Wages and Productivity

Issue #10217 - August 2017 | Page #24

By Todd Drummond

For many companies, properly staffing and retaining employees to meet their needs is a never-ending struggle. Let’s summarize what human resources gurus require years of training to understand and disseminate it to the masses for better results.

Let us start by understanding some basic truths about productivity. If there is an inadequate output and/or quality issue, then the two leading factors are usually not enough employees and/or poorly skilled employees. Some companies cannot attract enough new employees, or when they do, they have poor retention of employees, which both lead to an employee shortage. As a result of low employee retention, a company’s staff is often poorly trained or not skilled enough, which leads to many mistakes. Industrial engineers are taught that most skilled positions take an average of three years of experience to reach full potential. Experienced workers not only produce more units per hour but also higher quality units with fewer mistakes. So, how can any company reach maximum output if it has a high percentage of new employees with very little experience? The answer is simple: It cannot. If most companies retained their new hires, most would be fully staffed with long-term employees within just three years.

Some think money is the number-one way to retain good employees; however, this is a mistake. Many human resources surveys over the years have shown the same results; when asked about the most effective motivation for keeping employees satisfied, survey results rank contributing factors as follows:

Appreciation of work well done
Being part of the discussions
Help with personal matters
Job security
Good wages
Interesting work
Promotion and growth
Management loyalty to employees
Good working conditions
Tactful discipline

Notice how good wages is positioned 5^th place in this ranking? Similar surveys all find the same results: Wages are normally the 4^th or 5^th in a list regarding employee satisfaction. However, if a company has a high turnover rate and high employee vacancy, the number one reason is usually the company is not paying the correct market wages for the given positions

There are two very distinct aspects of employee pay rates.

Market Wages
Employer’s responsibility to attract and retain the right employees
Potential employees will not apply for the position if not met
Employee will eventually leave for better-paying positions with other companies if not met
Employee performance will suffer if not met
Employee Wage Needs
Employee’s responsibility to meet their own obligations, not the employer’s
Employees will eventually find other employment to meet monetary needs
Employers will find other employees to fill the position at market wages

To meet the first two most important things employees desire—appreciation of work well done and being part of the discussions—a manager needs to actually take the time to let employees know how they are doing and what is going on. To put it simply, managers need to praise the good work employees do, communicate what good work is, and communicate what the company is doing overall. As part of the communication process, many are surprised that, when talking about future investments in equipment or other mundane things managers would normally never discuss with employees, employees respond with a great deal of enthusiasm because the managers took the time and displayed an appreciation of them being part of the discussion. The “being part of the discussion” aspect is normally the one thing most managers fail to do the most. A daily walk-around while having brief conversations with all employees can go a long way to improve morale.

Every company has its own unique culture and way of doing business. In the end, it is about making the best net profit possible to survive and thrive. Without profit, there would be no business. And no matter how many investments are made in automation, employees play a key role in making everything work. But take heart: Wage expenses can actually decrease as a percentage of sales if productivity increases. That is quite common for the best companies that display the best net profit: These well-performing companies display very low employee turnover, few vacancies, and performance at the highest productivity with very few mistakes.