Medical Device Link.

ERP Systems Cue Employee Retention

With the cost of recruiting and training new employees at an all-time high, the best bet for medical technology manufacturers is to implement an effective ERP system—starting now.

Thomas R. Cutler

In medical technology manufacturing, the cost of recruiting and training a senior executive is in excess of $50,000. Retaining these employees in a tight job market is critical. One effective strategy for attracting and retaining quality employees in medical technology manufacturing is the adoption of enterprise resource planning (ERP) systems. In a comprehensive study of 369 executive-level medical technology manufacturers, more than two-thirds (68%) said that the use of an effective ERP software program results in improved job satisfaction ratings and increased employee retention (see Figure 1).

Figure 1. Importance of ERP manufacturing software to job retention among medical technology executives.

The survey, completed in late October 2000 by TR Cutler Inc. (Ft. Lauderdale, FL), revealed statistically significant results by job function within the medical technology industry. Manufacturing operations and quality assurance executives responded most favorably regarding the impact of working with an integrated ERP system, which is no surprise since these employees have job functions and duties that benefit most directly from this type of automation (see Figure 2). Accounting and administrative job functions followed in significance, with human resources reporting the least impact.

Figure 2. Projected likelihood of medical product manufacturing personnel staying in a company without ERP software, by job function.

A Key to Employee Retention

There are more than 500 ERP software programs sold worldwide. Pricing for this software ranges from $1500 to more than $1 million, depending on size, type of user, complexity, and a myriad of other variables. Many ERP software packages are designed for a particular industry or geared to a specific project.

Despite the variety of systems available, leaders of medtech companies can find it challenging to identify vendors suited to meet the needs of medical product manufacturing. More than 50 ERP software firms have either been acquired or have gone out of business recently. Several smaller ERP software firms with less than a dozen installations are struggling to become known and to capture a piece of the market.

Instead of ranking the hundreds of ERP programs available, isolating the specific functionality that a manufacturer requires can shorten the selection task. Basic guidelines to consider include a large installed base, national recognition, widely available training programs, and support from a vendor with a credible track record.

Engineered to Order

Medical manufacturing engineers realize they need an intuitive, easy-to-use computer-aided design (CAD) and ERP system to streamline the design cycle for new and revised products. As one survey respondent with a senior mechanical engineering title describes it, "We were getting more and more frustrated with the CAD software we were using. We needed a solution that allowed us to function in a unified environment and to better visualize what we were trying to accomplish—and we needed to have it integrated with the rest of the plant's operations."

Jim French, a vice president of operations for a major medical device manufacturer, explains, "The software we were using expected the operators to jump through hoops and be aware of so many things that focusing on the job became secondary to managing the software."

Specifically, engineers need to reduce prototype costs and tooling modifications—both of which save time and money—by gaining a better, more-detailed on-screen understanding of components and assemblies. This type of direct cost-benefit and employee satisfaction is often gained by engineered-to-order ERP software systems.

Since many medical technology manufacturers produce engineered-to-order and project-based products, this important criteria begins to narrow the field of ERP programs ideally suited to their needs. Most ERP software programs provide some level of integration to CAD, accounting, and project management programs. Implementation of an ERP system therefore provides a direct impact on employee productivity and efficiency. This causal relationship results in improved employee satisfaction and retention.

The reason that engineers are so negatively affected by the lack of an ERP system is because they are forced to do double duty when it comes to data entry. Engineers hired to provide product design, improvement, and ingenuity often do so by using CAD systems. Without an ERP software system, much of the information must be reentered manually, thus decreasing productivity, job satisfaction, and employee retention (see Figures 3 and 4).

Figure 3. Projected likelihood of medical product manufacturing personnel remaining in a company with ERP software, by job function.

Figure 4. Retention most improved with ERP manufacturing software, by job function.

The specific requirements of each medical technology manufacturer will dictate the best choice of an ERP program. According to Roger Meloy, an executive with the ERP firm Encompix (Cincinnati), "manufacturers offering custom-designed products require systems with greater flexibility in transaction processing, reporting, and implementation procedures." Encompix ERP software determines the critical path for the work processes of medical technology manufacturers with the following features.

• Two-way CAD link.
• Sophisticated finite scheduling.
• True job-costing.
• Lot and serial-number tracking.
• Two-way Microsoft Project link.
• Project management.
• Field service and installation management.

