Rol commented
>It is interesting that the major reason given for down-sizing is the
>amount of overhead in American companies compared to their international
>competition -- 27% of costs in the US, 22% in Germany, and 18% in Japan.
and Marion replied that his experience in Japan was that many service
industries seemed overstaffed, compared to US examples. Also, how low the
number of paid non-work days are in America when compared with any other
industrialized country.
He asked what he is failing to take into account?
This kind of thread can get into the classic oranges vs apples routine and
it really needs a clear definition of overhead.
In many manufacturing organizations they count employees as direct labor
(hands on in the processes) and indirect labor -- often calculating a
ratio. Indirect labor, such as managers and service departments are often
seen as overhead. The paradox of that model is that a process that is more
efficient because it uses less labor, will have a higher overhead ratio.
In Marion's Japanese examples, many of the folks he observed would be in
direct roles in their service industry and not necessarily seen as
overhead. One of the reasons Japan has less unemployment is because the
culture has a tradition of high labor utilization. As all companies do it,
a competitive comparison does not raise it as an issue. It is one of the
reasons that US companies like Toys R'us are now doing well there, as they
brought in different distribution and labor cost models.
On the European front, most countries have much higher costs related to
providing the mandated benefits. In the US, a company will add 18-25% to
every payroll dollar to cover the provision of benefits. In some European
countries it gets upto 40% and it is one of the issues driving the current
Frebch labor strike. Again, these #s may not necessarily be seen as
overhead, depending on your financial model.
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