Situation: A company is in the skilled trades. When there is an injury at work, Workers Compensation does not cover the employee if they were using drugs or alcohol at the time of the injury. Should you conduct random drug tests at work? How do you make employees aware of company policy on random drug tests?
Advice from the CEOs:
Laws governing Workers Compensation vary by state. Be sure to get the latest update on regulations from your State.
The best policy is preventative. Always test for drugs and alcohol prior to hiring. Let potential employees know that this testing is a requirement of employment, and that a positive test disqualifies the candidate. A candidate has the option to disqualify him or herself rather than be tested.
The use of medical marijuana with a doctor’s prescription does not preclude a candidate or employee from failing a drug test. State laws regarding medical marijuana are evolving, so monitor state regulations.
In your employee policy, specify that you can test for drug use at any time, at your discretion. Additionally, state that you have the option to perform a drug test in case of an injury. If there is an injury on the job, have the treating physician perform a drug test on the injured employee.
Assure that you are consistent in treatment of employees and in how you apply your policy.
There should always be a reason for a drug test – tie it to employee safety.
As you institute a new policy, let all employees know about the policy. Prominently post the policy at your place of work, and remind employees about the policy at appropriate company or employee meetings.
Situation: A company lost money last year, but turned the corner with a profitable final quarter. One of the company’s divisions continues to lose money, though the losses are small compared to the total picture. The CEO is considering cutting this business. What factors should the CEO consider in making this decision?
Advice from the CEOs:
What expense factors contributed to the loss?
The biggest factor was allocation of vehicle and space expense. This division has seasonal revenue but carries the allocated expenses for the full year.
Make sure that your allocated expenses are fair to the business. Do overhead allocations reflect utilization? Unless closing the business eliminates vehicles or space, if you terminate this business these expenses will be borne by the rest of the company.
Study your allocations by shifting the allocation made to this business to other businesses. What is the impact on their profitability?
If you find that the current allocation does not reflect utilization and adjust accordingly, does the business still lose money?
If this division covers its direct expenses along with most of its allocated expenses, a small loss in this division may be preferable to a reduction in profitability of other businesses from closing the division.
How strategic is this division to the overall business mix?
Is this business essential to your product/service mix or just a customer convenience? If you terminated the business will customers be upset?
Do competitors offer this service, and would you be disadvantaged by discontinuing it?
What are the alternatives?
Can you raise prices to increase profitability and refuse business that does not meet this pricing?
Can you restrict the offering to less price sensitive customers?
Can you refer customers to other vendors or sub out this business?
Can you reduce the scope of the offering while adjusting pricing to enhance profitability?
Can you source other labor alternatives to reduce cost?