Managing “Worker Capacity,” What is “Return on Worker Investment” and How Does It Impact Business?

Dean Prigelmeier, President of Proactive Technologies, Inc.

Most enterprises find it difficult to measure the value of a worker in terms of tangible, believable metrics. Performance reviews are often so focused on general traits that they miss entirely what separates a star performer of work as each worker progresses through their individual development. Although staffing levels are brought into virtually every planning or production meeting in nearly every business operation, most discussions of worker value degrade once it is discovered that data is not available beyond head count and loaded hourly rate.

The primary concern is the cost of labor versus labor output, or “cost versus value added” considering the product or service provided. Three things are needed in order to make the discussion more robust, more meaningful. First, for each job classification discussed what are the critical tasks that make up the job classification? Tasks as in “units of work,” not skills. A worker is hired to perform units of work that lead to completion of a larger unit of work for which the enterprise exists. A worker is not hired to “be good in math,” but they are, at least subconsciously, measured on how they apply that math skill in the performance of a unit of work everyone recognizes. If it is not known which tasks make up a job, it is difficult to measure how well new-hire workers and incumbents can, or cannot, perform to a job’s entirety.

Second, can your enterprise explain which of the tasks each worker hired for the job classification has “mastered?” In theory an organization decides to hire one more worker for a department because demand has exceeded capacity. Was the reason justified? It is only when an organization knows the gap between all the tasks of the job and the number of tasks each worker in the department had mastered can they confidently know they have exhausted all unused capacity of their existing workforce.

The third question is, does your organization know how much unused capacity exists across the organization’s workforce so it can calculate the “opportunity costs” to the organization? It may be that more bodies is not the answer, properly utilizing the existing workers for full return on work investment is the answer.

When a business enterprise contemplates investing in a new piece of equipment there is considerable consideration of what new efficiencies can be expected. Perhaps the old equipment could produce 200 parts an hour, and the prospective equipment 500 parts per hour. An analysis reveals if the investment to acquire the equipment is worth the added efficiency. While a similar discussion should happen over whether to hire one more worker to add to the existing level of operation, rarely does it occur to the same level of precision.

The main reason is the lack of accurate metrics for determining current “worker capacity” other than “at what level volume of production can the current group of employees consistently produce?” While an important consideration if no other information is available, there is a way to know the incremental impact of adding one more worker to the existing scenario.

To compare worker investment to capital investment, as in the example of new equipment, each job classification has a number of tasks that if all are mastered, that would make for a model employee. Each task has a purpose, an outcome and a set of procedural “best practice” steps. If the job is made up of 100 of these tasks, would your organization know how many of existing workers have mastered all of them, have reached “full job mastery?” Does your organization know how many tasks make up each critical job classification?

If incumbent worker A has mastered 50 of the 100 tasks, worker B 75 tasks and worker C 100 of 100 tasks, the respective levels of worker capacity are 50%, 75% and 100%. If there were only these 3 individuals in the department, the aggregate worker capacity for the department would be 75%. – 25% unused capacity that can only be derived with focused structured on-the-job training. If the organization had three departments with aggregate capacities of 40%, 60% and 75%, the manufacturing total aggregate capacity would be approximately 58%.

Once capacities are determined, all that is needed to determine the direct cost of unused capacity is the loaded hourly rate. If the hourly loaded hourly rate of the structured on-the-job training trainer is also known along with the time it takes to train each worker, the “internal cost of training” can be calculated , which is added to the accumulated classroom and online learning costs. With a little more math the “opportunity costs of unused capacity “ can be determined.

This analysis can help the employer determine if new employees are needed to increase output or is there unused worker capacity that can be developed in each area. There are many reasons for the existence of unused capacity: 1) no structured worker training program that keeps track of each worker’s training progress; 2) the propensity for workers to informally “specialize” only in tasks that interest the; 3) no management desire to cross-train workers to ensure each moves toward full job mastery; 4) no organizational memory of worker development (especially in organizations where managers are new to the area); and 5) a natural preoccupation to focus on solutions that are tangible and predictable which does not include worker training if no data or structure exists.

Job Mastery and worker capacity go hand in hand. Setting up the structured on-the-job training infrastructure is no longer impossible to establish. And the cost of the initial investment is recovered in the early returns on worker investment. The cost per worker declines and the number of workers increases – unlike classroom training and online content. Furthermore, the worker training system will cut the overall cost of worker training while worker capacity, work quality, safe performance and process compliance increase.

For more information click here.