by The HLH Team
“You either disrupt your own company or someone else will.”
-Peter Diamandis
Manufacturing is changing. Quickly.
Companies are adopting advanced technologies quickly in order to stay competitive. Disruption is the new reality, and those who embrace it as an opportunity, instead of fearing it as a challenge, will sharpen their advantage.
When it comes to hiring, you can expect things to get a lot more competitive for high skilled positions. The people creating and operating the disruptor technology will have their pick of companies, whereas the low skilled workers being replaced will face an uphill road.
Those committed to Process Improvement will have powerful new tools at their disposal. Those who let waste slip through the cracks may find that, without a committed team, technology does little to increase their efficiency and bottom line.
The Robots are Coming:
Robotics is the most feared disruptor sweeping down on us. But while it’s easy to imagine fully automated factories putting swaths of people out of work, the reality of what’s happening is more complicated.
Fully automated factories are more popular overseas, especially in Asia, than in North America. We tend to be more skeptical of computers, here. Cobiotics, which is the pairing of a robot with a human operator, is becoming more popular in Canada than full automation.
One of the problems with computers is that they do exactly what we tell them to. Automation only works if there’s enough human talent on hand to build, program, and monitor it. If something goes wrong, it’s usually human error and the more automated you are, the more expensive tiny mistakes can be.
Robots can beat humans at many things, but they aren’t problem solvers. Tiny symptoms of waste don’t “bug” robots like they do us, and a computer isn’t compelled to make small changes to fix their environment.
The mainstreaming of robotics will herald a change in the job market. Like the other technological disruptors, it will threaten traditional factory floor jobs but will increase competition for high skilled jobs in software, development, and operators.
The Internet of Things:
Seemingly overnight, we’re able to lock our doors, adjust the thermostat and water our plants with our smartphones. When you apply that tech to manufacturing’s complex systems, you have the makings of a fundamental innovation disruption.
A connected factory would allow us to synthesize massive amounts of data quicker and analyze it on a deeper level than we ever could before. Expect competitive manufacturers to link all aspects of their assembly chain in real time in order to maximize efficiency.
Stanley Black & Decker adapted the Internet of Things into one of its plants in Mexico. The resultant change in efficiency, just by being able to tweak things like required voltage, optimal temperature, and monitor time waste, was impressive. Overall equipment effectiveness increased by 24% and output by 10%.
The Internet of Things is a potential boon for Process Improvement. Those wanting to eliminate waste incrementally over time will have access to more data and insight into where their waste comes from than ever before. Expect companies that embrace this disruptor pro-actively to start to emerge from the pack.
by The HLH Team
“Education is the best economic policy there is.”
-Tony Blair
What’s Your Perspective?
So much depends on attitude. Alberta’s economy was cut down when oil prices tumbled. It’s growing again, but modestly. And the sectors hit hardest, like energy, aren’t making the cavalry charge back to prosperity.
In 2017 and beyond, most forecasts point to a slow rebound. Whether that’s good news or not depends on your perspective. If you haven’t reduced your spending in the last 2 years and are pacing your office waiting for the boom times to return, modest growth is a bitter pill.
But, if you’ve cut all the expenses that the customer is not willing to pay for, then you’ll probably have trimmed enough waste to remain in the black, however painful it’s been, that modest growth could all go to the bottom line.
In other words, did you get brutal with your internal waste when oil started to plunge, or did you hold onto the expense accounts and are just waiting for the boom to come back?
Oil & Jobs:
2 key indicators for our economy, jobs and oil, tell the story. We’ve had some very strong jobs reports, but the dominant trend is caution. The sheer volume of layoffs in the past couple of years have changed Alberta’s job market and our consumer buying power in a fundamental way. We got used to the “boom” being normal, and things are not going to return to normal anytime soon. While that’s good news if you’re hiring talent, it’s bad news for selling pretty much anything.
The World Bank forecasts that although oil prices are heading up, it’s a long, sustained road upwards. Their forecast doesn’t have crude crossing 470/ barrel until 2025 and no $100 marks in site. The U.S. Information Administration forecasts that a barrel will average $55 in 2017 and $57 in 2018.
While a long way from the low of $26.55 it hit in January, 2016, it’s not enough to bring back “the boom.” The consensus is that our economy is growing like a turtle: slow and steady.
While growth is forecast, it’s not guaranteed. Events out of our control, from El Nino to Trump, can be disrupters. Also, while oil is on a slight upswing, big industry lags a couple years behind. Big projects planned for 2016 are winding down, but new ones aren’t following.
What You Can Do:
You can’t control the price of oil. But you can control the money that’s wasted needlessly in your company every day. Oil prices don’t sink companies; the 8 Wastes do. (Intro To The 8 Deadly Wastes). If you commit to eliminating waste, you’ll see the impact.
