SDWT STRATEGY MAKING PYRAMID
Model Four
SDWT SWOT ANALYSIS
Model Five
SDWT FINANCIAL CONSEQUENCES
The Self-Directed Team Strategy will change the financial condition of Kitty’s Maids. Increasing employee psychosocial rewards and benefits will start a snowball effect resulting in a 20% gross income increase with a larger market share of 36%.
SDWT FINANCIAL CONSEQUENCES (cont)
In addition, the cost of doing business (expenses) will decrease by about 5% because of the newly allocated transportation system. This is 5% less than suggested because of the still-existing wages payable ($131,600 x 5% = $6580). The decrease in workers’ compensation claims will not be apparent in the financials until the year following. Implementing a Self-Directed Work Team Strategy would increase profits by about 5 times and would result in $29,563 more in profits.
Kitty’s Maids
SDWT ~ Comparison Income Statement
Current Projected
Gross Income $141,000 $169,200
Expenses 131,600 125,020
Profit Before Income Taxes $ 9,400 44,180
Income Taxes – 15% 1,410 6,627
Net Profit $ 7,990 $ 37,553
Model Six
PEO
It could be advantageous for Kitty’s Maids to contract with a Professional Employer Organization (PEO). A PEO would allow her to delegate many of the accounting and human resource functions of her position and give her more time get involved with her staff. This again would allow for Kitty to focus more of her attention marketing strategy. It is also suggested that Kitty implement the allocated transportation costs system of billing customers $0.345 per mile. This would help to increase profitability.
A PEO could meet many of businesses needs including:
- Complete Payroll Functions:
- Federal and State Withholding Requirements
- Social Security, Unemployment, Workers’ Compensation
- Provide Employee Benefits:
- Medical, Dental, and Retirement
- Provide Human Resource Functions:
- Employee Safety Training
- Employee’s and Safety Manual
- Human Resource Guidance
- Regulatory Updates
PEO OUTSOURCING STRATEGY
Model Seven
PEO SWOT ANALYSIS
Model Eight
PEO FINANCIAL CONSEQUENCES
The PEO Strategy will financially benefit Kitty’s Maids. It will considerably lower the workers’ compensation premiums currently paid. With a PEO contract, Kitty’s Maids will be subject to a 7% premium. This is much lower than their current premium which is expected to rise to 29.1% in July. Even though the difference in worker’s comp premium will not be present for one year, I have
PEO FINANCIAL CONSEQUENCES (cont)
included it ($6,700 / 29.1% x 7% = $1612). This is a difference of $5088. In addition, the cost of doing business (expenses) will decrease by about 5% because of the newly allocated transportation system ($131,600 x 5% = $6580). This is 5% less than suggested because of the still-existing wages payable. The cost of the PEO contract is 5% of the payroll plus ($3125) a setup fee of $50 for each employee ($50 x 50 employees per year = $2500 + $3125 = $5625). This aspect could get expensive unless Kitty can reduce employee turnover. While Kitty’s increased presence amongst her staff may help to reduce employee turnover, it is hard to tell. Therefore, I am not suggesting any increase or decrease in employee turnover. This strategy increases net profit by $5,136.
Kitty’s Maids
PEO ~ Comparison Income Statement
Current Projected
Gross Income $141,000 $141,000
Expenses 131,600 125,557
Profit Before Income Taxes $ 9,400 15,443
Income Taxes – 15% 1,410 2,317
Net Profit $ 7,990 $ 13,126
Model Nine
PERSONAL CHEF SERVICES (PCS)
Introducing a Personal Chef Services Strategy could be beneficial to Kitty’s Maids. The personal chef industry is fairly new and has never been better. It could allow the company to meet the customers changing needs and wants by providing the following services:
- Personal Chef
- Grocery Shopping
- Kitchen Organization
- Catering
After the business has become well established, the company could focus on adding:
- Event Planning
- Cooking Classes
PERSONAL CHEF SERVICES (cont)
In a personal chef service, all food preparation is provided through the customer’s home to avoid licensing a personal kitchen to meet state health codes and FDA standards of a commercial kitchen. The personal chef meets with the client before the schedule cooking day and prepares a personalized menu. On the schedule cooking day, the personal chef picks up the groceries and is off to the customer’s home. Once the meals have been prepared, they are placed in the freezer and clean up begins. By providing personal chef services, Kitty’s Maids will be able to tap into several different target markets:
- Working Professionals
- Affluent Elders
- Busy Families
- Active Singles
- Single Parents
- New Parents
- Dieters
- Convalescents
- Out of Town Children with Elderly Parents
- College Students
- Event Planners
- People who want to buy time
PERSONAL CHEF SERVICES (cont)
Kitty’s can market the new personal chef service by:
- Pass out business cards to everyone.
