The times have changed. A fable that was once considered true is indeed a myth — labour is not cheap.
It never was, yet companies in the region have consistently over-hired compared to global benchmarks. Over the years, I’ve often wondered why organisations have inflated workforces. I’ve entered shops, observed construction crews and walked the halls of companies, each heaving with masses of employees.
It’s a sight you simply don’t see in other parts of the world.
With labour regarded as cheap, companies deduced that the way to address problems was to hire additional employees rather than fix the underlying causes. It was a no-brainer: fixing problems would have meant replacing vast workforces with a streamlined team of more experienced — but infinitely more expensive — workers.
It would have involved investing in the development of their people. True, the size of the workforce would have shrunken as a result of such a move, but the cost per employee would have skyrocketed.
The very idea would have been counterintuitive for businesses that had spent years trying to build workforces as cheaply as possible.
This thinking supports the prevailing premise that the way to fix a problem is to add more hands on-deck. But the premise is flawed. What’s more, relying on cheap labour masks the real issue, which is how much employees produce for every hour they work.
I want you to calculate this for your company. First, multiply your total headcount by 1,760 (the average number of hours an employee works per year). This will reveal your total hours worked, or “productivity input”.
Next, determine your company’s output. If you’re in manufacturing, your output is the number of products you produce per year. In services, it’s the number of customers. For example, for a drinks company it’s the number of cans sold per year, while for a hotel, it’s the number of room nights sold — or, if they wanted to delve deeper, the number of people that sleep, eat, or attend a meeting with them.
This output is called the “unit/s of service”. Once you have identified yours, divide it by the number of hours worked.
This output/input calculation gives your productivity number. If you do this retrospectively, you can see if you’re becoming more productive, or simply hiring more people.
We’ve been fortunate to work in a rapidly growing market, and when growth was at its strongest, few companies saw the need to worry about what each hour worked was producing. But, top-line growth has hidden a real issue that you now need to give your attention to: getting more output per hour worked.
With attention locked on top-line market growth, the region’s productivity has been sliding down a slippery slope. For example, during the past 10 years, Dubai’s GDP — what the economy produces — has grown at an average rate of 5 per cent, while the total employment base — the input — has grown at a rate of 5.4 per cent.
These percentages translate to a shrinkage of GDP per employee, from $46,980 per employee to $40,900. This scenario is replicated across the UAE, Saudi Arabia and the region at large.
Behind the numbers is a troubling reality: today it takes more people to do less work than it did 10 years ago. Is this true for your company?
The days of throwing more people at a problem should be relegated to the annals of history — as should the days of masking workforce growth with rising revenues. In practical terms, this means that you must become more productive. You really have no choice but to extract more output from the hours that are worked.
It is time to accept that labour is not cheap. What once appeared to be saving companies money is now costing them dearly. Times have changed and you need to change with them.
Get ready: the coming management trend is productivity.
Tommy Weir is CEO of EMLC Leadership Ai Lab and author of “Leadership Dubai Style”. Contact him at email@example.com.