Attitude guides actions. Instead of “I’ll weather this storm and make it up in the good times,” consider “I’m going to find out what my customer isn’t willing to pay for and eliminate it.” Perspective starts with you and percolates down to your team and company.
Cutting waste doesn’t mean firing people. From inefficient transport schedules to machine downtime from lack of regular maintenance, waste is everywhere. Devote a portion of each day to finding it and pulling it out like a weed.
Being brutal with waste isn’t about dramatic actions. It follows the same pattern our economy is taking: small changes that, when sustained cumulatively over time, add to big cost savings. It’s the art of discipline, patience and, most importantly, perspective.
by The HLH Team
“If you’re trying to create a company, it’s like baking a cake. You have to have all the ingredients in the right proportion.”
– Elon Musk
Incorporation 101:
A lot of professionals have their own businesses. If you have one, you’ve probably wondered about whether or not to incorporate. If your business is growing, it’s likely more a question of “when” rather than “if”.
There are no formal rules as to when to take the plunge. It really should be tailored to each individual situation and depends on factors such as:
* Personal Liability – Once incorporated, typically only your corporate assets can fall victim to creditors or lawsuits. These third parties will not have as much ability to threaten your personal finances.
* Income Splitting – Does your significant other fall in a lower personal income tax bracket? A corporation can become a way to even out your personal incomes to reduce the overall tax burden on your family.
* Deferring Income – If you don’t need all the money that your business is making in any given year, you can keep the extra in the company for as long as you would like before having to bear the burden of personal taxes. This often allows you to delay tax payments until you fall in a lower tax bracket which leads to overall tax savings.
Pros & Cons:
Let’s break this down:
Pros:
Reduces Personal Liability: If an unincorporated business hits rough financial waters and you can’t pay your bills, creditors can go after your personal assets (house, bank accounts, etc). Corporations are considered separate legal entities, so your creditors will typically go after your corporation and its assets, not you and your personal assets.
You have Options: With an unincorporated business you have one way to get paid, and the taxman knows it. In a corporation you have a choice between salary, dividends, bonus or a combination, whichever is the most tax efficient. You can also take advantage of income splitting (Income Splitting Article).
Defer Your Taxes: If you don’t need business earnings for personal use, you can leave them in the business and defer your personal tax.
Debt Repayment: If purchasing an existing business, incorporation of a holding company may allow you to make your debt repayments to the vendor on a tax-preferred basis.
Employee Benefits: You’ll have more tax-favourable options to offer tax-free benefits to your employees to increase retention and attract the best candidates.
Cons:
Fees: You’ll need a lawyer and an accountant to incorporate, so plan to incur some professional service and filing fees. However, it pays for itself quickly (often in just a year or two) in tax savings. Remember that you get what you pay for, and going for the cheapest consultants won’t maximize your advantages.
Can’t Claim Losses: The shield against your personal assets goes both ways. If your business fails, you’ll only be able to write off the amount you invested personally against your personal income, not the corporation’s accumulated losses.
There’s Paperwork: You’ll need to file a separate tax return, an annual return, etc. It’s standard stuff, but you’ll need to be another level of organized if you’re going to do it yourself. Finding the right professional advisors to help guide you through these additional challenges will definitely be a worthwhile exercise.
How to Get it Done:
This is one of the biggest steps of your professional life, so find a qualified professional who won’t rush you, but will take the time to discover the opportunities that your personal situation allows. Every individual (and their business) is unique, so the structure and ownership of every corporation will be different. Take the time up front to ensure your accountant gets to know where you’re coming from, and more importantly, where you’re going. The proper foundation will help your business ensure both its current and future success.
by The HLH Team
“Automation is Voldemort: the terrifying force nobody is willing to name.”
-Jerry Michalski
Manufacturers Coming Home:
The idea of offshoring has become a magnet for all the vitriol of those caught at the wrong end of globalization. Since the 90s, North American companies have been lured overseas, most famously to China, to take advantage of lower labour rates.
Manufacturers didn’t move offshore because they wanted to. They were driven there by competitors’ increasing competitiveness. The trend has fueled a generation of workers’ rage and, some would argue, a new era of political populism. But the tide has turned back to North America. As China prospers, labour costs rise. Land to set up factories becomes scarce. Long supply lines, increasing domestic backlash, and the need for overseas oversight becomes tedious.
In 2014, the US saw a net increase of 10,000 reshored jobs. It’s been climbing quickly since. Canada has lagged behind, largely because we had less offshoring to begin with, but our pace is quickening, too.
