Management Teams Can ’ t Ignore These Three Profit Catalysts
BY IVAN ILLAN
Going through an economically challenging time forces businesses to evaluate everything . In some cases , they may have to question their very existence . Certainly , regarding the most recent crisis , some industries ( e . g ., hospitality , restaurants , personal services ) are very much in an existential crisis – and sadly many have already closed permanently . But for those businesses that have found ways to survive , what they ’ ve gained from operational survival insight cannot be easily forgotten . More importantly , they ’ ll continue to apply what they ’ ve learned . The three most impactful insights have come from the areas of personnel , real estate , and service experience .
Personnel : It doesn ’ t matter if the business has a couple of employees or a couple thousand , challenging environments will force extra attention to labor costs . Looking at U . S . Bureau of Labor Statistics ( BLS ) data for Q2 ’ 2020 versus Q3 ’ 2020 illustrates some interesting new realities for the labor markets . For example , BLS data shows that Hourly Compensation jumped at an annualized rate of 20.0 % in Q2 . Meanwhile , U . S . Q2 ’ 20 GDP plummeted at an annualized rate of – 31.4 %. This dichotomy reveals an uncomfortable truth about the labor market – higher wage earners who can work from home , did , while lower wage earners who cannot , didn ’ t . This is just the tip of a shifting labor market dynamic .
Many high wage earners are still not welcome back to corporate offices and are encouraged to remain remote . You can be assured that management teams are reviewing their payrolls and those personnel who are indispensable . In the 1980s and 90s , many businesses eliminated their highly compensated middle-management layer , as operating cash flows were redirected from human capital to technology . Being that we ’ re in the Fourth Industrial Revolution , we can be confident the same analysis is well under way today . Though this presents challenges to the labor market , it provides business owners with opportunities to further optimize operational efficiencies .
Real Estate : Given that the most recent crisis has forced isolation and work-fromhome adaptation with an increased reliance on technology for collaboration , business need for a status quo commercial real estate footprint too is under significant evaluation . Office space is routinely the second highest business expense after personnel for many professional service businesses . Management teams are determining how much continued flextime , part-time remote working , and permanent remote working could make sense for their culture . Families would love the greater flexibility ; businesses would enjoy major expense savings , as well as the accretion to profits .
As many continue to assess their future commercial real estate needs , others have already made the decision to allow team members to maintain their remote working situation indefinitely . Undoubtedly , the recent crisis serves as a pivotal catalyst event on the commercial real estate market to an underlying trend that had already been underway due to technological advancements and changing workplace needs .
Service Experience : Not only is the service sector the largest contributor to U . S . GDP , it supports more than 80 % of U . S . employment . Professional and business services , financial activities , and information industry sectors are more than 25 % of all services sector employment . For decades , sales presentations , client meetings , and doctor visits have been an in-person experience . The recent crisis has forced new behaviors and interaction protocols , which make meetings much more comfortable remotely . Reliable , multi-functional video conferencing technology , not too long ago , was an expensive operations item – where many companies built special purpose rooms . Now , this capability has been commoditized , as myriad platforms exist for any business to utilize it at very low cost with high ease of use .
Going forward meetings of all types will be readily accepted as remote . The occasional dinner or office visit to reinvigorate a personal dynamic within a business relationship will still be enjoyed , but not to the extent that it had been relied upon previously . Overall , this is an excellent marketplace advantage to those businesses with regional disadvantage but service product and experience superiority . Business travel and entertainment expense budgets , which have fully collapsed , will most likely never reach pre-pandemic levels . This too is a profit-expanding catalyst that business owners and customers can smile about .
Though there are many challenges ahead for businesses , creative and adaptive management teams will be able to implement new ways to improve their workforce and service experience . Doing so will improve financial results by reducing excess operational expenses and improve quality of life . Every crisis presents significant threat to the status quo , but it would be incorrect to assume that such threat automatically results in long-term negative impact . In fact , with an effective refreshed approach , many businesses will be able to serve new markets with new solutions at even greater profit .
66 BAY WINDOW