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Adding more labor can be beneficial to your bottom line

January 20, 2014

It’s been about eight years since I stepped into the manufacturing vertical in Kronos and I’m excited to announce that Kronos has asked me to take what I’ve learned here and apply it to a new initiative. This is a project to demonstrate that labor is not just a cost and compliance burden, but rather a strategic resource that is responsible for differentiating a company.

For those of you who have had a chance to read my book, Lean Labor, you know that I have espoused this proposition for many years. The challenge when I wrote that book is for many companies it is easy to measure the cost and compliance risk of an employee. What’s more challenging is to equate an individual’s effort to more positive outcomes such as higher quality, increased revenue or improved conformance to policies and procedures. The reason is that measuring cost can be recorded easily and accurately down to the minute. Labor’s impact to other factors can often take days or months. Additionally a single or group of employee’s impact is often mingled in with other factors such as weather, sales promotions or the performance of other downstream operations.

As any Lean follower knows, this is very similar to the Lean philosophy and I’m looking forward to sharing what I discover in the future here as well.

This initiative goes outside of Manufacturing. Healthcare organizations are evolving from measuring by activity to improving outcomes. Retailers are working to differentiate by providing the right types and levels of service to their customers just when they need it.

This is potentially valuable work for a company because when the only data driven linkage to labor is around cost, compliance and immediate output, the so called “war on labor” will continue. Once we can link the more positive outcomes experienced by a company to labor, companies will have another option to use in achieving their strategic goals. I would predict that this increases their use of labor because executives will have the metric and proof they need to feel confident in the outcomes.

Why do I have confidence in saying that? Today the only role whose performance is easily measured to a strategic goal, in this case revenue, is sales. Broadly speaking sales is always the role that is first to be grown and last to be cut. They are often the highest paid as well.

Fortunately, I’m not alone in this effort. There are examples already occurring in the market and academics who have already been proposing these ideas. A recent article in the New York Times Thinking Outside the (Big) Box provides some more specifics around the idea.

I look forward to communicating our findings and what others are doing in this area in the near future.

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