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Friday, April 18, 2014

Increase company productivity with fewer and better trained employees

Anthony Pellegrino

The increase of the minimum wage and federalization controls of labor are causing many of us in business major concerns. We either have to raise prices, dismiss some employees, or close shop. All around the islands I hear ranting and raving by many business people: “What shall I do? How can I survive? What is happening to our islands’ economy?”

But wait, let’s think through the problems. All of us in business know that good employees are the backbone of any company. There is a solution to correcting this labor problem.

There is a law in economics called “the law of diminishing returns.” Simply explained it states that by adding more and more resources or people to a project does not necessarily make the project more successful or completed faster. In any project there comes a point that, by adding more resources or more people, will make the project slower and less productive rather than improving it.

Let’s use an example such as watering a plant. We realize that a certain amount of water will allow the plant to grow healthy. But if we continue to add more and more water in the belief that more water will make the plant grow faster and healthier, we will notice that the extra water actually destroys the plant as the soil becomes waterlogged.

Can we apply this “law of diminishing returns” to our current nonresident labor workforce? With the impending implementation of federalization, we will see an increasing number of them being forced to return to their own countries. This is a serious situation and has many of us deeply concerned. However let’s view the problem differently and see if new opportunities do not exist.

Compare a construction job such a building a house in Hawaii to one being built on Saipan. I have studied both places and have noticed a major difference. In Hawaii, the project requires only a handful of workers because each worker is skilled in his particular trade. In Hawaii the worker uses modern tools to do his job. For example, how many carpenters here use skill saws or electric sanding machines? How many workers use chipping guns? How many use pneumatic nailing guns? Have we noticed how much hand labor and time is spent to sift sand? How many of our nonresident workers have graduated from a trade school? Because so many of our nonresident workers do not use modern tools and are not traded craftsmen, we really need 20 to 30 workers to build a house.

From my personal experience when I had my house built here on Saipan, I hired an American independent contractor. He then hired only skilled labor and had them come in as they were needed in their particular trade. For example, when the contractor was ready to lay the foundation for the house, he only had the workers specializing in that portion of the work report. As he needed walls to be constructed, he had his mason workers come, later his electricians followed, then plumbers and painters. Each group had a strict time frame so that that each group’s work would not delay or interfere with the other trades. I never saw more than five or six men working at one time on the house. As a result the house was built on schedule, faster and within budget. The cost was lower because of higher productivity and the workers got higher wages.

In a restaurant do we need all the waiters and waitresses? I have noticed that the more waiters and waitresses in a restaurant, the worse the service is. Again, how do restaurants in the mainland get away with using fewer waiters and fewer kitchen help? Could it be that they are better trained thereby working more efficiently?

When I lived in Tokyo years ago, salaries were very low. Every department store had about 10 girls behind small counters serving customers. As wages increased some of the girls disappeared. But the sales volume stayed the same. I have noticed the same in Honolulu, Los Angeles, and in many other cities. When wages are low, many employees are used. But when wages are raised, fewer employees are hired. Yet sales do not drop and many times the service is better. Why is this so?

When employees are properly trained and paid decent wages, they are motivated. As a result their work performance is higher and faster. But how many of us business owners take the time to study this? Instead we have had the luxury of using cheap and plentiful nonresident workers, thinking that it is a blessing. We feel that quantity is good. Few of us actually check the standard of performance. When it doesn’t match with our expectations, we simply shrug it off and mumble, “Well, what more can we expect from them? They are nonresident workers.” We rarely consider a fully integrated training program and rarely consider using local labor. We forget that good employees are trained, not born.

Now that fewer and fewer nonresident workers will be available, we must change our attitude on how to use our employees. The time has come to consider hiring local resident employees and train them. We must motivate them, pay them a decent wage once they are trained, and treat them with respect. After all they represent us to each and every customer. We must make every employee feel he is needed and appreciated. Frankly speaking, we can do with fewer employees once we accept this fact and work toward improving our employee relationship.

Consider this situation. If I hire two mediocre employees at $5.55 per hour, I need to pay them $11.10 for the two. But if I train one of them to do the job of two workers and pay him $9 per hour, I save $2.10 per hour. The employee is motivated to work harder and better because he is earning $9, and I am happy because I am saving $2.10 per hour. And my customers are satisfied with the service of a motivated employee. Thus everybody wins. I have been doing this for years in my companies with success. But of course, I am not saying that it works in every job position. But study our own company and see where it can apply.

A word to employers: Study how we can better train and motivate our local labor force. By doing this we will reap more benefits than anticipated. We cannot continue using nonresident workers for all our needs. True, we need specialists that we do not possess. Even in my own companies I notice this and adjust. But for daily normal operations, let us strive to hire and train local workers.

I am not suggesting that nonresident workers are not good workers. The fact is that many of them are excellent, dedicated, and loyal workers. Without them we would not survive in many occupations. They have done and are doing a fantastic job. I respect them highly! But we must slowly begin to wean ourselves from too much dependence, especially when so many of our local people have become addicted to food stamps.

As stated above, if we train our local residents better and motivate them, we will benefit along with them in our company. We will be able to pay them a better wage while enjoying saving costs to us. Think about and even try out my suggestion.

And despite all the headaches, remember that a smile is the international language of our hearts. A smile speaks Chinese, Korean, Russian, Japanese and all the other languages. So smile and have a great day.

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