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I sat recently with the Board of Directors of one of our manufacturing clients, reviewing their monthly management accounts, and challenged them on what was the right salary cost for their business? The reason for the question was that the costs were increasing, seemingly month on month, and the Directors were not able to agree on what the right salary costs should be for their business.
What followed was a thorough review of the staffing costs in their business, the conclusions to which can broadly be summarised as follows:
In many respects the conclusions from their research could have been predicted, as these are factors faced by many businesses in the manufacturing sector. However, the actual costs of these changes in terms of staff salaries and lost productivity came as a surprise to the Directors.
The key learning from the exercise was that the lack of a robust budget had resulted in there being nothing to benchmark the actual costs against, and therefore staff costs were spiralling upwards.
The impact of the above exercise is that the Directors are now able to agree on what the right staffing cost is for their business, and they forecast that as a result of changes we have helped them implement, they will now be far more efficient, and ultimately more profitable.
If you're unable to answer the question "what is the right staff cost for your business?", get in touch with Tony for help with the answerContact Tony
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