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Increasing Labor Productivity vs. Hiring

May 11, 2011

Guest blog contribution from Joe Hyland, Product Marketing Manager at Kronos and Brian Herr, Senior Product Line Director at Kronos.

According to Paul Ashworth, chief US economist at Capital Economics, domestic hourly economic output is on the decline – rising only 1.3% over the past 12 months, down from 6.7% in the previous year. So employers aren’t seeing the desired productivity gains from their workforce; what should they do? Ashworth, and other economists, believe this decline in productivity growth may be a sign that hiring is about to heat up as US companies will have no choice but to increase staffing in order to increase output. Ashworth adds, “We suspect that firms just ran out of potential productivity-enhancing measures.”

With the latest unemployment report released on May 6th showing an increase in unemployment, which now stands at 9% (US Department of Labor), a bump in hiring would surely help employ many unemployed and underemployed Americans. But stock market growth has been fueled, in part, by increasing productivity. Do companies and investors really want to give that up? Or worse, see it reversed and the economic domino effect on access to capital, inflation and profits?

One of the reasons behind the recent economic disaster was overspending and fiscal irresponsibility. With productivity hitting a plateau, Corporate America is at a cross-road and organizations have two options: get more out of the workforce you already have or increase hiring – and thus payroll. I’m all in favor of increasing hiring, but only once organizations have done everything possible to run their operations in a prudent, efficient manner. In many instances, additional workers are needed. Yet most organizations admit they are surprised they can’t get more out of their current workforce; they just don’t know how. The fact is that organizations are merely scratching the surface on productivity gains and lack the proper tools needed to fully realize optimal efficiencies. Imagine if you had a lens into work as it was being done allowing you to eliminate unnecessary bottlenecks from your work processes. What if you could identify payroll leakage or OT abuse and stay on budget while increasing productivity?

If we’re going to have sustained, long term economic prosperity it is in everyone’s best interest that businesses, plus local and state governments, are run as lean and efficiently as possible. Kronos offers Labor Analytics and Activities solutions that allow companies to truly do more with less and we have helped hundreds of customers reign in labor costs and maximize workforce productivity. The holy grail of getting more out of your workforce while keeping costs within budget is possible…it just requires additional emphasis on labor activity tracking and analysis to accomplish this goal.

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