Managing a small business is daunting, and especially when you are wasting resources at places where you could save money, running a small business could become way more difficult. Often during seasonal spikes or when enterprises are swamped with projects, they hire people to manage core project responsibilities. However, as soon as things return to usual, overstaffing can be a massive problem for small businesses. Companies resort to layoffs to save their budget, which costs them reputation, but fortunately, with forecasting, cross-training, allocation, scheduling, and resource management software you can handle overstaffing before it’s too late.
Want to know if your small business is overstaffed? Here are some tale-telling signs!
Business relations. Associative photo by Luis Villasmil via Unsplash, free license
#1 Unwanted Time Off:
If someone in your team feels they aren’t needed at work, they might start taking unwanted time off. Burnouts happen when people have more than they can manage. However, when people don’t have enough work on their plate, it is called “boreout”, and this happens when people feel disconnected from work as they don’t have much to work on.
#2 Idle Employees Even During Peak Hours
You can observe your employees, and if you see employees scrolling their phones or sitting idle during peak hours because they have completed their work, it is a clear sign of overstaffing. If your business experiences consistent periods of low activity despite adequate staffing levels, it may be time to reassess your workforce allocation with an allocation software or check for overstaffing.
#3 High Labor Costs Relative to Revenue
This is the thumb rule for finding out if your company is overstaffed. Compare your labor costs to revenue if you want to establish a metric or evaluate staffing efficiency. If in any way, your labor costs outweigh the revenue growth or remain disproportionately high, it means that you may have more employees than what you require for current operational needs.
#4 Declining Profit Margins
Are you noticing thinning profit margins despite steady or increasing revenue? If the answer is yes, it’s a red flag for overstaffing. If your business profitability is shrinking exponentially despite generating enough revenue, the culprit behind this might be excess staffing costs.
#5 Employee Underutilization
Sometimes organizations don’t notice how much of their human resources are underutilized. Employee underutilization can manifest as a lack of motivation, or employees completing tasks way below their skill level. Try to leverage allocation software and identify underutilized staff members for analyzing if your business is overstaffed.
#6 More Complex Management
If you think executives in administrative or managerial positions find it difficult to coordinate and supervise tasks only when there’s a lot on deck, you are mistaken. Allocating tasks among a large workforce is also overwhelming, and this is a clear sign of overstaffing. Excessive layers of management or overlapping roles can impede the decision-making process and hinder operational agility, which clearly is an indication of overstaffing.
#7 Not Meeting Productivity Goals
When your staff is constantly bored and unmotivated, they don’t work to help the organization achieve its core objectives; they work for the payday. If your business isn’t swamped with work, and you are still missing deadlines, not getting the quality of work you require, and not achieving the productivity goal you have, the real reason might be overstaffing.
#8 Less Overtime
There’s no denying that occasional overtime is necessary during peak periods, but if you notice a consistent reduction in overtime hours, this could indicate surplus staffing. If your business rarely requires additional hours beyond regular shifts, this means you have more employees than needed.
#9 Increased Employee Turnover
High employee turnover rates can be symptomatic of overstaffing, as disengaged or underutilized employees may seek opportunities elsewhere. If you have to constantly recruit and train new personnel, this means you are overstaffed, and this doesn’t just incur additional costs, it also disrupts the workflow and morale.
#10 Inefficient Workflow
Notice any bottlenecks, delays, or redundancies in your workforce? Well, when there are more employees than necessary for a given task, coordination challenges and inefficiencies often arise, and this impedes productivity and quality.
Conclusion
Employees are crucial assets for every organization, and we agree that having employees with the right talents and at the right hierarchy is imperative to have a productive and efficient workforce that contributes to your organization’s success. However, being overstaffed is not the solution. When your company is overstaffed, it ends up paying more wages than necessary, staff members become underutilized, productivity decreases, employee morale suffers, and people feel disengaged.
Instead of scrambling with this issue on the frontlines, enterprises can always invest in enterprise workforce management software like eResource Scheduler that keeps track of who’s working on what, how many resources you have; when they are available, and what more resources you need to hire. Having allocation software isn’t an alternative; it’s a mandate because instead of flying blind, having automation on deck helps you avoid overstaffing and maximize efficiency with the limited resources you have in your team.
References:
https://palmettopayroll.net/10-signs-youve-overstaffed-your-small-business/
https://joinhomebase.com/blog/are-you-overstaffing/
https://www.linkedin.com/pulse/seven-ways-determine-your-company-overstaffed-terry-thomas-mba-cpa/
https://www.shiftbase.com/glossary/overstaffing
https://www.linkedin.com/pulse/overstaffing-can-break-your-small-business-heres-how-know-mclellan/
https://factorialhr.com/blog/understaffing-overstaffing-guide/