The Hidden Costs of Understaffing
What is understaffing really costing your company?
Over the past decade, many businesses have mastered the art of doing more with less. Quality improvement, re-engineering, and right-sizing initiatives have resulted in unparalleled gains for American business. But the long-standing mantra of running “lean and mean” is resulting in costs that few anticipated. In many instances, understaffing has become a real threat to future prosperity.
Is the key to success really making due with less or are the hidden costs of understaffing and lost opportunities a potential threat to your business? Consider the following example of Fairfield Print and Graphics, a mid-sized commercial printer.
Case Study: Fairfield Print and Graphics
Owned and operated by Richard Stafford, Fairfield lost two experienced graphic designers at the end of June. Rather than replace them, Mr. Stafford reasoned that he could juggle schedules and pay a little overtime to get the work done with his remaining staff. He calculated that he would save thousands of dollars.
We’ll Never Use You Again
Weir Trucking, Inc. contracted Fairfield to format and print its annual report, due to shareholders by July 15th. Preparing the report was a complex job, and because they were short-staffed, Fairfield employees worked a total of 120 overtime hours on the Weir project. While the reports were delivered on time, Weir became extremely upset because their logo was printed in the wrong shade of blue and one of the bar graphs contained erroneous information. Fairfield printed 5,000 correction inserts at a cost of $250 and refunded Weir half the $4,000 fee for the reports, but Weir vowed it would never use Fairfield’s services again.
During July, First Community Bank, an existing customer, requested that Fairfield redesign and print an updated mortgage form. Likewise, Josef’s Fine Dining wanted a series of new coupon flyers produced. A potential new customer, Sky Hi Tech, was interested in having an employee handbook printed. Because Fairfield’s staff was already at maximum capacity, Mr. Stafford had to turn down the work – a revenue loss of $5,200. Whether any of these organizations will use Fairfield in the future is uncertain.
Not only was Fairfield forced to turn down work, it also had to pass on a strategic business opportunity. Ideas On-Line, creator of Fairfield’s Web site, finally had the time to design a new on-line ordering page. However, no one at Fairfield had time to work with Ideas On-Line, so Mr. Stafford had to postpone the project.
Fairfield’s creative director and office supervisor, Cathy Lynn, always did more than her share. However, the added stress she felt during July proved too much. Cathy accepted a position with another company that offered her a comparable salary and a less demanding working environment. Mr. Stafford estimated that it would take one highly-experienced full-time designer and one part-time administrative assistant to replace Cathy.
Adding It Up
At the end of July, Mr. Stafford added up the “savings” that resulted from understaffing and compared them to the cost of hiring two new employees (See the table below entitled, “Fairfield Cost Comparison for July.”)
The decision to limp along short-staffed during July cost Fairfield $2,360 more than hiring two new employees. Over the course of a year, the company stood to lose almost $30,000. As disturbing, it took only one month to lose a valuable team member, several customers, and an opportunity to acquire e-commerce capability. In fact, all Fairfield gained from the decision was an office full of overworked and overstressed employees. Realizing his mistake, Mr. Stafford reconsidered and decided to hire three graphic designers (one to replace Cathy) and a part-time administrative assistant.
Fairfield Cost Comparison for July
|Cost of Understaffing||Cost of Hiring|
|Weir insert correction||$250||Monthly salaries of two graphic designers (173 hrs x $18/hr x2)||$6,228|
|Overtime (60 hrs x $15/hr x 2)||$1,800|
|Lost revenue from turning down work||$5,200||Monthly benefits costs of two graphic designers ($850 x 2)||$1,700|
|Monthly salary of an extra part-time administrator (86.5 hrs x $12/hr)||$1,038|
Risks of Understaffing
Fairfield’s story may be fictitious, but the costs of understaffing are real. While sometimes a boon to short-term profitability, understaffing may expose your organization to unforeseen and unacceptable risks, including the following:
Scrap and Re-work—When organizations attempt to force more work through already constrained production processes, attention to detail tends to suffer. As a result, error rates typically rise.
Late Deliveries and Failure to Complete Projects On Time—Staff shortages affect production capabilities, which impairs your ability to meet production and project schedules.
Increased Stress—As employees are stretched to meet job requirements, their stress levels rise and they become incapable of maximizing their performance.
Customer Dissatisfaction—Delivery and quality problems invariably result in decreased customer satisfaction, which may be compounded by poor service from overworked and overstressed staff.
Increased Personnel Costs—Stress increases expense. As tension in the workplace rises, so does absenteeism, workers’ compensation claims, and the need for more management.
Increased Turnover—Burned-out employees don’t stay complacent. Even the best compensation packages may not make up for the decreased quality of life. Dissatisfied employees aren’t likely to stay around for long.
Inability to Capture New Opportunities—A company hard-pressed to meet its current commitments cannot hope to undertake new endeavors successfully.
Competitive Disadvantage—Without the capacity to ensure exceptional quality and service and to explore new business opportunities, organizations place themselves at a significant long-term disadvantage, compared to competitors that do not operate understaffed.
Penny Wise, Pound Foolish
Don’t be fooled into believing that running lean always saves you money. The costs associated with lost business, reduced productivity, and increased workplace stress are often far greater than the cost of hiring. A well-staffed business allows your employees to do their best work, which gives you the best chance of remaining successful in today’s competitive Marketplace.
Murray Resources Can Help
It’s important to maintain adequate staff levels, but for most organizations hiring is not a core competency. If you’re spending your time finding and screening job candidates, your attention to critical business responsibilities becomes diverted.
Murray Resources can help you determine your personnel needs and suggest a number of alternatives to satisfy those requirements. Options we can offer you include the following:
Temporary Personnel Services—Qualified temporary personnel to work on assignment at your company during peak work periods.
