Proactive Technologies Report – May 2016

Appreciating the Value of Labor

by Dean Prigelmeier, President of Proactive Technologies, Inc.

For expanding and improving businesses that have the capital for the investment in new equipment or processes, attempting to become or remain competitive, the level of investment is not as important as the return on that investment. This consistent practice of determining where to best place capital for the highest return should apply to labor. What is “paid” for labor is not as relevant as the value it adds to the operation and, ultimately, profit; the return on worker investment.

The lack of appreciation for the difference in “training cost” and “training investment”  is understandable because it is rarely contrasted. The college textbook entitled Financial Accounting: An Introduction to Concepts, Methods and Uses, defines “direct labor cost” as the “Cost of labor (material) applied and assigned directly to a product; contrast this with indirect labor cost.” Indirect labor cost” is defined as, “An indirect cost of labor (material) such as supervisors (supplies).” There is no mention of an expected return on investment. Generations of cost accountants have been taught that there is no good that comes for higher labor costs, which to them is determined by the level of staffing and wage levels. There is no differentiation between strategic labor costs and uncontrolled labor costs.

Who is Responsible for the Shortage of Skilled Labor?

by Dean Prigelmeier, President of Proactive Technologies, Inc.

Some critics say that employers have repeated the phrase, “we just can’t find skilled workers” to ease their guilt from outsourcing good paying jobs to lower wage labor markets. Some say they say this to justify low wages in the U.S., and some say it is to make the case to congress that the worker visa programs need to be opened up to allow technically skilled foreign workers who are willing to work for a reduced wage enter the labor market. While all of these may be true or could have been true at one time, no one doubts that the affects of the past few decades have greatly disrupted the continuity of a strong U.S. labor force and its ability to advance.

In an article written by Michael Collins for Industry Week last year entitled “Why America Has a Shortage of Skilled Workers,” the author makes a convincing argument that the so-called shortage was in large part self-inflicted. This article should be on every manufacturing operation manager’s, every accounting department manager’s and every corporate executive’s reading list.

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“Realistic Job Previews” Can be a Useful Tool for Measuring a Prospective Employee’s Transferable Task-based Skills       

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

The hiring process can be difficult for both the employer and the prospective employee. A wrong decision can cost each party a lot of time, money and opportunity. An unwanted outcome based on the employer not providing an accurate picture of the job, work environment and work expected to be performed can be avoided with a “Realistic Job Preview.” (“RJP”).

Wikipedia points out that “Empirical research suggests a fairly small effect size, even for properly designed RJPs (d = .12), with estimates that they can improve job survival rates ranging from 3–10%. For large organizations in retail or transportation that do mass hiring and experience new hire turnover above 200% in a large population, a 3–10% difference can translate to significant monetary savings. Some experts (e.g., Roth; Martin, 1996) estimate that RJPs screen out between 15% and 36% of applicants.

When RJPs are less effective, “According to researchers there are four issues that challenge RJP:

Proactive Technologies, Inc. has worked with many employers over the years, establishing cost-effective, task-based structured on-the-job training programs. For each employer, every effort is made to tailor the worker training system to accommodate the employer’s budget, job classifications (even unique training programs for each job classification in each department), business goals and manage the system through all types of change. Unlike some products or services that require the employer to change practices that work in order to utilize them, the PROTECH© system of managed human resource development  is built around what is working for the employer, incorporating established information such as work processes and specifications, safety standards, quality standards, etc. This approach minimizes the need for the employer’s culture to drastically change what works for them, focusing instead