- Place signs in the yard, on the cars, on community bulletin boards.
- Contact newspapers and volunteer to write a column for the food section.
- Design a web page.
- Send flyers to all doctors, lawyers, and accountants in town.
- Pass out flyers at area businesses.
- Provide free samples of cooking to area businesses and churches.
- Offer a discount on first purchase of personal chef services.
- Change message on Kitty’s Maids answering machine.
Approximately 10% of the households making a combined income of $60,000 or more will take advantage of a personal chef service according t the USPCA. The U.S. Census Bureau estimates that within a Yellowstone County, Montana there are approximately 9.5% (4.6% + 4.9% = 9.5%) of households earning $60,000 or more. According to the USPCA a full-time personal chef needs between 12-15 regular customers. They also said most clients become long-term customers. Using the information gained from the United States Personal Chef Association
PERSONAL CHEF SERVICES (cont)
and the United States Census Bureau, Yellowstone County, Montana could alone support 75 full-time personal chef business. With personal chefs a relatively new idea, Kitty’s maids could easily tap into the market providing personal chef services.
Yellow Stone County
118,000
x 9.5%
11,210 households
x 10%
1,121 people will buy service
1121 / 15 full-time customers = 74.73
OR
75 Full-time Personal Chefs
Model Ten
This strategy could decrease turnover. By making more profits with the Personal Chef Strategy, Kitty can pay higher wages to her employees. This could help turnover slow down.
PCS SWOT Analysis
Model Eleven
Kitty’s Maids can offer personal chef and kitchen organization services for $35 an hour, grocery shopping services for 10% of receipt, and catering services for an agreed upon amount (budget). The $35 will also cover the cost of storage containers and mileage. Customer groceries are extra.
PCS FINANCIAL CONSEQUENCES (cont)
It is expected that market share of her maid service division will increase by 10% because of the new PCS. This amounts to about $47,000 a year. Kitty will need to double her staff from 12 to 24 with half providing maid services and the other chef services. It is estimated that a Personal Chef service provided by 12 full-time employees will increase Gross Income by $920,600 (12 chefs x 2080 hours a year x $35 an hour = $873,600 + 47,000 = $920,600).
According to the USPCA the average startup costs for a Personal Chef business are $2,500 totaling $35,000. While this is a startup cost, it would be wise for Kitty’s Maids to set aside this money for unexpected happenings. The yearly workers’ compensation expenses will double ($13,500). With the PCS Strategy, Kitty’s Maids will need to acquire four times the amount of yellow hatchbacks ($9,600).
The USPCA estimates the yearly expenses of a one person personal chef operation to be $5,000. This includes purchases, grocery, office supplies, repairs, advertising, travel, and telephone expenses, as well as accounting and legal fees. For a twelve person operation the total estimated expenses would cost $60,000.
PCS FINANCIAL CONSEQUENCES (cont)
In order to increase employee satisfaction over wages, Kitty’s maids will increase payroll by four times to cover the cost of the pre-existing and new employees. The total payroll expense will increase to $250,000. This is the equivalent of paying employees $8 – 12 dollars an hour. This should help Kitty retain and hire better workers. If Kitty were to borrow the capital for her first year of PCS business she would need $305,600. Because starting a PCS business is flexible and can be started with as little as $10,000, I have not calculated borrowed capital into the following income statement. The PCS Strategy will increase profits by $642,600.
Kitty’s Maids
PCS ~ Comparison Income Statement
Current Projected
Gross Income $141,000 $1,061,600
Expenses 131,600 305,600
Profit Before Income Taxes $ 9,400 $ 756,000
Income Taxes – 15% 1,410 113,400
Net Profit $ 7,990 $ 642,600
Model Twelve
SOLUTION
According to the Weighted Average Ranking Worksheet that follows, the best strategy for Kitty’s Maids to implement is the Self-Directed Work Teams (SDWT). The criterion factors were selected from the most important company goals and weighted according to their importance. While the Self-Directed Work Team Strategy had the highest weighted score of 8.90, its score was very close to that of the Personal Chef Services Strategy.
