Human Resources Entries
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3.7 TQM/Sustainability
The TQM (Total Quality Management)/Sustainability Module allows companies to invest in several initiatives. Different initiatives return different benefi ts. For example, some initiatives will reduce labor and material costs, others will reduce R&D cycle time (allowing you to re-engineer products faster), and others will increase product appeal or decrease administration costs. You don’t have to invest in all initiatives.
Differentiators might want to reduce R&D cycle times, to ensure their products are newer and better positioned. Cost leaders might want to reduce material and labor costs, allowing them to reduce prices while maintaining their margins.
The return on investment follows an S-curve (Figure 3.2). If you spend too little or too much the returns on your investment are poor. If you spend less than $500,000 in any initiative in a single round chances are you will see little return. An investment of $1,500,000 in a single round produces a cost-effective impact, investments over $1,500,000 become dollar for dollar less effective. Finally, for each initiative, an investment over $2,000,000 in a single round produces absolutely no additional benefi t.
For each impact, complementary initiatives combine together to increase the total effect. You should bundle your investments in multiple initiatives that have an impact important to your company’s strategy. By spreading your investment among complementary initiatives you can invest more in each impact than the limit of $2,000,000 for an individual initiative. For example, to reduce material costs, companies should consider investing in both CPI Systems and GEMI TQEM Sustainability.
Aggressive spending in each initiative would involve spending $1,500,000 in year 1, $1,500,000 in year 2, and $1,000,000 in year 3.
The Best Case/Worst case table gives an indication of the return on investment. The impact is cumulative so cost reductions will continue in future years.
Refer to the fl ags on the TQM/Sustainability spreadsheet for a thorough discussion of TQM/Sustainability entries.
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and HR Admin costs. The effect of investing in recruitment is cumulative. You can spend up to $5,000 per person to hire better talent. The amount is added to the automatic recruitment charge of $1,000 for every new employee.