Indirect Employees Do Add Value

Lean as the cost cutting tool is a paradigm most of the lean community has to struggle against everyday.  Then the most common way is too reduce headcount.  The first comment I most commonly hear is, “Reduce the number of indirect employees.  We have too many.”

While a company may truly have too many indirect employees, it isn’t having too many, it is using them properly.  Most efforts I have seen go out and eliminate supervisors, material handlers, and clerks in one fail swoop.  What usually happens is the work they were doing must still get done and it gets put on the direct (or value-added) employees.  These are the employees that are working on the product or service directly.  When they pick up the duties of the indirect employees it takes time away from working on the product and therefore makes them less productive.  Management can’t figure out why this is happening.

My suggestion and a concept that Toyota uses is one team leader for every 4-7 team members.  The team leaders responsibilities are to provide immediate support to their team members each and every single time they have a problem and complete non-value added work like paperwork, finding parts, or getting someone to help with an improvement idea.

This structure takes the burden of non-value activities off the value-added team member so they become more productive.  The rapid response to problems allows for better understanding of what actually is happening and leads to more problems being resolved.  All-in-all this reduces the companies total cost by having these indirect employees.

I know going from a traditional supervisor structure to a structure mentioned above is not easy in most cases.  Usually, you don’t have extra employees sitting around that you can just train and insert.  One way to free up someone for this role is through improving the work of some indirect employees.  For example, improve the work of the material handlers so they are more efficient.  When they are efficient enough to do the same work with less material handlers, use that person to become the first team leader in an area.  As the area with the new structure gets more efficient then you may be able to free up some people to become team leaders in other areas.  And so on.

I have used this method before and it worked but it does take patience.  The good news is once results are shown the process seems to speed up.

So the next time you see indirect labor as $$$…..stop and think of how you can better utilize them to remove waste and cost from your process through continuous improvement.

Posted on January 19, 2011, in People, Problem Solving, Waste and tagged , , , . Bookmark the permalink. 3 Comments.

  1. Your expression as a part of the great Toyota Philosphy, Toyota Production System (TPS) is inspiring.. and is of great help

    Though i am not professionally related to Toyota, i have a interest over TPS. And have recently updated an article on how Toyota uses technology till the optimal level.. in this section of “TOYOTA” as per being tagged..

    I would be honored to have it reviewed by you…

    Hope you have a great day ahead

  2. Even shallow lean thinking can encourage eliminating these jobs — if you decide that they don’t add value. The first thing to do is to ask how can they add value, by supporting direct value-add work, strengthening supply chain connections, reducing their own non-value added work, solving problems and eliminating obstacles or safety hazards.

    • Karen –

      I like how you ask, “How can they add value by supporting the value-add work?” All the examples you listed are spot on. What most people miss is that by the indirect laboring taking on these tasks, the direct labor adds more value. Plus, the indirect labor could be solving problems for the direct labor allowing an even greater productivity gain by the direct labor.

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