SBA Loan Workout: Let Me Remind You Again, Employee Productivity is Critical, Especially in Our Downturn Economy

The times have changed. Revenues are down and expenses are up. Margins are thin as pricing is being forced into a downward spiral from brutal competition. Customers want value and are willing to shop to get it. Business owners need the revenue so deflation is the rule.

Business owners are reluctant to downsize by reducing the number of employees. Loyalty and waiting for the return of the demand are the excuses.

The answer is cut deeper than you think you need, eliminate as much of your workforce as you dare and then take more out. Old habits are hard to change and since productivity is usually in the area of 30 - 40%, you could maintain the same production with probably 1/3 fewer workers, if you could increase productivity while decreasing workforce. Since sales are down, cut to 50% and then rebuild with a new younger lower cost workforce willing to learn and work hard at far more than 30 - 40% productivity currently experienced.

There is a huge unemployed potential workforce available to rebuild with, and you can train them to be as productive as you want and now need.

The challenge is changing older workers work habits, getting them to increase productivity without developing animosity, very difficult to accomplish, and with a waiting available trainable new lower cost workforce available, the opportunity for a clean sweep and an upgrade is absolutely possible. Alternatively, take the time and effort to reprogram a smaller current workforce, as they will be somewhat receptive as they see half their peers are dismissed. Cruel, heartless, you can't do it? If you do not, you too will be out of work looking for a job, and we all know how that will work out.

Payroll is usually the largest expense line item, and it comes every week. Taxes and benefits are additionally huge. Reducing employee base is the quickest and most effective way to deal with the downturn. Increasing productivity is a crucial objective of downsizing, without it, the downsizing will fail.

Incentives, teams reviews, training, cross training, appreciation programs, goals and objectives, better organization, all play an important role in increasing productivity and, therefore, increasing profitability.

Do it, you have no choice.