Is employee motivation a dying concept? It shouldn't be.

I was reading the business section in the Sunday paper recently and juxtaposed in the center spread were two articles. One discussed Circuit City’s money-saving layoff of several highly paid workers. The other was a self-improvement article that suggested etiquette and gumption were the secret to job security. I wondered how many of those just-unemployed workers read the same page and saw the irony.

My reaction as a consumer is that I probably won’t shop Circuit City. Part of the rationale is driven by my distaste for that management strategy, but part of it is driven by the fact that I don’t like shopping in places with poorly trained salespeople. This move ensures that the best and brightest workers will likely move elsewhere. Savvy shoppers are likely to do the same, since competitors tend to carry the same inventory and price match.

Circuit City projects this move will save $100 million a year. The question is: What will it cost in lost sales and lowered productivity due to employee learning curves, errors and increased shrinkage? A combination of disgruntled, experienced employees and many new employees is a formula for poor productivity.

Like Circuit City, EMS is a service business. Business costs are increasing and further productivity improvements are limited. People are the key differentiator in EMS and in a world of razor-thin margins may be integral in continued profitability. Some of the lowest paid employees have the potential to make large contributions to revenue and profitability. A shipping clerk can make the difference between good end-of-month numbers or a revenue shortfall simply by the ability to ensure that all available product ships on the last day of the month. Production operators are often first to see incoming material issues or a design-related production defect. Many salaried EMS employees work significant overtime on a regular basis without much comp time, because time off in their position ultimately translates to even more workload backlog.

At the same time, domestic EMS operations must compete with facilities in lower-cost regions of the world. In addition to lower employee compensation costs, many of these foreign operations benefit from multi-year tax holidays, currency manipulation, state-run health care, fewer environmental regulations and lower facility operating costs. And, while popular regions such as China have started to see some costs increase, U.S. costs aren’t static. Fuel, transportation and raw materials continue to rise. Health insurance costs are increasing exponentially. At Starbucks, health insurance premiums exceed coffee bean expenses, and at least one Big Three automaker pays more for health insurance than steel.

Talk about challenges. In the face of these challenges, how can domestic EMS providers cut costs, yet still motivate critical employees? First, talk with employees about challenges and successes. In the late ’80s and early ’90s, high performance teams were in vogue at many EMS companies. Many EMS companies had strong employee communications activities, including newsletters and regular meetings with senior management. At a department or team level, there was strong focus on continuous improvement and meeting specific objectives. Over the past decade, the M&A frenzy and cost-cutting measures have either reduced or eliminated resources provided to these programs in many companies. CEOs whose focus is building a sustainable business continue to see value in these efforts, but in other cases, these programs have been reduced to slogans on the wall.

The reality is that straight talk with employees is the best way to cut costs long-term. While the average production operator may not be able to read a P&L statement or balance sheet, they can relate to the concepts of budgets, costs and cash flow. Explaining how specific job duties translate to improved company results can turn average workers into focused high performers. Explaining competitive pressures may generate ideas for process improvement or greater shared team focus.

Disenfranchised workers can also be addressed. Most manufacturing employees expect health insurance to be a company-provided benefit. They often assume company healthcare cost-sharing initiatives are simply a company’s attempt to cut benefits. Even at management levels, the skyrocketing cost of health insurance premiums is still not widely understood. There is value in explaining the cost of the benefits that make up an employee’s total compensation. When employees understand the cost of the hidden portion of their paychecks, they may be willing to work to minimize avoidable costs or choose a higher deductible in exchange for an increase in pay or other benefits. Wellness programs are also helpful in educating employees on ways they can change their lifestyle and reduce overall healthcare costs.

Discussing the overall health of the business can help with retention. As in the late ’90s, the market for skilled employees is heating up. Recruiters are active and good employees have many options. Informed employees may see value in staying in place at a healthy, growing company. Conversely, employees who feel they aren’t well informed about their employer’s financial condition and business prospects may see little risk in moving to a new company.

Good employee communication doesn’t require a huge investment, particularly not with current technology. Company newsletters can be distributed via email or viewed as video content on company intranet kiosks. Podcasts and blogs offer other options for focused communications. Some CEOs have a monthly open-door session with rotating groups of employees or schedule a series of company-wide meetings once or twice a year. The key in any of these options is tailoring the message to effectively communicate with the frame of reference of various employee groups. Variations in perceptions may be generational as well as driven by education, gender or job focus.

Set expectations and reward performance. Employee motivation isn’t simply about praising employees. In fact, poorly run employee motivation programs are often de-motivators. Good employees know who is working hard and who is simply taking up space. They value performance measurement systems that set aggressive, clearly stated goals and reward achievement of those goals. But, they also value a fair system that cuts rewards when goals aren’t achieved. Systems in which expectations aren’t clearly defined, or when there appears to be no relationship between bonuses and performance, are demoralizers to high performers. This is particularly true in relation to executive compensation, which in many non-EMS companies has become completely divorced from operational performance.

Some EMS companies offer skills-based pay to production operators. This has three benefits: First, employees who are certified to perform multiple tasks represent a flexible workforce that can be shifted as demand varies. This can reduce fixed labor cost and improve responsiveness. Second, tying pay to increased skills helps minimize the number of low-skilled, long-term employees, yet at the top of their pay category based on tenure alone. Finally, technological investments change the way employees do their jobs and ultimately make certain jobs unnecessary. An environment of continuous learning makes it easier to transition employees whose jobs become superfluous to alternate career paths.

There is no question that domestic EMS companies face greater challenges than ever before. On the positive side, turnover in popular markets is increasing and long-distance outsourcing transportation costs are going up. Businesses with a team of employees focused on high service, responsiveness and cost control will continue to have a competitive edge. Employees who feel they understand the business’ challenges and strategy will be more likely to support cost-cutting measures than those who feel they are in the dark.

Susan Mucha is president of Powell-Mucha Consulting Inc. (powell-muchaconsulting.com), a consulting firm focused on optimizing EMS account acquisition processes, and developer of the EMS Integrated Marketing™ and EMS Concentric Selling™ training programs; smucha@powell-muchaconsulting.com.