Speaker:'Let me start the first part of the presentation, with an overview of current employee under-performance. But what does employee under-performance mean? Basically, employees don't do what they are capable of, with the time and resources available.
Allow me to demonstrate this by showing you a Bar Chart. This is a bar chart from a well-known multinational retail company. It shows that over a ten-year period, between 1998 and 2008, that their relative labour cost for each product they sold increased every year. Over the ten years, this meant a 15% increase. Now, lets ask ourselves why this happened? Did the number of staff increase? Yes, it did up to 2006! Did wages increase higher than inflation? No they didn't! Did other costs fall? Yes they did. So while there were efficiency savings in other areas of the business, like in Information Technology etc..., labour was becoming relatively more expensive.
This isn't a one-off case. This next graph demonstrates that this is a trend affecting all companies. It shows the average staff costs as a percentage of total costs over the last 5 years for the top 100 companies in the UK. The average staff cost is represented by the red line, while the dotted blue line shows overall costs. As you can see, whilst overall costs fell by roughly 15% over the last 5 years, the actual average staff costs as a percentage of overall costs increased by over 10% over the same period. And this is just an average, in some cases it increased by almost 15%.
I think that you can agree that this is unsustainable. Companies can not be competitive in the long-term whilst their staff are becoming increasing inefficient and relatively more expensive.
Let me illustrate this with an example. You all remember the American company Samson & Heat? They went bankrupt this July. What do you think the fundamental reason was? Falling sales? Maybe it contributed, but other companies faced similar problems and are still here today! Their fundamental problem was that their overall relative staff costs had risen by just under 30% in the last 10 years, over inflation. To put it is simply, they were out-priced by their competitors.'