by Dean Prigelmeier, President of Proactive Technologies, Inc.
To many, “maximizing shareholder value” has become synonymous with layoffs and short-term cuts that will typically have harmful affects on long-term operational capacity. An often overlooked, but more productive, goal is “maximizing worker capacity” and should be a priority for every organization – publicly traded or not. Leaders of an organization are quick to say, “our workers are our greatest asset.” Yet, efforts to maximize returns on this asset are often hard to recognize or understand.
Maximizing a worker’s capacity maximizes worker value. Collectively, maximizing each worker’s capacity maximizes an organization’s value, and that of the shareholders. It is as simple as that.
Publicly traded companies, and even some privately held companies getting ready to go public, seem preoccupied with increasing quarterly earnings per share above all else. A consistently high level of earnings per share over the long-run no longer seems adequate for some. If the market is slack, an organization might carve costs out of the company from even a lean operation rather than disappoint investors. When labor is viewed as a “cost” rather than an asset, the temptation might be to cut benefits and wages. This may prop-up numbers for the short-term, but a demoralized workforce might not produce the same levels of output and quality yield as before. Sadly, a decision might be made in following quarters to cut benefits and wages even more, followed by workers if needed to make the magic number. All the while, worker and operational capacity, along with enthusiasm and loyalty, are eroding.
How does this erosion happen? When workers are cut, the work they used to perform gets transferred to the remaining workers. If there isn’t a mechanism to quickly “transfer expertise” to the worker expected to take on the new responsibilities, capacity drops until the trainee comes up to speed. For as long as the transfer takes, one well-paid subject matter expert trainer is being paid to train the paid trainee, yet productivity improvement may be negligible. And further complicating the process, perhaps no one thought about capturing the exiting workers expertise before they left the building, so some “reinventing the wheel has to occur.” Multiply this across all affected workers and the labor and opportunity costs may wipe out any anticipated gains by cutting worker payroll.
Proactive Technologies Report has presented many articles about the value of workers, how structured on-the-job training increases the worker’s capacity to perform more tasks to a level of mastery, the high cost of worker turnover, and more. It is a concept we feel strongly about. Yet we are continually surprised how this topic is avoided by company’s accounting departments and upper management when they feel inclined to trim costs here and there, avoiding cultivating the enormous wealth before them – waiting to be harvested. What would be the value of just a 10% increase in worker capacity, operational capacity, quality and quantity of work, and worker compliance (safety, ISO/TS/AS, etc.) to any operation?
Not to diminish the important role of investors, but there has been a lot written about whether maximizing shareholder value is a destructive rule that needs to be changed. Critic Steve Denningwrote in an article in Forbes published in 2011 entitled “The Dumbest Idea In The World: Maximizing Shareholder Value,” “Imagine an NFL coach,” writes Roger Martin, Dean of the Rotman School of Management at the University of Toronto, in his important new book, Fixing the Game-What Capitalism Can Learn from the NFL, “holding a press conference on Wednesday to announce that he predicts a win by 9 points on Sunday, and that bettors should recognize that the current spread of 6 points is too low. Or picture the team’s quarterback standing up in the post-game press conference and apologizing for having only won by 3 points when the final betting spread was 9 points in his team’s favor. While it’s laughable to imagine coaches or quarterbacks doing so, CEOs are expected to do both of these things.” Denning continues, “Suppose also that in order to manage the expectations implicit in the point spread, the coach had to spend most of his time talking with analysts and sports writers about the prospects of the coming games and “managing” the point spread, instead of actually coaching the team. It would hardly be a surprise that the most esteemed coach in this world would be a coach who met or beat the point spread in forty-six of forty-eight games-a 96 percent hit rate. Looking at these forty-eight games, one would be tempted to conclude: “Surely those scores are being ‘managed’?” Read More
Some, more forward thinking, human resources departments concluded that assessing job prospects might reduce the amount of hiring turnover. It certainly does help do that if the job classification was properly analyzed and the assessment instruments were aligned to the data for “job relevance.” However, even with the best screening potentially good employees might be lost. Knowing how to recognize the difference between attitude and training-related issues may save good employees from being lost due to misdiagnosis.
Whether a challenge to learning or performance is attitudinal is not easy to determine. Attitudes fluctuate from day to day, throughout the day. They can be affected by personal issues such as health of the individual, health of a family member, financial issues, relationship difficulties at home and the work culture (e.g. relationship with coworkers, supervisor and company management). Rather than hastily concluding any issue of worker development is attitudinal, I find it easier to eliminate the obvious and more common influence on worker learning and development; whether proper training has been conducted. After all, employee insecurity caused by feeling expendable while a 90-day probationary period clock is ticking can, in itself, affect anyone’s attitude and personality. If proper training is not available or worker development is conducted in an unstructured, haphazard and inconsistent manner, this is a major contributor to worker attitudes toward the company, themselves and others in the workplace.
Assuming that the offered wage and benefits are competitive, there are four essential considerations to the hiring and keeping the best workers; Read More
by Dr. Dave Just, former Dean of Corporate and Continuing Education at Community Colleges in MA, OH, PA, SC. Currently President of K&D Consulting
Since partnering with Proactive Technologies, Inc. in 1994, together we have advocated the use of a “systems approach” to training that includes a combination of related technical instruction and structured on-the-job training to develop multi-craft maintenance technicians. This approach works equally as well with other job classifications within a organization. This is a viable option to paying tens of thousands of dollars per year to employment recruiters to locate these technicians on a nationwide basis…who still need to be trained once hired. Plus, once the investment is made to setup the infrastructure, you can train as many workers as you need – with a declining cost per trainee.
The systems approach to training, if built correctly for your company, forms the infrastructure of a highly effective, low cost apprenticeship (registered or not) model. This model can quickly and cost-effectively produce the multi-craft maintenance technicians you need, who will be qualified to perform the tasks required at your facility. Based on detailed job/task analysis data – collected by Proactive Technologies’ experts using your internal subject matter experts who have the final review – worker development materials are generated by Proactive Technologies’ PROTECH© software system for immediate use. Most importantly, technical support to the project includes project implementation management, so you can focus on running your business.
The “Systems Approach to Worker Development” is effective. To establish the foundation. Read More
Finding the Balance Between Wages, Entry-Level Skills and Opportunities for Advancement
by Dean Prigelmeier, President of Proactive Technologies, Inc.
During the path toward recovery after the Crash of 2008, many employers that had to lay-off skilled workers tried to find some of those workers (in whom a great investment was made) and bring them back for rehire. Some were not needed, some could not be found, some moved on to what they thought were safer career tracks and some inexplicably “dropped out” of the labor force.
Concurrently, employers continued a push to drive wages down. Some of it was rationalized by the swollen labor pool, some of it was to take advantage of the economics of desperation due to job loss and some, it was said, to position the company competitively. Some was because everyone else was doing it, and some of it was because the investors demanded it.
The result is a world in which economic theory no longer supports reality. For example, unemployment is reported at a celebrated low 4.1 percent through December, 2017. Yet wages continue to decline in many areas. Most credible economic theories state that when the supply of labor becomes scarcer, wages tend to increase to reflect that scarcity. This is simply a supply and demand issue.
The nature of the employment is important to understanding its effect on the worker. We hear employers report on the “skill gap,” saying “we just can’t find the skilled workers we need.” You have seen, heard and read that for years. But what does that mean? Read More