Don’t mistake activity with achievement. ~ John Wooden
Last week, I highlighted one primary reason incurring persistent overtime should be avoided. To be specific, I suggested that in selecting a manufacturing company to work with, you’d be wise to exercise caution if that company persistently requires their employees to work tons of overtime. Citing the work of John Pencavel (The Productivity of Working Hours) and from my own observations, at a certain point, output rises with working hours at a decreasing rate (i.e., productivity goes down).
Persistent overtime affects more than productivity. Pencavel touches on things like accidents, illness, work fatigue, and work stress. I agree and would also argue it’s an indicator of a few possible operational deficiencies.
Increased Costs
Whether it be directly in the form of higher wages or indirectly through decreased productivity: overtime increases costs.
It should be obvious to anyone responsible for making payroll, yet I’m surprised at how often I have to explain why things costs more if overtime is required to make a delivery date. It wasn’t that long ago manufacturing companies like Evaero commonly absorbed those extra costs. Now, as our industry has become increasingly commoditized and margins razor thin, depending on the circumstances, companies are increasingly charging for efforts that require overtime (or building it into their overhead rates).
Labor Shortage
Persistent overtime may also be a good indicator that a geographic area isn’t able to support local companies with enough skilled labor, a condition that can be a major impediment to growth. Organizations are reporting the highest global talent shortage since 2007 according to the Manpower Group’s 2016-2017 talent shortage report. If you are sourcing work, this is definitely something worth paying attention to since it is a problem not easily remedied.
Curious to know what the hardest job to fill is? For the fifth consecutive year, of the 42,300 employers surveyed by the Manpower Group, the hardest jobs to fill remain skilled trade workers. This is a big problem if you rely on experienced machinists to manufacture complex aerospace parts!
Turnover Issues
Finally, persistent overtime can be an indicator that, for whatever reason, a company has an employee turnover problem. Although there may be some industries where employee turnover isn’t a concern, in the aerospace and defense industry, above average amounts of employee turnover can be difficult to manage due to the “high mix-low volume” nature of the work. That is because the short run nature of the work makes it more difficult to properly document processes and eliminate “hidden factory.”
For the sake of disclosure, I found myself thinking about this issue because, as a result of a spike in demand, Evaero is currently having to work overtime in several process areas. Indeed, as we work through the issues, it currently feels like we have our back up against a wall because, despite being aware of the pitfalls that come with working overtime, we are all keenly aware of the responsibility we have to do everything we can to manage all aspects of delivering product to our customers on time.
On that note, a good time to check out for the week. As I was finishing the blog I was reminded of Son Volt’s new album Notes of Blue and their song “Back Against the Wall.” It looks like they are out touring in support of the album and although I’m bummed they won’t be going to Tucson (hey Jay, trust me, Tucson is much cooler than Phoenix) if they’ll be in your neck of the woods consider checking them out.
Cheers…xian
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