OVERSTAFFING and understaffing are two sides of the same coin, and both can have severe repercussions for a business's financial health and operational efficiency.
This article sheds light on why every business should be concerned about these staffing issues, supported by statistics that underscore their impact.
Both overstaffing and understaffing can have significant and far-reaching consequences, affecting not just the bottom line but also employee morale, productivity, and overall company culture.
It is a delicate balance that every business, regardless of size or industry, must strive to achieve.
The perils of overstaffing
While it might seem counterintuitive, having too many employees can be just as detrimental as having too few. Overstaffing leads to increased labour costs, which can quickly eat into profits.
A study by the Bureau of Labour Statistics found that labour costs typically account for 70% of total business expenses. When a company is overstaffed, these costs can spiral out of control, leaving less room for investment in other areas, such as marketing, research and development, or employee training.
Moreover, overstaffing can create a sense of complacency and underutilisation among employees. When there are more workers than necessary, individuals may feel less challenged and motivated, leading to decreased productivity and engagement. A Gallup poll revealed that only 36% of employees are actively engaged in their work, and overstaffing can further exacerbate this issue.
In addition to financial and productivity concerns, overstaffing can also negatively impact company culture. When employees feel underutilised, it can breed resentment and dissatisfaction, leading to increased turnover and a decline in morale.
A study by the Society for Human Resource Management found that the average cost of replacing an employee is six to nine months of their salary.
Overstaffing occurs when a business employs more staff than necessary for its workload. This surplus can lead to a bloated payroll, reduced productivity, and diminished morale among employees.
According to a report by the Society for Human Resource Management (SHRM), overstaffed organisations can see a 50% increase in payroll costs without a corresponding rise in output. This imbalance often leads to a reduction in profit margins and creates an unsustainable business model.
The pitfalls of understaffing
On the other side of the coin, understaffing presents its own set of challenges. When a company does not have enough employees to handle its workload, it can lead to burnout, stress, and decreased productivity.
A study by the American Psychological Association found that 75% of employees have experienced burnout at work, and understaffing is a major contributing factor.
Furthermore, understaffing can negatively impact customer service. When employees are overworked and stressed, they are less likely to provide the high level of service that customers expect. This can lead to decreased customer satisfaction, lost sales, and damage to the company's reputation. A study by Accenture found that 80% of customers are willing to switch to a competitor due to poor customer service.
Understaffing can also stifle growth and innovation. When employees are constantly scrambling to keep up with their workload, they have less time and energy to devote to new ideas and initiatives. This can prevent the company from staying ahead of the curve and remaining competitive in the marketplace.
Inadequate staffing levels can result in missed opportunities and revenue loss. One study highlighted that for retail businesses, a 1% increase in staffing could result in an average of US$10 in additional sales per employee per hour.
In the healthcare sector, understaffing has grave implications, with a Journal of Nursing Administration study linking low nurse staffing levels to higher patient mortality rates.
Finding the right balance
Achieving the optimal staffing level is a complex and ongoing process. It requires careful analysis of the company's workload, goals, and resources. Regular reviews and adjustments are necessary to ensure that the staffing level remains aligned with the company's needs.
There are several strategies that businesses can employ to find the right balance. One approach is to use data and analytics to track workload and productivity.
This can help identify areas where the company is overstaffed or understaffed. Additionally, businesses can consider flexible staffing options, such as part-time or contract workers, to address fluctuations in workload. This can help avoid the pitfalls of both overstaffing and understaffing.
Workload analysis is essential for determining if staffing levels are aligned with operational demands. By conducting regular task audits and utilising time-tracking software, companies can monitor how employees spend their time and identify any disparities in workload distribution.
Additionally, monitoring overtime hours worked by employees can indicate understaffing, while tracking absenteeism and turnover rates can reveal areas where high turnover or absenteeism suggests understaffing or overstaffing.
Conducting staff capacity assessment can identify employee strengths and weaknesses, revealing areas where employees are underutilised or overworked due to skill mismatches.
Workflow mapping can also help identify inefficiencies and bottlenecks, highlighting areas where understaffing or overstaffing is causing delays or inefficiencies.
Conclusion
Companies can identify overstaffing or understaffing by utilising various methods, including assessing employee workload, productivity, and efficiency metrics.
Assessing staff capacity is crucial, as it can reveal whether the current staff can handle the workload, and identify areas where capacity is exceeding or falling short of demands, enabling companies to make informed decisions about staffing levels and resource allocation. By considering these factors, companies can optimise their workforce and address issues related to overstaffing and understaffing.
- Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: mnguwi@ipcconsultants.com or visit ipcconsultants.com.