Five Ways to Cut Labor Costs with Effective Business Systems!
If good business systems don’t reduce your costs and put more money in your pocket then you’re not tapping into their real potential. One of your best opportunities is to trim labor costs.
For example, I worked with a marginally profitable distribution company having $2,000,000 a year in revenues and thirty employees. After looking carefully at their operation, we were able to help streamline the business and decrease the number of people it took to process orders. We eventually reduced the labor of the order fulfillment system from approximately 12% to 7% of sales. The company saved over $100,000 in productivity gains the following year.
That’s what I’m talkin’ about—big results—the things you can expect when you put on the hat of a Systems Thinker.
Increase Productivity
In a Microsoft survey of 38,000 workers conducted a few years ago, it was discovered that the average employee is productive about 65% of the time. Using effective business systems to improve on this number is one of your best opportunities to save money.
Do you have twenty employees? I bet you could get the same work done with improved systems and only eighteen employees. Do you have fifty people in your company? Efficient systems could reduce your work force by five or more. I’ve been in many small businesses through the years, and I could do very well financially if I were only paid by the waste in labor I was able to recover.
Cut Labor Costs
Here are five methods you can use to slash your labor costs starting today:
- Pay the higher price for “A” workers instead of the lower price for “C” workers who cost you more in the long run. Fit the right people to the job. Train them well. Put workers in a great system where they can perform above their pay grade.
- Get rid of productivity busters such as clutter, poor floor layout, complexity, unnecessary movement, and so forth.
- Increase worker and system efficiency by eliminating mistakes and defects, delay and downtime, and show-stopping bottlenecks.
- Create competition. Turn the system into a game and keep score. Give financial incentive for high performance.
- Reduce the costs of supervision by creating smooth-running systems that provide frequent feedback to workers of system results. Give ordinary people the tools for self-management and make them accountable. They will become extraordinary.
In difficult economic times, you can keep your labor costs lean with good business systems! I bet your organization has opportunities just waiting to be discovered!
Wishing You Prosperous Times,
Ron
P.S. – More than half the participants, 55 percent, in the Microsoft survey said they relate their productivity directly to software efficiencies. Improve your productivity with Box Theory™ Gold business software.