Executive Excellence: Eliminate Waste...

What is better for the success of an organization, eliminating waste related to employees or eliminating the employees themselves? Both options may have to be considered in the drive to improve productivity; however, the first option has yet to be fully developed.

Obtaining maximum productivity in today’s information-based, learning-driven economy requires consideration of qualitative and quantitative factors in managing people. An employee who is underproductive creates waste. There are associated direct, indirect and hidden costs and lost revenue opportunities.

Cost savings, productivity gains, and return on investment (ROI) paybacks are obtained with minimal capital investment through these six learning-based steps:

1. Identify a comprehensive cost target. Executives can’t manage something

not measured comprehensively. Employee issues are currently fragmented, viewed as administrative matters, benefit issues, or less than fully controllable overheads. Lack of integration and direction toward goals hinders effective cost management.

Executive can obtain a new level of accountability in employee issues by adopting at Total Cost of Productivity approach, patterned after the Total Cost of Quality.

2. Assess areas of employee waste. All employee costs do not have the same value. There are those of an investment nature, and others that are pure waste and candidates for reduction. As the Total Cost of Productivity is developed a matrix of investment opportunities and cost savings targets can be assessed.

Employee waste is embedded across the cost structure: labor costs, labor excess, including health care, workers’ compensation, and disability; labor-related overheads. Health care costs biased toward treatment and administrative oversight instead of preventive care and rehabilitation are one indicator of employee waste. Others include sick-time costs, disability costs, employee-related legal spending, legal settlements, overtime and employee turnover costs for health and disability issues.

Organizations have developed a complex labor-related overhead structure for responding to employee issues in a damage-control manner, rather than charting continuous improvement in productivity. Spending for recruitment, training, legal counsel, outside management, and consultants is then developed around areas of employee waste.

3. Assess performance trade-offs. Many different parties impact costs and productivity, but due to fragmentation, there has not been an effective way to assess performance trade-offs between functions and cost categories.

Some examples include:

Managed Care health care plan controls treatment costs at the expense of higher disability and lost work time costs;
High overtime levels increase accidents, increasing health care, workers’ compensation, and other costs;
Use of temporary staff to save on benefit costs reduces overall productivity and quality, driving up costs in other areas;
Cutting internal support functions without an overall system for employee issues raises legal and consulting costs.

By controlling total employee costs and by assessing performance trade-offs, each function can become accountable for their contribution toward the goal of continuously improving employee productivity by reducing waste.

4. Integrate necessary resources through strategy. A comprehensive cost target serves many purposes. Apart from identifying areas of waste for action, executives can assess internal and external resources necessary for employee issues, putting in-place an effective, integrated strategy.

Resource analysis addresses areas where non-integration between internal and external resources creates unnecessary costs. The roles of internal staff, training programs, Managed Care, providers, and consultants become more effective when developed as a flexible set of programs. Most critical is the connection of employee, family, supervisor and line management to these resources for managing productivity.

5. Target ROI-driven cost savings. Reorientation toward a resources view of employee programs opens up new information-based, learning-driven strategies and tools for performance improvement. Employers can use value measures for developing resources while measuring performance based on cost savings, ROI paybacks, and continuous improvement in productivity. The key to achieving ROI-driven cost savings lies in aggressive, executive-led goal-setting for reducing waste, breaking with “the cost of doing business” mindset. Executives can then address the “leverage points” – areas of greatest exposure and related improvement potential. When action is taken on the highest ranked investment opportunities, resources are concentrated on the greatest exposures to achieve Return on Investment.

6. Refocus organizational learning. Employee costs and productivity have not fully held the executive’s attention span. Productivity targeting has been top-down, strategically developed based on employee aggregates. The more sustainable opportunity for rooting out waste and improving productivity also encompasses bottom-up, operationally developed profiles combining qualitative as well as quantitative factors.

Work processes have to be systematically connected to employees as well as to customers. Critical “employee processes” can be managed more proactively as part of the qualitative side of productivity. Making existing employees more productive in a qualitative sense causes a ripple effect of enhance productivity and reduced waste due to task interdependencies and learner staffing patterms.

Breakthrough performance comes to those committed to developing their human and economic potential.

First publication, copyrighted 1995 by System Change, Inc.:

Carlson, John G. “Eliminate Waste: There are many costs associated with unproductive employees.” Executive Excellence 12.5 (May 1995): 13.

John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.

