No matter what industry your business is operating in, there’s a good chance that your workforce is the single most expensive line item in your operational budget. It makes sense. Skilled, qualified people are key to operating a profitable business. You need the best workers to build a strong business, and you need to pay them well to make sure they stick around. However, there are many ways that businesses squander money and resources on HR and workforce management without thinking. Below, we look at 5 key ways businesses often waste money that could be better spent reinvesting in the business and their existing workforce.
1. you let turnover and absenteeism get out of control
High turnover and absenteeism can have a catastrophic effect on your business. If your HR team is constantly having to recruit to refill roles that your existing employees vacate (either on a short-term or permanent basis), your business can easily become stuck in a constant recruitment loop. You hire new employees, train them, and they leave, and the cycle begins again. This cycle can exacerbate low employee morale and make the problem even worse. When you’re understaffed, that puts pressure on your existing team members. If they’re stressed and unhappy, they’re more likely to leave, worsening this cycle. Download our guide for solutions to handle excessive turnover.
2. you are hiring too many contingent workers
If you’re understaffed, you may find your business relies heavily on contingent or temporary staff to meet your production or business needs. While temporary staff can be a great addition to your team to increase flexibility and rapidly scale up or down, if you’re relying too heavily on temporary staff it can be much more expensive than hiring permanent, full-time staff. Finding the ideal balance of permanent and temporary staff is key to optimize your HR spending. For solutions to hiring too many contingent workers, download our full guide below.
3. your compensation packages aren’t optimized
The right compensation packages are key to ensure you’re attracting and retaining the right type of talent. Packages that are too low will mean you can’t find skilled workers, and that existing staff will jump on new, higher-paying opportunities as soon as they arise. This leads to indirect costs such as significantly higher recruitment and talent management costs, as well as more spent on training and onboarding. On the other hand, offering packages that are too high and well-above market can be unsustainable. Download our guide for solutions to optimize your compensation packages.
4. you’re hiring too many people and are overstaffed
Sometimes companies go overboard on hiring sprees and hire far more workers than they need. Sometimes this happens during periods of growth or when they experience a surge in business. However if they fall into a lull where business is slow, they may be hesitant to let workers go. However maintaining a bloated workforce can be unsustainable and hurt your future business prospects. For detailed solutions to handle overstaffing challenges, check out our guide below.
5. you’re spending too much on new hires
Constantly sourcing and recruiting new workers is less than ideal for your business, especially if you operate in an industry with a lot of seasonal highs and lows. In these types of industries, it’s far better to build a pool of workers who you can turn to in busy periods to fill gaps without constantly having to find and train new workers. If the vast majority of your new hires are unfamiliar with your industry, you may be wasting a lot of money on advertising jobs and sourcing workers, then onboarding and training to get them up to speed. For specific solutions to handle this challenge, download our guide.