What companies are leading the reshoring charge with their manufacturers? (as of March, 2017)
Walmart: 4,838 North American jobs
Ford: 3,200 North American jobs
Boeing: 2,700 North American jobs
General Electric: 2,656 North American jobs
General Motors: 2,345 North American jobs
The Dark Side of Reshoring:
In the 90s, the bulk of the jobs lost to offshoring were in production and assembly; Factory jobs, and lots of them. Many reshoring companies look very different than when they left. The current automation explosion means that traditional factory jobs are rapidly disappearing. Manufacturers are returning seeking high skilled jobs in research, engineering, marketing and management.
Bottom line: companies are often reshoring because they don’t need as many workers, which is what eliminates the offshoring advantage. The jobs they’ll be offering will be fewer and higher skilled.
What Reshoring Means for Your Business:
Reshoring is a symptom of the global jobs earthquake that automation is beginning to unleash. Low skilled jobs, including not only traditional manufacturing but also retail, food industry, service sector, office admin, computer programming, and transportation, are all at risk.
Highly skilled jobs (including the people who design and build the robots fueling automation) will be in high demand and have short supply. Your competition for attracting talented people is about to get intense.
Automation has always cost jobs. Cart and buggy makers found themselves out of luck when Henry Ford came to town. But the shift has never been so rapid, and across so many industries, as what we’re witnessing now. In other words, automation has replaced offshoring as the new killer of lower skilled jobs. If you need highly skilled workers and have been assuming that they will always just “be there,” you may want to examine what incentives you could offer them.
Expect reshoring to accelerate the pace of technology innovation in the domestic arena. Companies are usually returning because advances in automation are eliminating the wage gap. If you’ve been pulling back on R&D due to the economy, you should reconsider. But that’s for another article…
by The HLH Team
“If you think hiring a professional is expensive, wait until you hire an amateur.”
-Anonymous
What Resumes Don’t Show:
You’re hiring. You’ve put the ads out and the resumes are piling up on your desk. The hundred or so applicants have similar education, experience, and they all claim to be the candidate who will “wow” you.
How do you decide? You can compare the courses they’ve taken all you want, but you know there’s an X-factor that their resume simply doesn’t show.
How will they blend with your workplace culture? What will their mood be every morning and will they want to learn something new every night? You’ll probably hire based on their accumulated skills and industry knowledge. Their resume gives you that.
But what attitude will they bring to work everyday? Will they develop habits to continue to mature into their role? Or are they a set of skills that will add nothing to morale and not develop alongside the company?
The 4 Corners of KASH
About the KASH Box
(Credit To Barb McEwen, Master Executive Coach with 20/20 Executive Coaching)
Using KASH is easy. Draw the grid on a full sheet of paper. Plan for a slightly longer interview process, and make point form notes in each corner throughout. It will take time to train our ears to listen for things other than Skills and Knowledge, but as soon as you learn to identify the cues they leave about their Attitude and Habits, you’ll become a more efficient at hiring.
The whole person arrives at work everyday, not just their skills and knowledge. KASH is a tool for evaluating candidates, and employees, beyond their resumes. There are 4 components:
- Knowledge: Everything the person knows from a lifetime of accumulated learning. It’s one of the first things we look at, but tells us absolutely nothing about how that person will perform.
- Skills: How well they perform specific tasks. As employers, we tend to hire based on who fulfills the highest number of necessary skills.
- Attitude: How will they approach their tasks? Will they inspire others or drag them down? This is the hidden second half of Skills. The most important of the 4 Corners, Attitude is also the hardest to quantify from a resume.
- Habits: What does this person do repeatedly and overtime, and will he or she build habits in order to excel at their role. The previous 3 Corners represent a person at a moment in time. Habits is how we gauge how that person will develop over time.
Here’s an example. The job you’re hiring for requires expert level use of Microsoft Excel. The resumes in front of you will show you who has deep Knowledge of Excel and Microsoft Office and who has taken the courses to develop the Skills that your company needs.
What the resume doesn’t tell you, is if they will perform their skills grumbling and gossiping, or if they will jump into it, mentoring others along the way. Skillset is the first step, but Attitude determines the application.
Excel is constantly changing. Will they change with it? Will they develop Habits to be constantly learning and adapting to new software. If you want to switch programs, will they fight tooth and nail or will they adapt with the company?
Why KASH?:
Hiring the wrong person is a massive waste of time and talent. Even if we don’t quantify the loss of morale and enthusiasm a failed hire brings, the average training costs of replacing someone are sobering:
- 16% of annual salary to replace a high turnover, low paying job
20% of annual salary for mid-range positions
- A whopping 213% of annual salary for highly educated positions. For example, to replace a CEO making upwards of 100K, expect to pay about $213,000 once all the bills are in.
In an ultra-competitive economy, picking the right person is vital. An hour spent brainstorming a KASH box can save your thousands, or tens of thousands, in wasted time and energy.
