Increasing Worker Capacity – An Alternative to Cutting Workers for Short-term Cost Savings

by Stacey Lett, Director of Operations – Eastern U.S. – Proactive Technologies, Inc.

In business, if you encounter market “softness” and believe that the business level that you were previously operating at is now unsustainable – even if for a limited period – you might be tempted to first “cut labor costs” to extend short-term cash flow and/or make the balance sheet appear healthier in pressured by investors. It often becomes a slippery slope that can lead some organizations struggling to get off. Sometimes the pundits’ forecasts were inaccurate or the recovery is swifter than anticipated. Regardless, what appear as a benign short-term solution can have long-term repercussions as the market recovers and the employer is now struggling to regain the capacity the workers afforded, while watching opportunity slip by.

Sometimes investments are made in machinery and technology during the lulls to get ready for the economic up-turn, but too rarely is any effort made to determine the level of each worker’s current capacity (i.e. what percent of the tasks they were hired to “expertly” perform) relative to the job they are currently in and what could be done to increase it to handle not only existing technology and processes, but the new technology and processes as well. One might even think about cross-training workers to build “reserve capacity.”

Too often, in this age where every quarterly report has to be as good or better than the one before – actually earnings per share – even if the economy currently doesn’t allow it, well-run businesses are pressured to cut into the bone; driving down wages, cutting benefits and ultimately eliminating workers. Investment in worker training isn’t permitted. It doesn’t take an accounting genius to make sweeping, ill-informed cuts, but it does take a pretty savvy leader to recognize and avoid the perilous track or, worse yet, pick up the pieces after these mistakes have been made.

“That is the one point missed in all of the cuts to wages, benefits and staff; the first wave affects those who have no choice, the second wave affects the company as those with choice exercise it and move on.”

When the economy recovers and the company stumbles in regaining its capacity, heads roll, more cuts are made and finally the investors pull out – leaving the previously well-run company impaired or near collapse. No good has come from this, and why it is allowed to continue makes no sense – except that it takes little thought to order, gives Wall Street the appearance of something good happening and something to report. That is why stocks rise when layoffs are announced – even in the face of predictable long-term effects of what the cost cutting means. That and the media’s cheering section that naively extols a short-term bump that may turn into a long-term fumble.

Worker capacity will be needed once the economy resumes, and the prudent businessman would not want to miss the recovery while spending too much time rebuilding the organizational capacity, part of which is finding “talent” to the replace the ones encouraged to leave and part trying to encourage the ones currently employed to stay. Additionally overlooked, employee and management morale suffers during wholesale cuts and irrational cost-cutting acts. The workers needed to sustain a recovery and regain market share are affected by what they see happening around them, and those most talented keep one eye on the door because they have the skills other employers might appreciate and always have the option to leave. That is the one point missed in all of the cuts to wages, benefits and staff; the first wave affects those who have no choice, the second wave affects the company as those with choice exercise it.

An alternative to knee-jerk cuts to workers is to assess each worker’s capacity (i.e. what percentage of the tasks of the job they have had a chance to learn and master), then use business “lulls” to raise it to full job mastery. This also sharpens the focus of the subject matter expert assigned to train the workers and leads to clarifications of “best practices” somethings in conflict between shifts and trainers. It may seem counter-intuitive to focus on training during business lulls when resources are reportedly short, but what better time to develop underutilized and undeveloped capacity that will help when business picks up and additional hiring may not be necessary. Learning without focus and purpose is often dismissed as a cost not currently affordable. But task-focused training, where each task is meaningful and the output recognizable and needed, is easier to appreciate as an investment.

In an article previously posted in the Proactive Technologies Report newsletter entitled, “Employers Say They Struggle With a “Skills Shortage,” Yet They Cut the Training Budget. What Gives?”, the author explores the conflicted behavior employers display when they struggle with the “skills gap” and that they have trouble finding skilled labor, then take measures, or not, that undermine the performance of their existing workers – investing very little in time and resources to develop the full potential of new and incumbent workers.

These employers do not understand that workers gain value for every task that they master that adds to the business model, and harvesting that value can be passive and hopeful or deliberate, documented, measured and improved. Multiply each worker’s improved capacity and corresponding value by the number of employees and this number in real dollars is huge! For anyone not familiar with this concept, it is described in a Proactive Technologies Report article entitled, ““Full Job Mastery” means “Maximum Worker Capacity” – A Verifiable Model for Measuring and Improving Worker Value While Transferring Valuable Expertise” and a article entitled, “The High Cost of Employee Turnover”.

The simple steps of maximizing worker capacity is too often avoided or ignored as not achievable. Much of that is based on the internal lack of understanding of just how critical the need to develop all workers is and how vital it is to maintain worker capacity…even during slow periods. It is also the result of years of misdirection sustained by educational institutions and their think tanks that tend to find or develop evidence that supports what has been done for the last 30 years but shows little promise in closing the skills gap.

Every employer should take just a few minutes to explore Proactive Technologies’ PROTECH© system of managed human resource development. If this approach doesn’t seem to be the possible solution to unused worker capacity, lack of worker training and documentation, uncertain worker compliance (e.g. ISO/IATF/AS and safety) and unassisted performance improvement, spending 45 minutes might be all that was lost. Sign up to join one of the regularly scheduled free 45-minute live, online presentations  or request a date and time good for you and others on your staff.