Currently, Garden Crafts has only two active personnel. Rob Kane and Keith Jones, co-founders of this company, will evenly split the labor duties as employees. The corporation will also pay a portion of net profits to the two founders as dividends. The remaining profits will be placed into an aggressive-growth mutual fund as a form of retained earnings.
The labor will be paid on a piece-rate method, rather than hourly. This will allow greater control in maintaining costs and efficiency by associating labor directly with product cost, rather than overhead. The only employees planned for at this time are the two founders, who will evenly split the work for a rate of $2.50 per piece produced.
Keith Jones: President. Owned and managed a cabinet shop for six years. Has been involved with several start-up businesses.
Skills brought to this venture are: knowledge of shop functions and woodworking skills, experience with start-up planning, and the idea for the Sit N' Caddy.
Rob Kane: Vice-President. Twenty-plus years in television news, B.S. in chemistry and business administration.
Knowledge that benefits the business: Experience in dealing with large corporations, previous participation in limited partnerships, strong financial background.
Currently, only one team member is familiar with the construction of the Sit N' Caddy, while the other team member controls the finances. A strengths/weakness analysis indicates that cross-training should take place at the earliest time possible. Until both members of management are familiar with all functions within the company, the potential for a loss of operations will exist should one member become incapacitated.
Once the company has progressed far enough to warrant the inclusion of hired help, the management team will also need to ensure proper communication exists between labor and management.
Of the $10 cost per unit, it was determined that labor would account for $5 per unit. Rather than pay on an hourly rate, it was decided that piece-rate would be best option for future employees. The corporation will also pay a portion of net profits to the two founders as dividends. The remaining profits will be placed into an aggressive-growth mutual fund as a form of retained earnings.
Currently, all labor will be done handled by the two founders, Rob Kane and Keith Jones. The piece-rate of $5 will be split evenly between the two until such time as another employee becomes necessary. Any additional employees will be added only when the cost per unit will not be significantly increased. This can occur either by increased efficiency, higher sales growth rates, or by replacing one or both of the founders.
The personnel table shows the projected labor costs for the next three years, based on the piece-rate method at $2.50 per piece.