Improving Labor Productivity in Mexico

Increasingly, companies are turning to offshore outsourcing as a strategic approach to streamline operations and reduce costs. Offshore outsourcing involves delegating non-core business functions to specialized service providers located in offshore destinations, such as Mexico. 

By outsourcing tasks like customer support, IT services, and back-office operations to offshore partners, companies can leverage cost savings, access specialized expertise, and free up internal resources to focus on core business activities. In Mexico, offshore outsourcing has become particularly attractive due to its proximity to the United States, cultural affinity, and skilled workforce. 

Moreover, the country offers a favorable business environment, supported by government incentives and investment promotion programs, making it an ideal destination for companies looking to optimize their operations through offshore outsourcing. Consider the following six tips for maximizing labor productivity in Mexico:

1. Set clear goals

There is ample research to indicate that clear goal-setting drives higher levels of productivity. This is important both at the corporate level and on the manufacturing floor, where your labor force is actively driving company goals forward. Yet, the average employee only spends 40% of their time on tasks directly related to company goals, often resulting from poor communication of corporate goals to employees.  

This communication should begin on Day One for new employees. Take time to discuss the role they play in the bigger picture, how they can help the company achieve its goals, and how this impacts them. Providing regular direction and feedback will further ensure that workers meet manufacturing standards and contribute to workplace success. Regular internal communication through company bulletins or announcements can also help employees feel that they are part of achieving the company's goals. 

2. Take care of your Mexico workforce 

From incentives for productivity gains to gamification strategies designed to reengage your workforce, manufacturers have adopted a wide range of strategies for boosting workplace morale. That's because of the wealth of evidence indicating the clear connection between worker engagement and performance. 

In some ways, however, your strategy may not need to be as complicated as bringing gamification to the factory floor in Mexico. Ensuring that employees know what they need to do to succeed is a big step for establishing workplace morale. Managers who know their employees and ask questions about their family and personal life can help engage workers in corporate goals. 

Offering a competitive wage is also directly related to manufacturing productivity. One 2021 study exploring pressures of poverty on worker productivity identified an average 6.2% jump in productivity when workers were paid part way through a job instead of when the job was complete. This cash infusion also reduced error rates for the remainder of their contract. "This strongly suggests that attention plays an important role — that people are able to focus on their work instead of thinking about school fees, health care, and so on," said Frank Schilbach, lead researcher on the study. While most manufacturers in Mexico will find that a competitive wage is already critical to retaining the most skilled workers in a manufacturing-intensive region, this study goes to show that strong compensation and benefits that care for the whole worker are drivers of productivity.

This is one more reason to see the recent minimum wage increases in Mexico as a boon to manufacturers. The U.S.-Mexico-Canada trade agreement ratified in 2020 pushed for an increase in the minimum wage. Even then, an analysis of USMCA published by the U.S. International Trade Commission (ITC) indicated that higher wages are more likely contribute to higher manufacturing productivity and, consequently, larger sales volumes for manufacturers.

3. Train regularly

Regular training is essential for boosting productivity. Ongoing training on existing skills increases productivity by preventing small, basic mistakes and stopping bad practices before they become habit. It eliminates any confusion around expectations. It helps your Mexico workforce grow increasingly stronger in the skills needed to boost overall manufacturing productivity and reduces micromanagement so that managers can better utilize their time with other tasks. 

Thorough employee training should focus on more than necessary technical skills. It should also prioritize time management skills and company goals. Helping factory workers understand what is most important to accomplish and how much time to attribute to each task can further your low-cost manufacturing strategy. 

Fortunately, manufacturers in Mexico have a wide range of training options available to help workers achieve an expected level of manufacturing quality. For specialized needs, many employers opt to share resources to develop customized technical training. CEFTA is one such example. The Advanced Technology Training Center in Tetakawi's Roca Fuerte Manufacturing Community in Guaymas, Sonora, supplies manufacturers with a Mexico workforce trained to solve their unique challenges. 

4. Explore technology solutions

Today, manufacturing productivity growth depends in no small measure on adoption of technology-based solutions. Companies that invest in smart factory technology can expect an average increase in manufacturing output and labor productivity between 10% to 12%, according to one survey from Deloitte and the Manufacturers Alliance for Productivity and Innovation. The report further noted that as these technology solutions free up labor, those workers are often redeployed in other areas where they can drive growth—yet another reason to have company-specific training opportunities available. 

Manufacturing in particular is an increasingly technology-driven field, and Mexico's factories are keeping pace with technology adoption. Mexico is home to a number of smart factories that are working to boost productivity across a range of manufacturing industries. As adoption of these innovative workplace solutions grows, so too does worker familiarity with operating in an environment where laborers work collaboratively with robotics and other technology. 

5. Reevaluate processes regularly

Poor workflow is one of the major obstacles to improving labor productivity. As workers come and go, product lines change, and technology evolves, processes need to be reevaluated to identify areas for improvement. Programs like Lean, Six Sigma and other continuous improvement approaches can help provide a framework for driving workflow-based increases in productivity. 

One key part of this ongoing evaluation often overlooked is engaging your workforce to get their input on how to improve productivity. Talk to factory managers to get their perspective on what processes work, what bothers them, or what gets in the way of doing the job better. Sometimes the simplest solutions can drive big productivity improvements, but this often begins with a conversation. 

6. Hire the right fit

One of the most critical strategies for high labor productivity is ensuring that your hires are a good fit for your corporate culture. Frequent turnover is detrimental to productivity, as onboarding a new hire takes time. 

Many manufacturers coming to Mexico can find it challenging to know where to look to hire skilled laborers or create a competitive benefits package that will encourage employee loyalty. This is an area where Tetakawi can help. We have decades of experience in helping manufacturers to recruit and manage a workforce in Mexico for maximum productivity. This experience has provided us insight into local expectations around compensation and benefits, and regional turnover averages. 

To begin to build your productive labor force in Mexico, access one of our locale-specific Labor Market Reports or contact Tetakawi today.