How “Saving” Money Now on Understaffing Costs You Later

Leverage. Optimization. Streamline. Lean and mean. Do more with less. Maximize resources. Right size. Over the past decade, the challenging economic times have driven some of the most commonly-used corporate phrases into becoming actual management strategies.

While quality improvement, re-engineering, and right-sizing initiatives have resulted in unparalleled gains for American businesses, the long-term effects of cutting too deep and staying understaffed are often hidden. In many instances, understaffing has become a real threat to future prosperity.

Below are just a few of the hidden costs of understaffing:

Stressed employees – Understaffing virtually ensures employees are stretched beyond the limits of what they can sustain over extended periods. The result is a stressful environment, where employees battle to get the same (or more) amount of work done with less help. In this environment, workers are generally concerned with just getting through day. Value-added initiatives typically stall, while teamwork and morale often suffer.

Higher personnel costs – Years of research supports that stressed employees are much more likely to get sick, stay home, and require workers’ compensation. In addition to the related hard costs, tending to personnel issues can be a significant drain on management resources.

Mistakes – When organizations try to produce more work using a constrained workforce, attention to detail will inevitably suffer. Whether it’s paying an engineer rework a project or replacing incorrect orders, those mistakes cost money.

Missed deadlines – How much do you have to pay for late deliveries or projects that aren’t completed on time? Empty desks (that need to be filled) mean the rest of the workforce pushes products out the door later than you (and your clients) will want.

Unhappy customers – Customers notice when we’re one day (or hour) late with a promised product. They also notice when the product isn’t perfect. Unhappy customers do not result in repeat business. How much would it cost you per year to lose even one of your best customers? Chances are, it’s more than the cost of the extra assistant your staff needs.

Missed opportunities – One of the most commonly overlooked consequences of stretching your staff too thin is missing new business, partnership, and related opportunities. Networking lunches, ‘thank you’ dinners with top customers, and breakfasts with prospects tend to take a back seat to the more pressing issues, such as getting orders out the door and satisfying current clients. Yet reductions in business development activities will eventually take a toll on the new business flow for an organization, ultimately costly your company significant revenue.

Employee turnover – Even if you continue to pay your current workforce well and offer the same benefits you always have, burned-out employees will not stick around indefinitely. Chances are, there is another company offering similar benefits while maintaining a well-equipped staff.

Disadvantage against competition – Compound all of the above repercussions of a too-lean staff, and it’s obvious why competitors will enjoy another company’s  “cost-cutting” methods. While the cost-cutting company stretches the remaining employees too thin, competitors will jump at the opportunity to produce quality products, on time, and with a smile on their faces.

Yes, running lean can save money in the short term, but don’t underestimate the costs associated with lost business, reduced productivity, and increased workplace stress.  A well-staffed business not only allows your employees to do their best work, but it also gives you the best chance of remaining successful in today’s competitive marketplace.

What’s your take on understaffing? Have you experienced it? How did it go?

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