		Eliminate Waste: There are many costs associated with unproductive employees by John G. Carlson, System Change, Inc. What is better for the success of an organization, eliminating waste related to employees or eliminating the employees themselves? Both options may have to be considered in the drive to improve productivity; however, the first option has yet to be fully developed. Obtaining maximum productivity in today’s information-based, learning-driven economy requires consideration of qualitative and quantitative factors in managing people. An employee who is underproductive creates waste. There are associated direct, indirect and hidden costs and lost revenue opportunities. Cost savings, productivity gains, and return on investment (ROI) paybacks are obtained with minimal capital investment through these six learning-based steps: 1. Identify a comprehensive cost target. Executives can’t manage something not measured comprehensively. Employee issues are currently fragmented, viewed as administrative matters, benefit issues, or less than fully controllable overheads. Lack of integration and direction toward goals hinders effective cost management. Executive can obtain a new level of accountability in employee issues by adopting at Total Cost of Productivity approach, patterned after the Total Cost of Quality. 2. Assess areas of employee waste. All employee costs do not have the same value. There are those of an investment nature, and others that are pure waste and candidates for reduction. As the Total Cost of Productivity is developed a matrix of investment opportunities and cost savings targets can be assessed. Employee waste is embedded across the cost structure: labor costs, labor excess, including health care, workers’ compensation, and disability; labor-related overheads. Health care costs biased toward treatment and administrative oversight instead of preventive care and rehabilitation are one indicator of employee waste. Others include sick-time costs, disability costs, employee-related legal spending, legal settlements, overtime and employee turnover costs for health and disability issues. Organizations have developed a complex labor-related overhead structure for responding to employee issues in a damage-control manner, rather than charting continuous improvement in productivity. Spending for recruitment, training, legal counsel, outside management, and consultants is then developed around areas of employee waste. 3. Assess performance trade-offs. Many different parties impact costs and productivity, but due to fragmentation, there has not been an effective way to assess performance trade-offs between functions and cost categories. Some examples include: Managed Care health care plan controls treatment costs at the expense of higher disability and lost work time costs; High overtime levels increase accidents, increasing health care, workers’ compensation, and other costs; Use of temporary staff to save on benefit costs reduces overall productivity and quality, driving up costs in other areas; Cutting internal support functions without an overall system for employee issues raises legal and consulting costs. By controlling total employee costs and by assessing performance trade-offs, each function can become accountable for their contribution toward the goal of continuously improving employee productivity by reducing waste. 4. Integrate necessary resources through strategy. A comprehensive cost target serves many purposes. Apart from identifying areas of waste for action, executives can assess internal and external resources necessary for employee issues, putting in-place an effective, integrated strategy. Resource analysis addresses areas where non-integration between internal and external resources creates unnecessary costs. The roles of internal staff, training programs, Managed Care, providers, and consultants become more effective when developed as a flexible set of programs. Most critical is the connection of employee, family, supervisor and line management to these resources for managing productivity. 5. Target ROI-driven cost savings. Reorientation toward a resources view of employee programs opens up new information-based, learning-driven strategies and tools for performance improvement. Employers can use value measures for developing resources while measuring performance based on cost savings, ROI paybacks, and continuous improvement in productivity. The key to achieving ROI-driven cost savings lies in aggressive, executive-led goal-setting for reducing waste, breaking with “the cost of doing business” mindset. Executives can then address the “leverage points” – areas of greatest exposure and related improvement potential. When action is taken on the highest ranked investment opportunities, resources are concentrated on the greatest exposures to achieve Return on Investment. 6. Refocus organizational learning. Employee costs and productivity have not fully held the executive’s attention span. Productivity targeting has been top-down, strategically developed based on employee aggregates. The more sustainable opportunity for rooting out waste and improving productivity also encompasses bottom-up, operationally developed profiles combining qualitative as well as quantitative factors. Work processes have to be systematically connected to employees as well as to customers. Critical “employee processes” can be managed more proactively as part of the qualitative side of productivity. Making existing employees more productive in a qualitative sense causes a ripple effect of enhance productivity and reduced waste due to task interdependencies and learner staffing patterms. Breakthrough performance comes to those committed to developing their human and economic potential. First publication, copyrighted 1995 by System Change, Inc.: Carlson, John G. “Eliminate Waste: There are many costs associated with unproductive employees.” Executive Excellence 12.5 (May 1995): 13. John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.
		Copyright 1995 by John G. Carlson, System Change, Inc. All rights reserved.