Discussion - 3.2 - Understanding the Problem

The problem from the companies point of view is that revenue is declining whereas total costs and salaries are increasing. This therefore means that the company is loosing money. The problem from Neil's point of view is that his position may be under threat as the salaries level is increasing at a greater rate than the revenue of the company. This could cause the company to cut jobs meaning Neil's job may be at risk. From the data provided, Jill's reading of the situation is correct as salaries appears to be the highest increasing amount in the graph. However, there could be other variable effecting the total cost such as increases in other areas which may also account for the rise in total cost. Jill's proposed plan may well be successfull if the salaries is the main cause of the total cost rising over the revenue. Jill's plan to reduce the amount of staff will cause unemployment and could also make the company perform less effectivly as you are getting rid of experienced staff who can work the machines to a good standard. Other causes of action which could be taken are a pay cut in staff which would reduce the amount on salaries, or being more energy efficient which will reduce the electrics bill causing the total cost to fall. However, the likley causes of these effects are that people may leave the job anyway if there is a pay cut to find a place which may pay more elsewhere.