Cannell Ltd - Case Study Example

There is very little likelihood of profitability increasing in the near future, so either labour costs or materials costs will have to be cut back. Materials can be very hard to get at low prices, so Cannell would likely have to remain with its current suppliers. One area where Cannell could cut back is with its labour costs. But, to reduce its workforce could cause profitability to fall even further. The only way to decrease the percentage of labour costs is to increase labour productivity. This could be done in a number of different ways.

One of the most common is by offering bonuses to employees who reach a certain level of output. This, in turn, encourages workers to increase their output so they can receive the benefits that Connell offers. Also, the company would benefit because input would remain the same but output would grow. If this occurred, then the company could possibly increase its profitability by reducing its prices and offering large sales. Once Connell Ltd’s profitability is high enough, the Connell Ltd can try to increase its output further by purchasing new machinery.

One positive to this would be that labour costs would decrease compared to the total costs. However, if Connell Ltd is to increase labour productivity, then it will need to reduce its labour turnover of 11.4 percent. The problem with high labour turnover is that is takes new employees a while to get up to speed, and this reduces labour productivity. As long as the company is offering competitive wages and also providing employee benefits, then there is no reason to believe that this high labour turnover figure will remain high for too long. (b) The employees of any workforce are a large reason behind the success of a company.

The case of Connell Ltd is no different—the manufacture of soaps, shampoos and other complimentary toiletries is a labour-intensive process. It is for this reason that the role of the employees is a huge determining factor in the success or failure of the company. I agree with the managing director in that the company should double its spending on training. A well-trained workforce can increase labour productivity and also produce goods at a faster rate. Because employees of Cannell Ltd work in teams, the collaboration among workers helps to either increase or decrease labour productivity.

Training can take on many different meanings. Training about how to get along with fellow co-workers is perhaps just as important as learning new skills to perform a job. Increasing human capital can help Connell Ltd to match its larger competitors. Also, by training workers, they are more likely to enjoy their working environment because they will feel as though they are qualified to be employed by the company. One thing that Connell Ltd would have to watch out for is employees moving to a rival competitor after they have been trained by the company.

Connell Ltd can help avoid this situation by (1) offering wages above the industry average; (2) Rewarding long-term employees through promotions and bonuses; and (3) only giving training appropriate to an employee’s stature in the business. As long as training costs do not get out of hand, then there is no reason why the company should