In manufacturing we all look for ways to save money. To be successful we must consistently and constantly identify and correct inefficiencies. This is typically done through streamlining processes, value stream mapping, supply chain management and general cost reductions in supplies and materials. Tangibles are generally the first thing that is looked at for obvious reasons; we can see incoming raw materials, we can see part processing and we can assign value, KPI’s (key performance indicators) and make measure of the metrics associated with these tangibles/things that we can measure, even cycle times during and between manufacturing events can be monitored for proficiency.
But what about time? I’m not talking about time in a manufacturing process. As previously mentioned, we can, and do measure process and cycle times. What I’m talking about is human time. From an efficiency standpoint human time is a huge variable for many reasons and can be hard to realize and measure. Human time most often gets overlooked or shrugged off. Time efficiency monitoring becomes even more crucial if your company is heavy on the engineering and administrative side. SG&A (Sales, General, & Administrative Cost needs to be identified and calculated into your COGS (Cost of Goods Sold) prior to adding a margin. In extreme cases, time inefficiencies in SG&A can increase your overall COGS to the point where you may not be cost competitive in your market.
To understand the true value of human time we must first understand hat the true costs are per employee per hour. The true cost, referred to as “Burden Rate” can be calculated by adding the per hour rate to all costs associated with maintaining the employee. Associated costs can include; Social Security, MEDI, FUTA, SUTA, Workers Comp., Payroll Tax, Health Care Insurance, 401k & Pensions. Now factor in the available productive hours per year which is 2080 hours minus non-productive hours like paid vacation, holidays, sick leave and breaks. An average employee making a wage of $20.00 per hour with benefits, 2 weeks vacation and 5 sick days would have a burden rate of $26.75 per paid hour. The burden rate per productive hour would be $30.40. Here’s the surprising part, at 70% efficiency the burden rate per productive hour would increase to $43.40 per hour.
How time efficient are your employees? Although I’m a bit skeptical of this number a recent study by vouchercloud.com found that the average office worker is only productive for two hours and 53 minutes a day. An online Microsoft Office survey funds workers average only 3 productive days per week which is a 60% rate of efficiency.
There are a number of factors that cause these inefficiencies and consequential high burden rates such as: email, ineffective meetings, unclear objectives, and lack of team communication. A Vouchercloud.com study listed the top 10 unproductive activities (ranked by percentage of respondents):
47% Checking social media during work hours….44min
45% Reading news websites….65min
38% Discussing out of work activities with colleagues….40min
31% Making hot drinks….17min
28% Smoking breaks….23mins
27% Texting and instant messaging….14 min
25% Eating snacks….8min
24% Making food in the office….7 min
24% Making calls to partners and friends….18 min
19% Searching for new jobs….26min
To put this into financial perspective, take for example an office of 10 employees at $20.00 an hour with a burden rate of $43.40 per hour. Looking at this conservatively, if each of the 10 workers had only half an hour of lost time per day, that would equate to $5,240.55 lost per year per employee for an accumulative sum of $52,405.50 per year. This is equal to the salary of one additional employee. Looking at it another way, a company would have to increase its revenue by approximately $1,500,000 to cover that cost based on a 3.5% final net profit.
So what can be done to increase human time efficiency?
Limit emails to work related content through the optimization of spam filtering. The average worker receives 42 emails a day per the Microsoft Office survey.
Evaluate meeting times and have a clear agenda. Use a countdown clock so everyone is time conscious and stays on topic.
Create Standard Operation Procedures (SOP’s) for all tasks and keep them in a controlled documents folder on your network so everyone has a clear understanding of how things are done.
Educate employees so they understand the costs associated with inefficiency. Create a baseline of costs and incentivize employees with a bonus structure if they improve time efficiency.
Time is money. How lean and efficient is your company? Check your human time.