Direct Hire Services—We can assume responsibility for finding qualified candidates for your direct staff openings.
Temporary-to-Direct Hire Services—You can initially “try out” a promising candidate by placing him or her on assignment. If you are satisfied with the temporary employee’s performance, you can then offer that person a direct position.
Contact Murray Resources to learn more about how to avoid the hidden costs of understaffing through utilizing various recruiting and employment strategies, or call us at (713) 935-0009
How to Interview and Hire Top People Each and Every Time
A Guide to Hiring the Best Talent
The most important aspect of any business is recruiting, selecting, and retaining top people. Research shows that those organizations that spend more time recruiting high-caliber people earn 22% higher return to shareholders than their industry peers. However, most employers do a miserable job selecting people, having little knowledge of how to interview and hire top people each and every time. Many companies rely on outdated and ineffective interviewing and hiring techniques. This critical responsibility sometimes gets the least emphasis.
Below are several reasons why traditional hiring and interviewing techniques are inadequate:
- The majority of applicants “exaggerate” to get a job
- Most hiring decisions are made by intuition during the first few minutes of the interview
- Two out of three hires prove to be a bad fit within the first year on the job
- Most interviewers are not properly trained, nor do they like to interview applicants
- Excellent employees are misplaced and grow frustrated in jobs where they are unable to utilize their strengths
A Five-Step Interviewing Process
Cisco CEO John Chambers said, “A world-class engineer with five peers can outproduce 200 regular engineers.” Instead of waiting for people to apply for jobs, top organizations spend more time looking for high-caliber people. An effective selection and interviewing process follow these five steps:
Step 1 | Prepare – Prior to the interview make sure you understand the key elements of the job. Develop a simple outline that covers the job duties. Possibly work with the incumbent or people familiar with the various responsibilities to understand what the job is about. Screen the resumes and applications to gain information for the interview. Standardize and prepare the questions you will ask each applicant.
Step 2 | Purpose – Skilled and talented people have more choices and job opportunities from which to choose. The interviewer forms the applicant’s first impression of the company. Not only are you trying to determine the best applicant, but you also have to convince the applicant this is the best place for them to work.
Step 3 | Performance – Identify the knowledge, attributes, and skills the applicant needs for success. If the job requires special education or licensing, be sure to include it on your list. Identify the top seven attributes or competencies the job requires and structure the interview accordingly. Some of these attributes might include:
- What authority the person has to discipline, hire, and/or fire others and establish performance objectives
- What financial responsibility, authority, and control the person has
- What decision-making authority the person has
- How this person is held accountable for performance objectives for their team, business unit, or organization
- The consequences they are responsible for when mistakes are made.
Step 4 | People Skills – The most difficult to determine, as well as the most important part of the process, is identifying the people skills a person brings to the job. Each applicant wears a “mask.” A good interviewing and selecting process discovers who is behind that mask and determines if a match exists between the individual and the job. By understanding the applicant’s personality style, values, and motivations, you are guaranteed to improve your hiring and selecting process.
Pre-employment profiles are an important aspect of the hiring process for a growing number of employers. By using behavioral assessments and personality profiles, organizations can quickly learn how the person will interact with their co-workers, customers, and direct reports. They provide an accurate analysis of an applicant’s behaviors and attitudes, otherwise left to subjective judgment.
Step 5 | Process – The best interviews follow a structured process. This doesn’t mean the entire process is inflexible without spontaneity. Rather, each applicant is asked the same questions and is scored with a consistent rating process. A structured approach helps to avoid bias and gives all applicants a fair chance. The best way to accomplish this is by using behavioral-based questions and situational questions.
Speed Up Your Job Search with These 5 Simple Strategies
It’s easy to get into a rut when you’re searching for a new job. Once you do, the process can slow down, which is a frustrating experience. But don’t panic. There are steps you can take to speed up your hunt and find a new job faster. Here are a few tips from our Houston headhunters to consider:
Expand your network.
Most job opportunities come by way of networking. While it’s a good idea to search the job boards for positions, it’s also vital that you schedule regular networking events into your week. These can be online, in-person, or a mix of both. Also, make sure you notify friends and family of your job search. When you do, you’ll increase your odds of finding out about new opportunities.
Review your resume.
If your resume isn’t aligned with the positions you’re applying for or if it’s full of vague language like “team player,” then you’re not going to get a lot of calls for interviews. Instead, read through each job posting first and make a list of your skills and qualifications that are most pertinent. Then, before you apply, modify your resume so it’s as relevant as possible. The less generic your resume, the more you’ll stand out to a hiring manager.
Polish your interviewing skills.
Interviews are stressful for even the most experienced candidate. One way to offset the associated nerves is through practicing your answers. As Houston headhunters, we recommend making a list of common interview questions and then respond to them one by one. You can even record yourself so you can evaluate your body language, tone of voice, and interview effectiveness. To further polish your skills, ask a friend or family member to conduct a mock interview with you.
Evaluate your online presence.
What happens when a recruiter or hiring manager Googles you? Do the search results reflect positively on you? If not, then you’ll need to take some steps to clean things up. In addition, make sure your LinkedIn profile is updated and that it matches the resume you’re sending in.
Rethink your approach.
If you followed the steps above and still aren’t getting calls for an interview, it’s time to take a step back and consider the positions you’re applying for. Are you truly qualified for them? Or are you under- or over-qualified? If you want the best results from your search, then it’s important to make sure you’re applying to the jobs you’re best-suited for.
Need more help finding a new job in the Houston area?
Connect with the Houston headhunters at Murray Resources. We offer talented, highly-motivated candidates opportunities across a broad range of industries and job functions. Contact us today to learn more or get started.