Whether you’re in retail, manufacturing, farming, mining or hospitality, productivity will soon be the new “Bottom Line”
“Take care of the pennies and the pounds will take care of themselves”
Andrew Carnegie
That quote sounds so obvious, so clearly beneficial and prudent, that it is to wonder why anyone would argue. Like “the Bottom Line”, it is an entire discussion summed up with what sounds like finality. However, common sense has been coming around to the value of productivity for many years now, and it behooves people who leap at arguments like ‘the bottom line’ to understand the difference in perspective. This question will become more common in 2023: ‘Are you being fiscally prudent, or are you just managing the dialogue about the project, budget, etc.?’ That question will be relevant because it is not cost cutting, but productivity that equals profit. The extent to which cost controls mitigate productivity, and the details supporting that discussion, will define the “bottom line” of your business.
Every restaurateur remembers a time that they or someone they know cut staff at key times to save money, while failing to anticipate sales. The sudden arrival of a full seating overwhelmed the one or two servers while the manager was busy elsewhere. The result was just a bad experience for most of those guests, who then told twelve people each. That is a significant loss in sales, to save a small investment in staff. The logic reduces to a sensitive estimation of staffing needs based on many factors, rather than a ‘rule of thumb’.
I am certain there are other readers saying to themselves that their business, or industry, is different. It is not.
I can almost hear some readers out there saying, “Yeah, yeah, everybody knows you put the right people in the right places, yada yada yada.” Yet my wife and I, with 40 years experience combined in restaurants, have watched places fail spectacularly at that very thing. It seems like something that can’t be taught, (several of those places went out of business later). Likewise, I am certain there are other readers saying to themselves that their business, or industry, is different. It is not.
Pick a jobsite at random, and you will find that cutting costs without considering productivity can be disastrous. At a pulp mill, do those safety committees seem like a waste of money? They certainly won’t after the first horrific accident and, when it is discovered that the accident or death was preventable, it won’t be socially safe to make the argument. It is the same at a sawmill, or a car factory, a mine, farm, warehouse or even a retail outlet.
In logistics, I have watched, in real time, the powerful difference between locations of the same company, where some site managers cut costs by ignoring equipment maintenance or ignoring staffing needs. One location is efficient and orderly, while another comes to rely on the compensating by over-worked staff or even by associated contractors. The resulting customer complaints and needless conflicts are at times ridiculous and chaotic. Perhaps there is no obvious causal relation to lost profits, but you will notice it on the balance sheet.
In retail I have watched the unfortunate lack of focus on the clerks, who are often hired and thrown into the job with no training. Could we not wonder what it would look like if the focus was on productivity? The simple fact is that even one or two more sales per employee per shift equals greater product turnover. That lack of attention to one of the biggest costs is like a kind of freedom to the ‘bad actors’ among your staff, supervisors, or management. Once problems like those arise, maximising productivity will feel like a pipe dream. We budget maintenance costs into most physical assets, but maintaining untrained people is somehow expected to make money?
The real question to ask- the Bottom Line- is whether there is a preference for profit over a preference for appearing to be in command of the dialogue. The dialogue won’t be valuable when the speaker seems oblivious to productivity. Productivity may look different for each different industry or business, but the manager who can’t express what they are doing to maximise it, with the stats to prove it, is the cost that needs cutting first.