Why is it that corporations focus on cutting costs than improving productivity?

Question

I was just reading a book on economics the other day (don't ask me why, very bored) and came to a section on improving productivity in the workplace. One of the main points was to keep wages low and simply rely on the constant turn-over in minimum wage jobs to keep wages low. Some jobs have around 70% quitting rates after a year. I see this type of activity in many types of corporations (Wal-Mart and retail are the biggest that come to mind).

Instead of improving profits by keeping wages low, why not give workers a stake in a business and give them productivity bonuses. If a worker puts out more work than another, then they should be paid more. It seems to me this would light a fire under the other workers to work harder to try and catch up, leading to greater productivity. This could also point out those employees who are not being productive and simply doing the least amount of work for minimum wage.

Any opinions?

Answer 1

The bottom line is always the profit. If you don't make profit, the company does not survive, and everyone loses their job.

You can increase the profit margin by raising prices, but far too often that reduces sales, so the net profit can be less.

You can increase the profit margin by cutting costs, but far too often that reduces quality.

You can increase the profit margin by reducing wages (which are a cost also of course), but far too often that reduces productivity.

Somewhere in between, there is a happy compromise where a corporation thrives.

Answer 2

For some businesses this works very well and many do this.

Walmart and McDonald's as well as many more like them are not suited to this kind of system. Keeping costs down is the only way to keep the price of their product down so people will buy it.

Walmart and other places are a good place for the young to get a start an begin to learn what work means. Most move on to other jobs and after getting an education go to other jobs. There are those that are not capable of doing much more than beginner work and they are not as productive as others so are not apt to be paid a lot.

It takes many things to make a business succeed. Every cent needs to be accounted for.

Answer 3

Cost cutting is immediate. Improving productivity can take many months before the impact is seen on the bottom line.

Many companies do have profit-sharing plans, which is about the same as a productivity bonus. But, as some point in time, people can only work so fast. So, you have to do other things to boost total output per person (automate, implement a system like the Toyota Production System, outsource, etc.).

Answer 4

IT should be seen as a tool to meet business objectives. IT should not be looked at as a revenue generating stream. So ITs role is helping business meet its objective that results in revenue generation for the enterprise. In helping business achieving its goals IT has to employ the best and most cost efficient methods in providing answers to business problems.

Answer 5

Cutting costs by lowering wages and just raising prices is the quick and easy method. HEAVEN FORBID they do anything NICE that takes ANY amount of effort. Some WORDS are in CAPITAL LETTERS.

Answer 6

Because they think by doing one, you achieve the other.