Boosting Productivity and Reducing Costs in Tough Economic Times

March 9, 2009
Effective workforce management that helps achieve quick bottom-line results.

Unprecedented economic challenges are driving manufacturers to find new ways to cut costs and boost productivity. Many have already taken steps to identify inefficiencies and improve supply chain, design and production processes. Unfortunately these changes are not always enough.

Because labor often represents a manufacturer's most significant controllable expense, a big opportunity for reducing operating costs and increasing productivity lies in more effective workforce management that help achieve quick bottom-line results.

The following six tips offer ways to manage your workforce more effectively for higher productivity and lower costs -- even in these tough economic times.

1. Put Systematic Controls in Place to Ensure Fair, Accurate Employee Pay

Without sufficient timekeeping controls, you may be paying your workers too much -- or too little. Overpayment eats into profits and underpayment puts you at risk for legal penalties, union grievances and employee dissatisfaction. Manual timekeeping processes require managers to remember complex pay rules -- overtime, government regulations, union agreements, and more -- an approach that too often results in payroll errors.

An advanced time and attendance system eliminates costly guesswork by capturing company, union, and regulatory rules up front and automatically applies the rule for consistently accurate pay calculations.

2. Reduce Payroll Inflations by Eliminating "Buddy Punching"

Buddy punching is a pervasive problem that no manufacturer can afford to ignore. A recent study found that this widespread practice inflates payroll by 2.2% on average. Multiply that across 1,000 workers making $35,000 a year on average and buddy punching would inflate payroll by a whopping $770,000 annually.

Fortunately, buddy punching can be reduced by using an automated time and attendance solution that verifies the identities of employees punching a time clock. Unlike manual timekeeping practices that are highly vulnerable to abuse, approaches like badge swiping with PIN entry or biometric verification offer higher levels of protection against buddy punching.

3. Shrink Administrative Overhead with Employee Self-service

Handling employees' administrative queries takes a toll on supervisor and HR manager productivity. Employee self-service solutions enable workers to access their own payroll data, vacation accruals and other HR information. Limiting access to self-service functions to specified times -- like breaks or off-hours -- helps ensure that employee productivity doesn't suffer.

A Nucleus Research study found that electronic or software-enabled self-service capabilities can save $210 per employee per year, which adds up to an impressive $210,000 in annual savings for a 1,000 employee organization.

4. Gain Control Over Employee Absence Costs

Employee absences may be costing your organization much more than you realize. Unplanned absences equal 6% of base payroll on average. According to a 2008 Mercer study, this number represents the total cost of incidental absences, including the indirect costs of replacement labor, which translates to as much as 21% of net lost productivity per day.

Absence management systems can help you gain visibility into absenteeism trends and identify workers with problematic attendance patterns. They also automate and enforce vacation, sick and disability policies as well as government and union-mandated leave rules to reduce costs and lower risk of noncompliance.

Alora Brady Perkins, JD, Employee Relations Manager at Rheem Sales Company, Inc., can attest to the benefits of implementing an absence management system. She explains, "Rheem has experienced an increase in productivity, a decrease in downtime, and a definite decrease in absenteeism, which has improved our employee morale."

5. Use Overtime the Right Way

Although overtime lets you "flex" your workforce as needed to meet output targets, it can sometimes mask serious underlying problems. For example, overtime may be used to make up for production delays caused by faulty equipment or process bottlenecks. Without sufficient insight and controls, managers run the risk of overtime misuse by employees.

Some automated time tracking solutions provide up-to-date reporting that helps managers understand where and how overtime is being used. These reports let you monitor workforce performance indicators and drill down to determine the root causes of overtime use so you can take corrective action.

6. Apply Lean and Six Sigma to Your Workforce

Many manufacturers have successfully implemented lean manufacturing and Six Sigma programs to reduce waste and optimize production processes. But some have yet to apply these techniques for eliminating hidden workforce-related waste.

The right manufacturing workforce management solution will enable you to focus Lean and Six Sigma techniques on the workforce. Analytical tools let you zero in on the root causes of low productivity, such as insufficient training, and quantify the impact of high overtime or absenteeism on productivity. As a result, you can manage labor productivity in the context of target outcomes for less waste and higher profits.

Gregg Gordon is the Director of Industry Marketing, Manufacturing for Kronos Incorporated. Kronos is a provider of workforce management solutions that enable organizations to control labor costs, minimize compliance risk, and improve workforce productivity.

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