The Unquantifiable Expense

What is the unquantifiable expense? Over the years I have had an opportunity to work with and run many companies. One day when I was out in the front office of a client just observing, something dawned on me, some employees were on cell phones, texting, talking and others were working on what was obviously personal business. If this was happening in this small office of 20 employees, calculate that over the thousands of companies in the United States.

Lost employee production costs companies millions of dollars each year. This amount does not show up on any financial statement and contributes to increased overtime hours, longer time to produce products, longer time to perform administrative tasks and increased time to get data needed to make business decisions.

In a manufacturing environment, when fixed and variable costs are calculated to determine a product price, the hidden cost of employee non productive time is not factored into the final price submitted to a customer. There is not a method to calculate and capture these costs. As a result, non productive employee time is never discussed or corrected. Many companies do have a policy that prohibits texting, cell phone use, and personal work during business hours, but rarely do you see it enforced.

I am not advocating a Stalinist system of managing employees, my goal is to point out that there is an unquantifiable expense that is not showing up on any financial report. I believe that going to work should be fun as it leads to increased creativity and a happy workplace leads to improved moral. What business owners need to recognize is that there should be accountability to them and to the company by their employees. Without a system in place to monitor employee inactivity, the owner is losing money without being aware of it.

 

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