button Vol. 7
No. 5



line Non-union

line Obesity In
The Workplace

line Productivity
Or Push?

line English-only

line Update On
Overtime Rules

line Briefs

Braun Consulting News
News on Personnel, Labor Relations and Benefits

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Human Resources and labor relations Productivity or Push?

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There has been a dramatic rise in productivity over the last several years.

The question sometimes asked is whether it is due to smarter business practices... or employers pushing employees harder and demanding more in overtime and personal sacrifices at the job site.

In this article we will explore this issue and look at the relationship between productivity and stress. We will also explore some ways that employers increase productivity while at the same time maintaining, or even increasing the satisfaction of their employees.

Productivity is up... but for how long, and at what cost?

Some companies are doing it right and are in for the long haul, while others are short sighted and pushing employees in ways that will often backfire on them over time.

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Checkmark Graphic Trends in Productivity Gains

U.S. employers of all types are doing just about everything they can to get the most out of their employees today.

They know that increasing productivity most often comes from making people more efficient in their jobs and/or finding ways to do the same things for less money.

These methods are paying off.

In 2003, productivity in the business sector increased 4.5 percent from the previous year, according to the Bureau of Labor Statistics.

From 2001 to 2002, productivity jumped 4.9 percent.

This means that the annual average rate of productivity growth was 4.7 percent from 2001 to 2003, the biggest two-year rise since 1949 to 1951 - that is, in the last 50 years.

Better use of technology has contributed to about one-third of the rise in productivity since 1993, according to James Smith, professor of finance at the Kenan-Flagler Business School at the University of North Carolina. Smith also speculates that corporate initiatives that encourage workers to do more in response to hard economic times since 2001 may be showing up in the recent productivity gains, but he won't swear to it.

While organizational restructuring and new technologies are partial reasons for the productivity gains, Federal Reserve chairman Alan Greenspan has said repeatedly that high-performing companies create "cultures in which productivity flourishes".

However, those companies who push harder for productivity gains without that culture often do so at the expense of their employees. One of the main byproducts of this kind of short-term productivity is more stress on the employees.

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Checkmark Graphic Productivity And Stress

The rapid rise in productivity has often meant that employees have been working longer hours, in more difficult conditions, and with higher levels of stress and burnout.

It is estimated that worker stress and burnout costs the U.S. economy $344 billion a year.

Stressed and distracted workers have more unscheduled absences and higher medical expenses. Tired and overworked employees have trouble balancing the demands of work and family. They will file more workers' compensation clams, make more mistakes, and create more waste.

According to the 2001 CCH Unscheduled Absence Survey conducted by Harris Interactive, the annual cost per employee from absenteeism rose from $610 in 2000 to $755 in 2001.

The direct costs of unscheduled absences have increased 24 percent in one year.

The American Medical Association stated that stress was the cause of 80 to 85 percent of all human illness and disease, or at the very least had a detrimental effect on our health.

The American Institute of Stress estimates that 90 percent of all visits to doctors are for stress-related disorders. Every week, 95 million Americans suffer some kind of stress related symptom for which they take medication.

And employers are paying for this in one way or another... usually through absenteeism or medical related costs and burnout.

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Checkmark Graphic Productivity And The Legal Environment

Demanding more of employees to increase productivity can backfire on companies if it isn't done right. If it is not done legally and ethically, it can cost employers a lot of money.

Lawsuits seeking overtime pay have risen over the last several years.

Companies like T-Mobile USA Inc. and Radio Shack Corp. have paid anywhere from $5 million to nearly $30 million to employees and their lawyers.

A quick search on the Internet netted the following class action suits in the recent past:

  • Phoenix University. A $2.7 million settlement has been reached in the class action lawsuit filed on behalf of admissions counselors. The suit alleged that the university had violated labor laws by not paying overtime to the plaintiffs, and that they were denied time for meals or rest periods.

  • Electronics Boutique. A $950,000 settlement has been reached in the lawsuit brought by managers of their California stores, alleging they were improperly denied overtime pay.

  • D'Arrigo Bros. Co. A verdict has been reached in the class action lawsuit filed on behalf of approximately 3,000 current and former farm workers. The suit alleged that the company had forced the plaintiffs to spend an estimated 1.3 million unpaid hours commuting to work in D'Arrigo buses over a four-year period, and a federal judge has ruled that the company must now pay them for that time.

  • Classic Distributing and Beverage Group, Inc. A $1.35 million settlement has been approved in the class action lawsuit filed on behalf of 150 salaried sales representatives employed for the past five and a half years. The suit alleged that the company had misclassified the employees as exempt from overtime.

  • Big Lots. A $10 million settlement has been granted final approval in the class action lawsuit filed on behalf of 1,451 store managers and assistant store managers employed at Big Lots and Pic-N-Save stores for the past six years. The suit was filed in reference to the company's improper classification of the plaintiffs as exempt from overtime.

  • Wet Seal Inc., has agreed to pay as much as $1.3 million to settle a lawsuit by California store managers who claimed they were wrongly denied overtime pay.

  • Peet's Coffee & Tea, Inc. A $3.4 million settlement has been reached and is pending approval in the class action lawsuits filed by the company's California-based employees. The suit alleged that the company had improperly classified certain employees as exempt from overtime pay.

