Non-wage Solutions to Rising Wage Pressure
October 15, 2014
Source: James Dillingham
We all knew this was coming. We watched and cheered as unemployment numbers dropped, month after month. This meant the economy was recovering. Manufacturing, in many industries, has reached the tipping point and is returning to the United States at a pace not seen in decades.
One of the results of this “bountifulness” is a lack of skilled labor. In some cases, it’s a lack of labor at even the most basic levels.
Part of this is a training issue. We have modernized our production methods without a training mentality to keep pace with the new skills we need. Part of this is just “not enough bodies.” The result is a scarcity of labor which drives up the cost of labor as we compete for this ever dwindling resource.
The most obvious way to deal with this; to bring in the labor with the skills you need; is to raise wages. Raise that wage bar high enough and labor no longer becomes a problem. However, you have now changed your cost structure and thus your profitability. In some industries, labor costs are a small component of the Cost of Goods Manufactured and increased wages have relatively little impact. In other areas, labor costs eat away at a small profit margin and your very survivability depends on your keeping these costs low.
So, what can you do if you don’t want to, or don’t have the ability to raise wages?
The answer is to use your schedule as part of the attraction. Make it one of the reasons people want to work for you and not the company across the street.
Here are just a few ways to do this:
- Maximize days off. The overwhelming preference of our labor force is to work longer days to get more days off. As an example, let’s assume an employee works 40 hours a week or 2,080 hours a year. If they work 8-hour days, they will have to work 260 days a year. If they work 10-hour days, they will have to work 208 days a year. If they work 12-hour days they will have to work 173.3 days per year.
- Make your work schedule one that fits the needs of your employees. Don’t assume you know what your workforce wants. Ask them. Ask them in such a way as to allow everyone to participate. This means creating setting where the “loud cannot intimidate the meek.”
- Make your work schedule predictable. This means creating a system where your employees know when they can work and when they can plan on not being at work.
- Look at flex-time or work-from-home ideas. There is little doubt that employees find these types of ideas attractive.
- Use overtime as a benefit. This means finding out how much overtime your workforce wants as well as who wants it and who does not. You want to be able to get overtime to those that like it while not forcing it on those that don’t. This will improve predictability as well as help you to compete wage-wise. A company across the street may pay $15 an hour while you only pay $14. However, if you offer a lot of overtime, your overtime employees will recognize that they can make a lot more money working for you. Along with making overtime available, try to absolutely minimize the amount of times overtime is “mandated” or assigned on short/no notice.
- Create a participative work environment. No one likes to be told what to do. When I go to a site and find the workforce somewhat disgruntled, it is nearly always a communication issue. More specifically, it’s a feeling of “I don’t matter” or “No one is listening to me.” Keep in mind, people come to work for the money but stay for other things such as job recognition, the ability to advance and a feeling of accomplishment.
- Make you actions and policies transparent and apply them fairly. All too often, I come across employees who misunderstand a policy or feel they are being singled out. When this happens, it is important to listen and investigate. They might be right. Or, they might be wrong but are just seeing things incorrectly. Feelings of “not fair” are precursors to an employee leaving for greener, more just, pastures.
The right schedule choice can help keep cosst and attrition low and employees engaged. Asking the workforce about their preferences, however, has utmost importance and so does the way you manage and communicate the change and keep up the participative work environment.
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