The Systems Thinker Blog

Five Ways to Cut Labor Costs with Effective Business Systems!

Posted byRon Carroll

If good business systems and processes don’t reduce your costs and put more money in your pocket then, you’re not tapping into their full potential. One of your best opportunities is to trim labor costs.

For example, I worked with a marginally profitable distribution company having two-million dollars in annual revenue and thirty employees. After looking carefully at their operation, we were able to help streamline the business and decrease the number of people required to process orders. This initiative eventually reduced labor costs for order-fulfillment from approximately12% to 7% of sales. The company saved over $100,000 the following year with the productivity gains. 

Business Productivity

We're talking about the big results you can expect when you put on the hat of a Systems Thinker.

Boost 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 better business systems and only eighteen employees. Do you have fifty people in your company? Efficient systems and processes could reduce your work force by five or more. I’ve been in many small-business operations through the years, and I could do very well financially if I were only paid by the waste in labor-expense I could recover.

Cut Labor Costs

Here are five methods you can use to slash your labor costs starting today:

  1. 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 business system where they can perform above their pay grade.

  2. Get rid of productivity busters such as clutter, poor floor layout, complexity, unnecessary movement, and so forth.

  3. Increase worker and system efficiency by eliminating mistakes and defects, delay and downtime, and show-stopping bottlenecks.

  4. Create competition. Turn the system into a game and keep score. Give financial incentives for excellent performance.

  5. Reduce the cost of supervision by creating smooth-running business processes that provide frequent performance feedback to workers. Give ordinary people the tools for self-management and make them accountable; they will become extraordinary.

In a highly-competitive marketplace, you can keep your labor costs lean with effective business systems and processes! Your organization has opportunities just waiting to be discovered!

And by the way, more than half the participants, 55%, in the Microsoft survey said they relate their productivity directly to software efficiencies. Maybe you should take a look at Box Theory™ business software today.


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Tags: Systems Thinker, Business Systems, People, Efficiency/Speed, Cost Cutting