Peter Fleming of Business Doctors offers 3 solutions to deal with the productivity conundrum.
The national unemployment rate of 4% is the lowest since 1975. Cumbria’s unemployment is 1.9% based on 5,665 claimants out of work. Unemployment across the region; Barrow, 2.4%, Copeland 3.1%, South Lakes 0.6%, Eden 0.9%, Allerdale 2.9% and Carlisle 1.7%.
However according to The Office for National Statistics (ONS) Nomis website there’s a total of 13,300 of the Cumbrian population of all ages looking for work.
We keep hearing that the lack of employees is often the biggest reason holding back business growth in Cumbria with the inability to recruit qualified and experienced staff.
So whether you’re looking for an electrical engineer, welder, clinical technician, elderly care nurse, catering manager, business development representative or operations manager, the skills shortage is undeniable and isn’t going to get any better in the short term.
The national employment market
- Nationally 75.6% of eligible 16-65 years olds are in work, (80% of men and 70% of women) with 27m employed in the private sector and reducing numbers in the public sector, currently 5.36m the lowest in this sector since 1999, (Health, 1.64m and Education 1.51m).
- There’s a record number of female workers, partly driven by pension age changes, with many women now working past the age of 60. A consequence of high employment, is families have more disposable income, driving the growth of the leisure and retail industries, compounding resources in these sectors.
- Recently there’s been a reduction in the number of self-employed workers, 4.77m down from 5.0m last year. We’ve also seen a reduction of 120,000 zero hours contractors, down to 780,000.
In today’s competitive and ever-changing employment market there seems to be a natural draw to secure employed roles, from the more unpredictable hours’ and Gig economy/sectors.
Over the last quarter;
- The average working week has dropped 6 minutes to 31.9 hours.
- The national minimum wage is £7.83 per hour for 25+ year olds,
- Average weekly earnings continuing to improve and now £488 pw.
All figures from ONS second quarter (June) 2018.
No wonder it’s hard to recruit additional staff.
So how does my business overcome recruitment difficulties and still continue to grow?
- Improve the productivity of existing workers (reduce non-productive time)
This is a key area where you will find extra time and create more capacity which could make a huge difference to your bottom line. Most businesses’ wages costs are around 50% of the total sales revenue. For a business with a £2 million turnover, a 5% improvement in internal productivity can put an extra £50,000 per year on the bottom line. This can often be achieved by simply improving work allocation, planning and utilisation of the existing workforce to increase employee productivity. By making small changes in these areas, you’ll find that your business has more capacity to take on more work without recruiting someone else.
While the solutions are often quite straightforward, spotting the opportunities for change and implementing them yourself is difficult to tackle alone. You’ll probably need the input from an expert from outside your business to cast a fresh pair of eyes over your current workflow situation. But for now make a start by creating productivity metrics, i.e. establish average hours per job/task determine who’s over who’s under the average rate. Then walk through the workflow process and learn, what can you influence and where can you change behaviours? Also focus on reducing wasted time such as duplication, repeat repairs or return visits. Uncover all the bad costs within the workflow process and focus on supervision to develop your team’s capabilities. One tip is to communicate the key challenges and obtain ‘off the coal face’ ideas. Make sure the quick wins are implemented first and remember to follow up with any further improvements. By introducing small incremental changes will make a significant difference over time.
- Introduce technology and innovation
Buy in technology (not just machines); look into software management systems and apps. There’s now many online account management, customer relationship management (CRM) systems, electronic point of sale (EPOS), design and manufacturing (CAD, CNC) software. Consider resource planning (ERP) software, online customer booking systems and workload planning systems.
Whilst there will always be an initial cost and ongoing fees, you’ll find it cheaper and more reliable in the long run than recruiting an additional administrator or planner. Used correctly you’ll find your current employees will have more time to do other tasks. Ensure you provide the training for your staff to use these systems effectively; a good tip to counter staff resistance to new IT systems is to simply take away and discard the old books, forms, handwritten templates and any other paper systems!
A simple exercise to carry out and an example is a family owned engineering business which we have been supporting whose introduced online time logs (tsheets) which allows the engineers to capture the hours worked, travel time to a job but also log any sundries used on these jobs.
By capturing the information at source, this allows the engineer to close the job and in most cases, get sign off and then process the invoice within QuickBooks accounts software themselves, on site and then email the bill direct to the client;
The added value and outputs being;
- Capture the true actual time taken and bill for the materials and ancillary equipment used. In many cases in the past, trying to recall what you did, looking at a scruffy handwritten note or faded time sheet, the chances are you will always under charge and miss off material and sundries.
- Invoice there and then will generate less queries and the payment terms start straight away.
- With engineers managing their invoiced hours this has made them very aware of non-productive time and therefore they’re actually either selling up whilst on site (offering additional services) or moving onto the next job much sooner.
- Back in the office the admin team have more time to carry out other tasks, chase debtors to improving cash flow, follow up proposals, secure more work and plan these jobs further ahead in the diary.
- Overall there are less queries on invoices and the company are billing more hours per person per month and staff are ultimately more efficient with the overall productivity greatly improved, (8% in the first month).
The business owners are now also in a much better place too and spending time out developing new strategic business relationships and they’ve seen the benefit of their profitability improve too.
- Restructure your business
A more radical approach is to rip up the existing organisational chart and start with a blank sheet of paper. Chances are that the industry and your business have evolved and grown arms and legs over the last few years. So, take a step back and think about where your business is today and where it’s heading. What’s the customer demands now, which sales channels do you engage on and what’s likely to be the demands in the future?
Design a company structure that will deliver and be aligned to these future demands. Determine the key roles and responsibilities for each position, there may even be new roles created. However don’t put names in these boxes just yet and based on your findings, decide which staff have the right attributes and potential. First retain then retrain and reallocate responsibilities. Don’t bang square pegs into round holes, so there may be some staff you need to release. Figure out any gaps in capabilities and skills and either recruit or consider outsourcing some specialist tasks to freelancers.
We’ve supported a number of businesses to restructure. In all cases it’s been painful for the business owner, but they have stuck to the process and have all emerged on the other side as a leaner, more agile and focused organisation. They are now more capable of maximising opportunities as their competitors are still stuck in their old ways of working. In almost all cases, bottom line improvements have been obtained with fewer employees by having a more flexible workforce, resulting in an improved working environment for not just the business owners but all of their team too.
Nervous about taking the plunge?
Think about why you started your business.
- Did you want to be able to afford or even have the time for a proper family holiday each year?
- Did you want to build a company that can be managed without you?
- Do you want to reap the benefits in retirement from all your hard work?
- Or did you just want to free up a day a week to play golf or to spend with your family?
Whatever your reason, just take some time to step back, look at the bigger picture and then ask yourself “Can I achieve my personal aspirations if my business continues to run as we are today?” If not, then perhaps it might be worth considering one of the above options.
Want to learn more?
Our next business breakfast seminar “Working Smarter not Harder” 8.00am, Thursday 13th September, Crown & Mitre Hotel, Carlisle. Booking link
Alternatively we will be running some “Freedom” seminars and workshops during the autumn across Cumbria. Please keep an eye on our events website page.
At Business Doctors we offer free access to the Value Builder online tool click here, along with a free no obligation meeting to go through the key factors which will increase the value of your business.
Summer reading/audio obtain a copy of The E-Myth (Revisited) by Michael E. Gerber
For further advice or a no obligation Business Health Check,contact Peter Fleming on 07966 686112 or email firstname.lastname@example.org