The law of unintended consequences often strikes in situations where the intent is to do good, but the result actually hurts. The minimum wage increases around the country are an example of this.
Just yesterday I was talking to a client who will be affected by the minimum wage increases in Oregon. This client has treated their employees exceptionally well. They participate in community training programs, support local colleges that train workers in their industry, cooperate actively with ex-prisoner training and hiring programs and have a very team-oriented workplace. Now, because of increased costs created by Oregon’s minimum wage increase, they’re facing automation, lights-out operations and a greater focus on the higher paid positions in the company. They’re planning to lay off about 20% of their workforce, almost exclusively in the low-end jobs and ex-prisoner positions, hurting the very workers that the minimum wage increase was supposed to help.
Our politicians, leaders, company executives and managers always need to consider the risks of doing things to make sure the law of unintended consequences doesn’t lead to bad results.
According to economists, the number of people over 65 will double in the next several years and by 2020, people over age 65 will outnumber people under 20. This is the first time in recorded history that this has happened. This has important implications for companies because as the Baby Boomers age, many of them may decide not to retire. This creates a gap in the ability for Generation X and the Millennials to move up and earn higher wages.
According to Steve Scranton of Washington Trust Bank at a recent presentation on Demographics: Impacts to the Economy and your Portfolio, the late-retirement phenomenon could have some interesting results. For example, on a recent tour of a local screw machine shop, the CEO lamented that many of his operators and machine mechanics were planning to retire soon and that qualified younger workers are few and far between. He’s not sure how he’ll respond when his long-time workers retire.
However, due to the so-called Silver Tsunami, perhaps more of the “old guard” will continue to be available, if only on a part time basis. Have you thought about how your company will respond to the brain drain as the Boomers retire?
Here are three things you can do:
Develop succession plans now for all levels in your organization. Start to bring new people in and train them over time to fill potential needs.
Restructure your labor environment to allow job sharing and part time work. While many of the Boomers may not want to work full time, there are many who don’t want to quit working entirely. Take a look around during your next visit to Home Depot to see what I mean. Many get bored or want supplemental income, and what better way than to continue doing what they know in familiar environment, but on a more limited basis.
Look for opportunities for public/private partnerships with local colleges, trade schools and other organizations to begin training programs for younger generations.
Be ready for the Silver Tsunami in your business. You don’t want to be swept away by the current.
Recently I was talking to a VP, Operations about his role in the organization and how to improve the company’s operations. He told me his role was to develop policies and procedures and then monitor them for compliance. If compliance wasn’t forthcoming, he took action to change behavior, usually through training or discipline.
Can you imagine how excited his people must be about change? Do you agree that they are probably walking on egg shells every moment of the day? Do you think they are engaged in process improvements?
While rules should be followed – and there are some instances where compliance is critical, such as dangerous work environments or extremely precise processes – most companies that have a high compliance culture find that people won’t take chances and are afraid to make mistakes. They tend not to look for opportunities for improvement or cost reduction through problem solving or “do easy” approaches to continuous improvement because they are afraid of the discipline that might follow if they stray from established norms.
It’s much better to have a work force committed to every day improvements: to processes, to their own jobs, and to the business as a whole. Commitment to personal and organizational success creates an environment of excitement, success and enjoyment. Striving for commitment in your culture creates an empowered workforce that will work toward excellence in performance and customer service.
Developing great people is the vital ingredient to success. Alignment, empowerment and hiring are foundational elements of developing excellent people in your organization.
One of the biggest roadblocks to getting things done is a lack of alignment between people. Having a common goal makes the difference between winning teams and dysfunctional committees. Putting a clear vision in place helps people understand not only the direction management wants them to go, but what the ultimate destination should be. People need to understand what is expected and why.
The Right Tools…
Empower people to get the job done. Give them the training and resources to accomplish the objective set out in the vision. Then let them do what needs to be done – this helps develop a culture of trust.
…in The Right Hands
Careful hiring is essential. People with specific technical capabilities are often easy to find and training is widely available. A person whose values align with the company culture is a rare gem. Questioning and testing during the interview process can determine if the person has personal characteristics that will make them successful within your company’s culture.
Alignment, empowerment and hiring are all vital to developing great people, and every company needs great people now.
If you talk to your local cost accountant, they will tell you that labor costs (along with materials and supplies) are recorded as variable costs. In reality, they should be treated as fixed costs. Why is that? Because, in the short run, it is not easy to turn this asset into costs that can vary with revenue which is the definition of a variable cost. It is very difficult to lay off people in a low revenue month and then rehire them in a high revenue month. If you try to do that, hiring costs, training costs and cost of quality all increase usually to the degree that they more than offset keeping the people through the downturn.
Many companies will try to furlough people or send them home early in an attempt to turn this fixed cost into a variable cost. While this works in the short run, people will get tired of the lower income and unpredictable work schedule and eventually will look for a new job. This again raises the cost of hiring, training, etc.
The only true variable labor cost is the use of temps and overtime. If your company is in a volatile market, it is best to plan for a level of temps and overtime to create a variable environment.