution.
As labor management experts, our job is to identify the people and tools your operation requires in order to thrive. We equip those people to do a great job, and help you use those tools to get meaningful results. This will improve your workforce management processes while at the same time, freeing you up to concentrate on your core business.
For help in ensuring your workforce management is aligned and succeeding, contact us today. Let us empower you to lead a stronger, more unified operation right now.