Labor - Expense or Investment

"You can't manage people. You can manage things and cows, but not people."

                                                   - Rick Wallace

"The biggest difference between coaching and managing is that the coach knows she can't play the game so she has to focus on making each player the best they can be. A manager thinks she can play the game better than anyone else, is the quarterback and drags and pushes the team with her to try and win." 

- Rick Wallace

Anyone that has budgeted expenses or looks over a P&L knows that the biggest line item under the expense category is Labor. For eons, business people have looked at that line and, when budgeting for the next year, simply added 3% or so to it to take into consideration the raises they would be giving in the upcoming year.

I'm challenging that belief. Greg Crabtree, Simple Numbers, has awaken many of us to question that long-held belief and begin to look at the Profit Lever that line item can, and should, become. To look at Total Cost of Labor as an investment not as an expense we are trying to control.

To grow profits we must leverage the Productivity or Return On Investment ( ROI) in labor. Why is this different? Well today everyone is looking at labor as an expense, that is basically a given, and they try and cut it a little or simply live with the number and pay little attention to it.

Thinking of it as an investment changes the whole mindset. We should be thinking "I'm spending all that money - what am I getting for it?"

Now change your mindset about everything to do with Labor and People in your organization. We must begin to invest time, as well as money, into this investment to see the ROI we want.

These are the mindsets that need to change: 

1. Coach don't manage

• Focus on making each individual the best they can be.
• As a coach you cannot play the game. 
• Weekly coaching conversation instead of annual reviews and showing everyone "how to do it".

2. 'A' Players in every position

• Costs a little more, but produce 2X.
• Fewer people but each producing more.

3. Always be recruiting (scouting)

• Build a virtual bench, looking for talent and attitude everywhere you go.

4. Set and measure and share financial goals every week

• Let them "in on things".

People productivity is the biggest single contributor to profit and the one few of us focus on. Begin now to focus more of your time on learning the power of the mindsets above, and build a company with 'A' Players who are engaged and look forward to coming to work each day. Your profits will soar, the drama will decrease and your stress levels will go way down.

You will be building a company that has real value. Wasn't that your dream when you started?

Regards,

Rick Wallace