Should We Train Our Employees?

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Why would a company spend the time, resources and capital to train their employees?  When a company doesn’t invest in employees, it has a difficult time growing it’s business. Since there are skeptics on the subject of employee training and the return of investment to a company, let’s look at the reasons companies don’t have formal training programs for employees:

Cost
Training programs can be expensive to implement and can be difficult to add hard return numbers to the expense.

Time
Companies of all sizes note that it takes too much time to train employees because it removes them from their primary duties for too long. Managers must also step away from their responsibilities to set up for training.

Lack of Trust
Companies fear if they train employees, they will take that knowledge and go work for the competition.
(http://www.bizmove.com/personnel/m4d.htm)

Here are a few advantages of providing training to your employees:

Raises bottom line.
Companies that invest $1,500 per employee in training compared with those that spend $125 experience an average of 24 percent higher gross profit margins and 218 percent higher revenue per employee (source: Laurie J. Bassi et al., “Profiting From Learning: Do Firms’ Investments in Education and Training Pay Off?” American Society for Training and Development, 2000).

Saves a company money.
A trained staff reduces time spent problem solving, time correcting mistakes, fewer accidents, lower maintenance costs, reduced downtime, lower recruitment costs, fewer support calls, and increased staff productivity. It frees up the managers to spend more time on other tasks that can earn the company more profits with a fully trained staff.

Increases worker productivity.
Just a 2-percent increase in productivity has been shown to net a 100 percent return on investment in training (source: “The 2001 Global Training and Certification Study,” CompTIA and Prometric).

Motorola calculated that every dollar spent on training yields an approximate 30 percent gain in productivity within a three-year period. Motorola also used training to reduce costs by over $3 billion and increase profits by 47 percent (source: Tim Lane et al., “Learning to Succeed in Business with Information Technology,” Motorola).

Improves employee satisfaction and retention.
A Louis Harris and Associates poll reports that among employees with poor training opportunities, 41 percent planned to leave within a year, whereas of those who considered their company’s training opportunities to be excellent, only 12 percent planned to leave. A Hackett Benchmarking and Research report shows that companies that spend $218 per employee on training have more than a 16 percent voluntary turnover, while companies that spend over $273 per employee have turnovers of 7 percent.  Career development is the No. 1 factor in employee retention, according to a survey of 6,400 employees conducted by consultants Sharon Jordan-Evans and Beverly Kaye.

As noted by Zig Ziglar “What’s worse than training your workers and losing them? Not training them and keeping them.

Training can dramatically increase the productivity of a company and increase its intellectual capital as well.  A company that invests in its employees will find that they are loyal to that company and work hard to provide results that prove their investment was worth it to the company’s bottom line. In a competitive environment it’s the staff that can really set a company apart from its competitor.  Ultimately a company will do business with another company it is confident can do the job they are hired to do.

Incentive Pay Programs – Casual + Structured

Many employers utilize incentive pay programs to motivate their employees.  The design of these programs are to aid in employee retention, company loyalty, worker satisfaction, and ultimately, lower costs.  By having tenured employees and a reduction in turnover, businesses benefit from not having to train new employees and can minimize mistakes in the production process.

Casual rewards include a pat on the back, a sincere thank-you, a $50 bill, a dinner for two at a local restaurant, or a gift cards to stores and gas stations. Many programs also entitle workers to choose from a menu of several rewards.

While utilizing a casual incentive program, jealousy and perceived favoritism toward those who get rewarded can arise if there is no data to back up why an employee received a reward.  Avoid potential pitfalls by developing rules and goals. Reward employees who offer suggestions that improve the process and result in a savings or increased productivity that can be documented.  Create a feedback mechanism for all of the legitimate ideas submitted.  Without feedback, confusion for the employees and frustration in the program will continue. Make your rewards system clear.

