WESLEY CHAPEL, FLA. — One of the greatest investments in a business is the money put into labor and training. For that reason, getting the most out of your workforce can help improve your bottom line.
During a Feb. 25 session at Plastics News Executive Forum titled “Realizing Greater Sustainable Net Profit,” Rob Comeau discussed ways for plastics companies to mold a more efficient workforce.
Comeau is CEO of Business Resource Center Inc., a company dedicated to bringing increased visibility to key areas of managing business in order to map out solutions to drive a greater net profit.
Most times, business owners don't believe they have tapped the full potential of their employees.
Benefits of harnessing a workforce can include improved profits, quality, growth and a higher return on investment. It also can lead to lower turnaround times and increased employee retention.
“You want to look at motivations that will impact your workforce on a long-term basis,” Comeau said.
While some companies could have a lot of working capital to automate their entire operation, for most firms that is not an option.
As a result, labor plays a large role in a company's financial health.
Like a balloon
Comeau described his balloon methodology, in which a business is viewed as a balloon within a balloon.
The external balloon represents revenue and it expands and contracts based on market penetration and sales. The internal balloon represents overhead and it expands and contracts based on cost containment and operational expenses.
“If you have a stagnant external balloon and an interior balloon that is expanding, your business is a ticking time bomb,” Comeau cautioned. “You've got net profit margins that are shrinking continuously. It affects cash flow, scalability within your organization and ultimately, if it doesn't change course, it is going to affect you being in business.”
Moreover, Comeau noted that there isn't one area of an organization that isn't impacted in some form by its workforce.
“Every aspect of business, to some extent, is driven by the workforce,” he noted. “A good company will stimulate production from the workforce, which leads to increased profits.”
Showing value
Companies exhibit value to the workforce through wages and benefits, and Comeau pointed out that most organizations haven't tapped the full potential of their workforce.
“When there is room for improvement, there is room for net profit growth,” he said.
The key is to establish metrics to quantify progress with regard to workforce potential. While each company will have its own nuances, there are commonalities that can be measured.
“If you look at sales reports, that is something that you can quantify,” Comeau said. “Incentives can fuel competition, increase productivity and drive up profits.”
Moreover, an incentive program has to be manageable to be sustainable.
“The one issue I often see with employee stimulation programs is that they start off with a bang and then it sizzles,” Comeau noted. “You don't see sustainability or longevity within these models.”
Value also is attached to individual positions based on their department value and production value. For example, a net profit quantification demonstrates employee yield commensurate with production, positional and departmental value.
Comeau also took aim at the “80/20 Rule,” which maintains that 80 percent of the work is done by 20 percent of the workforce.
“You have to look to destroy that,” he said. “You always should be looking to move the needle on the 80/20 Rule. When you have 80 percent of the work done by 20 percent of the people, you are running thin.”
Stimulating the 80 percent that is doing 20 percent of the work can be done through measuring median production.
“Every time you move that dial forward, you set a new median production,” Comeau said. “The goal is to move that forward
continuously.”
Show them the money
“Unless you are employing a bunch of philanthropists, cash is the greatest incentive,” Comeau sad. “Nobody is going to come to work for free.”
Using cash as an incentive also can fuel competition among the workforce and drive employees to work harder.
Setting up pay structures establishes value metrics attached to positions. Profit sharing and pay increases will be based on the overall goals of the organization.
Comeau noted that few companies realize the full potential of their workforce.
“Where there is room for improvement, there is room for net profit growth,” he said.
Companies can use benefits, bonuses and pay increases to show value to their employees and their employees will as a result feel valued for their contribution.
There are a number of variables that can affect workforce optimization, including visibility.
“If you can't see it, you can't hit it,” Comeau said. “Some of the areas you can quantify when you are looking at workforce optimization is driving the quantification process that is going to increase visibility for operations as well as production, distribution, etc.”
Bringing the visibility of a sales-generating position to production and operations can be a challenge.
Manageability is another key variable.
“It has to be a manageable program to be sustainable,” Comeau said. “If it is too comprehensive or too labor intensive, it is something your labor force won't stick with.”
Many companies will take on a profit sharing model to force organizational alignment. This will create stakeholders and make them accountable for their own situations.
One of the benefits to a workforce optimization net profit yield program is that of the organization has not realized a net profit increase, there are no bonuses.
“It is all based on the net gain of your organization,” Comeau said. “It is not based on the status quo.”
Each position of a company has individual production value that will allow leadership to see visibly what the throughput is per employee and the departmental value to the organization.
Comeau also recommends that companies take 20 percent of their net profit gain and infuse it back into the workforce. It can be done in a way that will appropriate the bonus to the departmental or positional value.
“Now your workforce is now driving toward a common goal,” he said. You can drive the bonus capacity on an annual basis or a quarterly basis.”
The workforce will be more apt to focus on what they need to do well to drive growth in the company to ensure net profit increases because they will make more money.
Comeau urged attendees to care about the net profit increase of their organizations.
“So will your employees,” he said. “They absolutely care about the net profit increase. I challenge you to realign that focus and make their net profit increase a derivative of your organizational increase. By extension, your company is going to grow and infuse that money back into the pockets of your people.”
The end result will be improved employee morale and retention. Customers also will be happier to do business with a company that has long-term employees.