The Direct Approach

There are many ERP programs that lack a fully integrated suite of programs. A program missing any of the features that the manufacturer considers essential will only add to the frustration of the company's manufacturing staff. The ability to provide integrated and comprehensive estimates is particularly important. With tightening profit margins already an industry-wide phenomenon, accuracy in cost estimation is vital. Similarly, the ability to provide actual job-costing and advanced scheduling are crucial features to an ERP system.

While not thought of as a "shop floor," medical technology manufacturers require shop-floor data collection to ensure timeliness of product assembly and shipping. The issuance of lot or serial-number traceability is of particular relevance in the medical manufacturing industry.

Simple accounting functions integrated within the ERP system can also provide huge time and cost savings. Payroll, progress billing, integrated financials, inventory control, bill of materials, sales order entry, and purchasing all establish a degree of efficiency when they are part of an ERP program. Data entry becomes a nightmare if even one of these features is missing.

Microsoft Project interface, executive reporting, CAD interface, and project management features are also important, ensuring that the system provides support to all medical technology manufacturing staff.

The characteristics of medical technology manufacturers include design and development services performed to contract specifications, long lead times, and the need for progress billing. Often, there is also a need to collect actual costs for a project, make complex products, and design and build a unique product according to customer specifications.

Other common threads among medical technology manufacturers include the need to estimate and quote in order to win business, the need to install products at the customer's site, and the need for a significant spare parts business. There is also a need to track warranty and provide postmarketing services, a heavy engineering content, and a need to track customer revisions.

Business issues facing medical technology manufacturers include the need to manage all aspects of complex projects, including ensuring that delivery is made on time and within budget constraints. ERP systems must have the ability to pinpoint project problems—for instance, when a project is exceeding estimates of time or cost—and to do so early on. These features improve cash-flow management and confidence in estimates, and enhance an e-business strategy. The results are shorter cycle times and the knowledge of which projects are profitable.

Technological innovation is imperative for sustainable growth and competitive advantage in the medical technology industry. The attention to a workplace environment that supports the development of a technology strategy, the selection of management systems to foster innovation, and the aggressive search for alternative technology routes to ensure satisfied and excited employees are all key factors in long-term employee retention.

Employee Motivation Issues

Enthusiasm is contagious. When senior management is enthusiastic about the technical advancements of an integrated ERP system, their staff will often respond similarly. With ERP software, an employee's tasks can be configured to support his or her own motivations of productivity, efficiency, professional accomplishment, and respect.

Aligning the goals of the organization with the goals of the employees creates an opportunity to maximize the implementation of technology. If the results of the employees' work do not contribute to the goals of the organization, then the organization is not any better off than if its employees were sitting on their hands. Identifying the goals for the organization is usually accomplished during strategic planning. Whatever steps are taken to support employee motivation, ensuring that employees have strong input is a key factor.

A national survey commissioned by SuccessWorks (Laguna Hills, CA) suggests that medical technology manufacturing companies could retain more IT and engineering employees if they offered professional development programs that employees claim are important but unavailable.

"The professional development needs of medical technology manufacturers are going unmet," says Suzan Fiskin, senior consultant and director of SuccessWorks. According to the survey, the problem is widespread, affecting both directors and nonmanagers. Companies must invest in their IT employees and do more to help advance their careers within the company—which costs less and yields a higher return on investment than hiring and training new workers.

An overwhelming majority of respondents said that receiving feedback, having individual development plans, and having access to skills training would make them less likely to leave their company. But only a small fraction of respondents said that their company offers these programs. Interesting and challenging work topped the list of retention issues, with 87.9% of respondents giving it a high rating. Salary followed with 64.3%.

Using the science of human behavior to help individuals, groups, and organizations operate at their very best must include identification of repetitive functions. People are at their best when they are living their mission and constantly growing. However, along with natural abilities, people also have different emotional styles and issues that affect their lives and their performance in the workplace.

With recruiting and training becoming more and more costly, it doesn't take a mathematician to determine the efficacy of implementing an ERP system. Since this type of automation offers a useful key to employee motivation and retention, many medical technology manufacturers are expected to implement such systems. If this is combined with personal coaching and development, their employee retention efforts will be maximized.

Thomas R. Cutler is president and CEO of TR Cutler Inc. (Ft. Lauderdale, FL), a manufacturing marketing firm.

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