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By utilizing a structured incentive program, employees will have a better understanding of exactly what they need to do to be rewarded.  The positive results for businesses include cost certainty and cost reduction.  Results to employees are higher wages and improved satisfaction.  However, there are also potential pitfalls in a structured program. Avoid these by developing a structured incentive program by taking these 7 steps:

1. Analyze the challenge and determine if incentives are appropriate – the targets and goals need to be clear and specific, and achievable for the employees.  Support functions need to enable employees to be successful.

2. Link pay with performance – measure the output of each employee or group versus the developed standards, and reward the employees for exceeding the targets.

3. Anticipate loopholes – identify any shortcuts the employees may utilize to increase their productivity.  Many businesses initially add quality steps downstream from the process that will catch any errors before full implementation of the program.  The best programs actually link quality objectives into the incentive pay to ensure a positive impact on both productivity and quality benchmarks.

4. Establish standards and determine pay – This process involves clarifying expected performance, considering work content variations, contemplating potential savings and gains, determining base wage versus incentive pay, anticipating effects of technological or capital investment changes, and converting standards into pay.

5. Protect workers from negative consequences – establishing an effective communication strategy to keep employees up to date on performance and establishing fair expectations are critical for positive morale

6. Improve communications – both on overall performance, as well as how they rank in the group.  There also has to be a mechanism to allow for suggestions and comments from the employees to improve the process.

7. Periodically review the program – record keeping and statistical analysis must be performed to understand the success of the program, ensuring that all are benefiting from the implementation of the model.

Structured incentives are most likely to succeed if they have accurately established standards, clearly linked superior performance with pay or a valued reward and carefully considered what type of performance the incentive stimulates.  

Effective incentives are designed so the more an employee earns, the more the employer benefits.

Beyond Minimum Wage: Are You Paying or Being Paid a “Living Wage?”

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A term you’ll often hear in conjunction with minimum wage is “living wage”, which is the amount an individual must earn to cover a normal standard of living.  Living wage is becoming the standard for how the minimum wage should be calculated.

On the policy front, a $10.10 federally mandated minimum wage is being pushed in Washington.  Supporters say making the change would push nearly 60% of people who work full time jobs but earning below the poverty line out of poverty.  The federal bill is unlikely to get through The House, but 13 states approved plans to increase their minimum wage last year and several cities are going even further. For example, Washington DC raised minimum wage to $12.50, San Francisco is at $10.50, and there’s a push in Seattle for $15.00.

Ikea announced that it will be adopting a new wage scale in the US based on a living wage calculator developed by MIT professor Amy Glasmeier.  Want to see what might be coming down the pipe for your business?  MIT’s calculator is available for everyone to use. Check it out here.

To get a sense of what to expect, the following information was generated at nGroup’s corporate headquarters in Fort Mill, SC.

 

The living wage shown is the hourly rate that an individual must earn to support their family, if they are the sole provider and are working full-time (2080 hours per year). The state minimum wage is the same for all individuals, regardless of how many dependents they may have. The poverty rate is typically quoted as gross annual income. We have converted it to an hourly wage for the sake of comparison. Wages that are less than the living wage are shown in bold and italic. 

Hourly Wages 1 Adult 1 Adult, 1 Child 1 Adult, 2 Children 1 Adult, 3 Children 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children 2 Adults, 3 Children
Living Wage $9.61 $17.85 $21.34 $26.05 $14.70 $17.53 $18.94 $21.95
Poverty Wage $5.21  $7.00  $8.80  $10.60  $7.00  $8.80  $10.60  $12.40 
Minimum Wage $7.25  $7.25  $7.25  $7.25  $7.25  $7.25  $7.25  $7.25

 

Typical Expenses 
These figures show the individual expenses that went into the living wage estimate. Their values vary by family size, composition, and the current location.  

