Labor costs are one of the biggest line items on any company’s balance sheet. When a business is looking to increase their profitability, reducing the number of employees that are currently on the organization’s payroll is often one of the first options a company examines.
While right-sizing your staff should always be a goal, figuring out how to balance profitability and your workforce is inherently challenging. To help you do so effective, here are five tips for examining your unique situation.
Five Ways To Balance Profitability and Your Workforce
#1: Review Production Metrics
Your first step to determine if you have the proper size workforce for your needs is to examine your production metrics. This involves identifying exactly what is being produced in a specific period.
Without a solid understanding of your current output, it is challenging to determine whether you have the ideal number of employees on staff, so starting here is a wise move.
#2: Consider Sales Data
Once you have reviewed your production metrics, it’s time to compare those numbers to your sales. This allows you to determine if you are creating the right amount of products or offering the ideal level of services today based on what is actually being sold.
If you’re having trouble meeting customer demand, such as when low inventory causes backorders, then you may be understaffed. However, if you have a significant surplus of product, it is possible your production rate is outpacing demand, which can occur if you are overstaffed.
#3: Individual Worker Contribution
Even if your production rate is well-matched to your sales rate, that doesn’t mean you have the proper number of employees. If you are meeting demand through the frequent use of mandatory overtime, a costly arrangement to sustain long-term, then bringing in more workers can lower your costs while simultaneous improving morale and relieving employee stress.
However, if a significant portion of your workforce spends a notable part of their day idle, then it is possible you could maintain your rate of production with fewer people on your staff. By reviewing each employees’ contribution rates, you may discover that your team isn’t right-sized for your business.
#4: Seasonal Peaks and Valleys
Businesses that are seasonal in nature may face the biggest challenge when it comes to identifying how many employees they actually need. Some fear that, if they don’t permanently hire the number of workers it takes to support peak production, that they will miss out on sales opportunities when peak season arrives. But, this approach puts a long-term burden on your business, as you are paying for employees that you simply don’t need year-round.
In some cases, the best method for handling seasonal fluctuations is to keep your core staff on permanently and supplement your workforce during peak seasons with temporary workers. This allows you to ramp up production during busy times without having to keep them on the payroll all year. Plus, since they remain employees of the staffing firm and not your company, you are not responsible for unemployment costs when it comes time to end the contract, which can save you a bundle by itself.
Are you looking for a strategic staffing partner to help you manage your workforce needs and find better balance?
Figuring out how to balance productivity with your workforce can take some time, but it is a wise move for companies that want to operate at peak efficiency. If you are interested in learning how temporary employees can benefit your business, the experts at TRC Staffing Services can help. Contact us to learn more about how our services can assist you as you right-size your staff.