And the list goes on and on.

(Source - Class Action and Large Recoveries Legal Newsletter)

William Pinilis of Kaplan Fox & Kilsheimer, in Morristown, New Jersey, is an attorney who represented employees in the Sears, Roebuck and Co. class action suit in 2001. He said, "A lot of these productivity programs are designed from the employer's perspective to compel the workers to do work off the clock without pay. They are getting productivity from workers but getting it in exchange for nothing."

As we can see from some of the cases listed above this type of productivity gain can cost a company large sums of money in the long run.

There are better ways to increase productivity, and we will discuss some of those below.

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Checkmark Graphic Using The Internet

Among the technological advances that have contributed significantly to the increase in productivity in recent years has been the Internet.

Cisco Systems in Silicon Valley has been increasing its productivity by continually leveraging the Internet and looking for innovative ways to become more efficient. The company utilizes HR technology that streamlines and enhances every possible process.

Karen Horn, senior director of HR for Cisco states that: "Employees learn on day one that we make virtually everything a Web-enabled process. They log on to the 'New Hire' main page and realize this is where they sign up for everything -benefits, filing expense reports, locating project information, and finding important metrics."

At Cisco Systems a manager might electronically transfer an employee or give a person a raise; an employee might go online if he wants to take a vacation or initiate a performance appraisal, or leave the company. The system there is transforming the workplace so that menial, repetitive, low-value tasks are accomplished by software instead of people.

At FedEx the companies' Web site offers a career center as a draw for job seekers. As a selling point, the center directs candidates to identify their ideal job (prompting them to enter data about their desires in location, type of work, etc. by using drop-down lists), and to describe their skills. Hiring managers now have instant access to a database of about 500,000 electronic resumes in which the applicants have profiled themselves and specified what they want and can do, when there is a job opening. This saves the company time and money in its recruiting process.

The Internet has been used by companies in facilitating employee communication and by being able to produce more in less time by cutting out layers of paperwork.

It can save money by increasing efficiency and convenience for employees and employers in many areas related to HR processes.

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Checkmark Graphic Summary And Ideas

Productivity had been rising dramatically over the last few years - sometimes brought on by long-term thinking and ethical business practices, and sometimes by short-sighted "emergency" measures pushing employees to the limit.

The following practices are ways to increase productivity that many experts in the field have found to be effective.

We will focus on the long-term cultural changes and practices that have proven to work for companies.

As we mentioned earlier, Federal Reserve chairman Alan Greenspan has said repeatedly that high-performing companies "create cultures in which productivity flourishes".

Here are some ways they do that:

    Checkmark graphic Sharing the wealth - and doing it sooner rather than later.

    Much of corporate America doesn't appear to be spreading the wealth created by the gains in productivity. Employees who feel cheated will wait till the first opportune moment and then change jobs. FedEx Freight began disbursing incentive pay on a quarterly basis instead of yearly... and saw a direct correlation to an increase in productivity.

    Checkmark graphic Creating realistic job matching between the skills of the candidate and the requirements of the job.

    With a good job match the interest level and desire to be productive are already there. Management professor Peter Cappelli states: "What we know best is that giving workers an interest in the work they're doing is the key. The most important impediment to improving workforce productivity is where workers believe they will actually be hurt by improvements in productivity; for example, that improvements will lead to job loss or harder work and longer hours per person."

    Checkmark graphic Addressing the problems of stress, depression, and family pressures.

    In order to be productive people have to actually be on the job. Absenteeism often results from the stress of modern living and increased demands from the workplace. Alternative work arrangements, telecommuting, and compressed workweeks are some common solutions. Some companies are using creative methods to reduce stress, and have even turned to meditation as an alternative to increased pressure. For example, AOL Time Warner, Inc., and AstraZeneca Pharmaceuticals offer meditation classes for stressed out employees.

    Checkmark graphic Using proper training, and training on an ongoing basis.

    An employee properly trained will work better and more productively. Cisco estimates it has saved $42 million in training. Training needs to be an ongoing process. If people are doing their job the wrong way they are wasting valuable time... if they do it the right way they are saving time and money. The training process ought to help employees handle their current responsibilities more effectively and to prepare them for what they need to know in the future as well.

    Checkmark graphic Keeping employees informed.

    If an employee does not understand how they fit in to the larger scheme of things in their workplace they are likely to be less productive. They should know how every act and contribution of theirs is vital to the success of the entire organization, and where the company is going. Good information helps keep employees feeling like part of a team working towards common goals.

    Checkmark graphic Recognizing and rewarding employees.

    Most employees want recognition as much as money. Employees recognized by supervisors and managers will be more satisfied on the job. Public praise and recognition of employees who are doing a good job will go a long way towards increasing productivity by everyone involved.

    Checkmark graphic Giving employees decision-making power.

    Pushing decision making to the lowest levels on the job site works to increase productivity. Helping employees to feel they are a part of the decision-making process boosts their involvement and their interest in their job. Giving them some authority to make decisions that will make their job more productive pays off in more ways than one.

If you are interested in more ways that proper HR policies can increase productivity in your workplace you can contact us at Braun Consulting Group for more information.

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