WEIGHTED AVERAGE RANKING
Model Thirteen
JUSTIFICATION
What profitable business strategy will allow Kitty’s Maids to increase market share, gain a competitive advantage, reduce company expenses, and maintain quality employees? The answer to this question is to implement the Self-Directed Work Team Strategy. Kitty’s Maids needs to focus their attention on satisfying employees and the rest will follow.
By emphasizing participation between Kitty and her employees, Kitty’s maids will begin the transformation process of the business. The expected advantages of empowering employees are better performance, decreased costs, and higher morale. While these results are not guarantees, proper management of the Self-Directed Work Team strategy will increase there likelihood.
To produce an effective SDWT Strategy, Kitty’s Maids must focus on productivity, satisfaction, and future viability. All of these are interrelated and work together. If employees can get excited about what the future holds, productivity and satisfaction will increase.
IMPLEMENTATION
Strategic Vision and Mission
Kitty’s Maids will attempt to remain the top market share holder within the cleaning services industry by gaining a competitive advantage, reducing company expenses, and retain quality employees.
Strategic Objectives
Short-term:
- Communicate strategic vision and mission with staff.
- Empower employees to get involved with change.
- Suggest alternative employment options for nonconformitive employees.
- Train employees in managing work teams.
- Hand management of work teams over to employees.
- Provide guidance as needed.
- Improve employee productivity and satisfaction.
Long-term:
- Regain a competitive and productive staff.
- Increase competitive advantage.
- Maintain reputation for quality and customer service.
IMPLEMENTATION (cont)
Financial Objectives
Short-term:
- Increase market share by 6% and gross income by 20% in 2004.
- Maximize resources to provide benefits and training opportunities to staff.
Long-term:
- Decrease Workers’ Compensation Premiums to 10% within 3 years.
- Continue to increase gross income by 5% each year.
- Secure financial stability.
- Improve owner’s equity.
Overall Business Strategy
Kitty’s Maids will use the Self-Directed Work Team Strategy to achieve the following:
- Empower employees by providing them with the necessary resources and guidance to perform at maximum productivity while increasing overall job satisfaction.
- Continually increase market share and competitive advantage to push out competition and decrease likelihood of market saturation.
IMPLEMENTATION (cont)
- Improve Customer satisfaction by providing quality services and offering security and privacy.
Supporting Functional Strategies
Production:
Kitty’s Maids will continue to provide quality services to customers through top notch cleaning services. Employees will be regularly trained in standard safety procedures to maximize productivity.
Marketing/Sales:
Kitty’s Maids will continue to market the business through telephone solicitations, fliers, yellow pages, and advertisements. She will also continue to employ her best marketing resource of using her hatchbacks for advertisements. She will expand her marketing opportunities by advertising on city cabs, buses, and other forms of transportation.
Finance:
Kitty’s Maids expects to increase market share by 6% in 2004 and gross income by 5% every year. The business will also focus on ways of decreasing workers’ compensation premiums to 10% within 3 years. Kitty’s Maids will also focus on increasing the financial stability of the company and the owner’s equity.
IMPLEMENTATION (cont)
Human Resources:
Kitty’s Maids will empower employees to take over the human resource functions necessary to build good work teams. This will include the hiring, electing, and firing of employees. Kitty will oversee that regulations and overall company goals are being met.
Other Supporting Strategies
In its long-term plans, Kitty’s Maids should consider looking further into the Personal Chef Services Strategy. Once the Self-Directed Work Team Strategy has met all of its short-term goals, Kitty should reevaluate this as a viable option.
Recommended Action
Immediate:
- Communicate strategic vision and mission with staff.
- Empower employees to get involved with change.
- Suggest alternative employment options for nonconformitive employees.
- Train employees in managing work teams.
- Hand management of work teams over to employees.
IMPLEMENTATION (cont)
- Provide guidance as needed.
- Improve employee productivity and satisfaction.
Long-Range:
- Reconsider Implementing Personal Chef Services Strategy
- Regain a competitive and productive staff.
- Increase competitive advantage.
- Maintain reputation for quality and customer service.
Kitty’s Mai s Bobbie Coster ~Page