Monthly Expenses 1 Adult 1 Adult, 1 Child 1 Adult, 2 Children 1 Adult, 3 Children 2 Adults 2 Adults, 1 Child 2 Adults, 2 Children 2 Adults, 3 Children
Food $242 $357 $536 $749 $444 $553 $713 $904
Child Care $0 $342 $533 $725 $0 $0 $0 $0
Medical $129 $387 $403 $384 $278 $385 $362 $372
Housing $670 $806 $806 $1,016 $726 $806 $806 $1,016
Transportation $318 $618 $712 $764 $618 $712 $764 $777
Other $77 $160 $200 $256 $131 $164 $186 $212
Required monthly income after taxes $1,436 $2,670 $3,190 $3,894 $2,197 $2,620 $2,831 $3,281
Required annual income after taxes $17,232 $32,040 $38,280 $46,728 $26,364 $31,440 $33,972 $39,372
Annual taxes $2,748 $5,098 $6,103 $7,451 $4,206 $5,020 $5,419 $6,275
Required annual income before taxes $19,980 $37,138 $44,383 $54,179 $30,570 $36,460 $39,

 

Typical Hourly Wages 
These are the typical hourly rates for various professions in this location. Wages that are below the living wage for one adult supporting one child are bold and italic.

Occupational Area Typical Hourly Wage
Management $39.16
Business and Financial Operations $25.00
Computer and Mathematical $28.02
Architecture and Engineering $31.68
Life, Physical and social Science $24.20
Community and Social Services $16.70
Legal $25.43
Education, Training and Library $20.80
Arts, Design, Entertainment, Sports and Media $16.91 
Healthcare Practitioner and Technical $24.89
Healthcare Support $10.88 
Protective Service $14.57 
Food Preparation and Serving Related $8.56 
Building and Grounds Cleaning and maintenance $9.56 
Personal care and Services $9.20 
Sales and Related $10.47 
Office and Administrative Support $13.69 
Farming, Fishing and Forestry $11.78 
Construction and Extraction $15.48 
Installation, Maintenance and Repair $17.57 
Production $14.68 
Transportation and Material Moving $12.32 

 

What does the calculator say about your city?  What should minimum wage be?

Top 10 Characteristics To Look For While Staffing A Lean Organization

Does your organization the term “lean” as a belief of managing people, process or P&L’s, or as slang for having the appearance of managing by rigorous principals?

At its core, “lean” is a production philosophy that considers any resources, other than the direct value for the end customer, to be wasteful. “Lean” was introduced to the business world in the 1990’s and organizations have been adopting this ideal of utilizing KPI, Five S, Value Stream Mapping and Kaizen to drive their organization since.

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Lean workforce management practices will prove your organization’s effectiveness in utilizing technology, resource management, accountability and reporting practices, while trimming waste and promoting positive behaviors. It also demands a great deal from employees.  In order to be successful, you need to develop people who are willing and able to proactively help manage the Lean process. Employees who are customer focused, good problem solvers, and interested in helping to continually improve the processes around them is essential.

Your organization will need a robust Lean competency management process to help you to easily evaluate your employees and put development plans in place to address identified skill gaps, such as a Skill Flex Program.

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Making Lean work in any organization requires critical competencies for the whole team, from management to employees. It keeps everyone focused on adding value, without producing waste.  So, what kind of Lean-oriented skills and behaviors should you look for in your employees? Here are the top 10:

1. Ability to work in a team environment
2. Ability to make decisions and solve problems
3. Ability to plan, organize and prioritize work
4. Ability to communicate verbally with people inside and outside an organization
5. Ability to obtain and process information
6. Ability to analyze quantitative data
7. Technical knowledge related to the job
8. Proficiency with computer software programs
9. Ability to create and/or edit written reports
10. Ability to sell and influence others

Once you have identified, hired, trained and empowered your team members effectively, the results of investing in a Lean workforce management philosophy will become evident. If you will realize that your workforce is the single most important thing in developing a sustainable Lean workforce, your organization will realize unfounded results for years to come.