Consulting Firm Explains How to Have a Business Without Any Employee Costs

Dallas consulting firm RWSMC suggests businesses reduce employee costs by doing away with employees.

(PRWEB) August 13, 2006 -- The consultants at Dallas management consulting firm RWSMC basically believe that organizations should change their activities to become more efficient instead of resorting to layoffs to save costs. However, says Bob Kinsler, lead consultant for the firm, “We’ve looked into ways to save on employee costs, and we’ve found some interesting ideas that we’d like to share.”

Says Robert Scroggins, director of operations at RWSMC, “Employee cost is the largest cost of doing business today. Because of the high cost of labor and associated employee benefits, the USA has overpriced itself, and it has become an expensive place to live.”

Scroggins continues, “We’ve found that the average employee now stays an average of about three years with an employer, but we’re not sure that they would leave employment just because they didn’t have expensive benefits and overpriced labor. Promotions, fair pay for their services, and new challenges are big reasons why many of them leave.”

Kinsler says, “As a start in our employee cost reduction program, in non-union states, we recommend terminating all employees. In union states, we recommend notifying all employees that their contracts will be allowed to end without any extension. We recommend that businesses adopt a policy of paying only what they want to pay for employee services, regardless of their personal beliefs, cultures, national origins or race. We recommend that they establish target costs for the various employees or employee levels. By target cost, we mean taking the profit margin and business costs out of cash inflow, leaving an amount of money to be allocated to the workers. In a nutshell, you will be subcontracting out the work function to organizations, such as PEOs, temp agencies, unions, or outsourcing firms, that are experts in a specialized work area or independent contractors.”

According to Kinsler, “Ford Motor Company for some time now has established the benefits of using PEOs or temp agencies to fill their positions. Their financial statements show no employment cost figures. Instead, they show contractual obligations to certain outsourcing firms that actually employ the plant and office workers.”

Kinsler continues, “For another example, in the United States Department of Defense (DOD), soldiers, sailors, airmen, and marines are not paid by the units with which they serve but are paid by a branch of the Department of Defense. Most of the DOD budget relates to the payment for services rendered by those in uniform after the senior leadership of their unit informs their HR representatives of the service member’s whereabouts and completion of assigned tasks for the pay period. PEOs or temp agencies are the actual employer of many business workers, and they operate in a similar manner. Outsourcing specialty firms and independent contractors are paid when invoices are generated upon satisfactory completion of their work or on a milestone or results-oriented basis.”

Kinsler explains, “In these examples we’ve given, the workers are not part of the company. They are either with a company contracted to perform the work, or they are independent contractors with a definite end date to their work. This includes unions, which already negotiate with companies on behalf of union workers. Because of this, we advocate that unions should manage their membership similar to other organizations that provide similar services—such as PEOs and temp agencies, which are the actual employer of their workers and negotiate for them as well. This would require unions to manage themselves instead of putting management and administration upon the back of the companies. After the negotiations, the companies can tend to business and leave worker management/administration up to the unions.”

Per Kinsler, “We believe that all contracts from organizations representing workers (PEOs, temp agencies, unions, outsource specialty firms, or independent contractors) should be for a three year (or less) term and provide for a set amount of cash as determined by the target costing method mentioned above. These contracts will not include retirement, relocation or bonuses—just a set price that the firm is willing to pay for services rendered by the employees of the organizations representing the workers. All other worker expenses (including benefit packages, etc.) will be the responsibility of these organizations.”

Scroggins explains, “this concept we’ve put forth may be extreme, and it can certainly be improved, but we believe that an arrangement such as this may be necessary in view of the current global market place and the pressure on companies to make a profit. The companies would have to look at their activities and the cost of performing them and determine if enough was left over from sales revenues to attract proposals from the contracting organizations. The result of this would be a mix of contracting in a supply chain management system.”

Kinsler sums it up, “We believe that under this plan, companies would save on worker administration costs and associated costs as well. Everything possible would be covered by contract. The contracts would be the result of bottom dollar negotiations for definite time periods with predetermined costs. There would be a buy-in by all parties concerned, and the resulting work would be more efficient.

“Are we just kidding with this proposal? Contact us and find out!”

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