The majority of business owners around the country probably worry about spending too much on their labor costs, and for good reason. Service-based businesses might be spending upwards of 50 percent of their total business costs on employees, which might seem like a lot. For other types of businesses, keeping labor costs between 15 and 30 percent is generally considered to be a healthy margin.
Though spending too much on labor costs can certainly cut into your company's profit margins, being short-staffed or understaffed might be an even worse scenario.
According to a recent Gallup poll, four out of every ten workers in America believe that their company is understaffed, while relatively few believe that overstaffing is a problem their company faces.
Below, we take an in-depth look at some of the negative effects of understaffing, the primary causes of understaffing, and then recommend a few ideas for how businesses can overcome the effects of being short-staffed.
The Negative Effects of Understaffing
Keeping your labor costs within a reasonable margin is often seen as a strategy to maintain your company's liquidity and profit margins healthy. However, severe understaffing can actually lead to a number of serious side effects that can put your company into financial stress.
A recent press release published by PR Web summarizes the problem perfectly:
“Inadequate staffing is a principal contributor to job-related stress, which is, in turn, a principal factor in turnover. Employees in understaffed organizations can lack a sense of control over their rapidly increasing workload. This hectic environment can lead to poor work performance and can be detrimental to the organization as a whole.”
Simply put, overworked employees will tend to suffer from high levels of stress. One recent study found that over 50 percent of workers are not engaged at work as a result of stress, leading to a loss of productivity. When your workers feel like they have a never-ending list of tasks or deadlines that are perennially bearing down on them, stress levels will obviously rise. On the other hand, workplace environments where workers feel that they are part of a team that equally delegates tasks are generally much more productive and happy.
Another negative effect of being short-staffed is employee turnover. According to a recent analysis, “every time a business replaces a salaried employee, it costs 6 to 9 months' salary, on average. For a manager making $60,000 a year, that's $30,000 to $45,000 in recruiting and training expenses.” By ensuring that your business is properly staffed, you can lower the risk of employee turnover. This will allow your business to not only avoid the costs of turnover, but also develop long-standing relationships with your best employees.
Lastly, chronically understaffed companies can also lead to higher incidences of workplace accidents. As individual workers in an understaffed facility put in extra hours, over-tiredness, high stress levels, and physical exhaustion will likely set in. Tired and distracted employees not only are less productive, but also more prone to workplace injuries that can drive up your workers compensation costs.
Causes of Understaffing
There are many different reasons why businesses suffer from severe understaffing. In some cases, managers or business owners may be trying to drive up their profit margins through sparing on their labor costs. In other cases, however, understaffing may occur simply because small business owners or HR managers do not have a firm understanding on how to best delegate tasks.
In many cases, the cost of an extra employee or two might be quickly offset by productivity gains that drive up profit margins. Furthermore, many companies do not fully understand the importance of implementing programs and policies that actively seek to protect the physical and mental health and wellbeing of their workforce.
Optimize Your Staffing With Work-Fit
Work-Fit is a leading company that offers onsite injury prevention and management for your workforce. We have years of experience in adapting sports medicine techniques in the workplace to keep workers healthy and happy in order to increase your company's bottom line.
Our wellness management program offers a number of tools that your company can utilize to reduce employee stress levels in order to maximize productivity levels and keep employees happy.
If you’re interested in finding the right balance of staffing for your company while simultaneously taking proactive steps to improve the health and wellness of your employees, contact Work-Fit today to learn about how we can help your team.