Over the past couple of decades, many businesses have come to idealize the notion of leanness. Running a streamlined and efficient operation, without much bloat or ballast, can certainly be appealing. However, for as much as business leaders want to do more with less, it’s crucial not to fall into the trap of understaffing.
In fact, trying to succeed with an understaffed team can actually lead to some significant losses. In this post, we’ll take a closer look at some of the hidden costs associated with keeping your team too lean.
Case Study: Charlotte Printing Company
To help us identify some of the costs of understaffing, we present a case study. In this case study, we’ll consider a Charlotte printing and graphic design company. This company lost a couple of its top designers, one of whom retired and the other of whom took a new job in Wilmington. Rather than replace these two employees, the company decided they would try to make do with their remaining staff. The thinking was that, if they juggled some schedules and perhaps dipped into overtime pay, they could continue with their current workload and save thousands of dollars on payroll and benefits.
“You’ve lost our business for good!”
The Rock Hill Logistics company hired Charlotte Printing to format and print an annual report, which they needed to present to their shareholders. This turned out to be a complicated job with a lot of exacting demands. Because Charlotte Printing was understaffed, they wound up putting in more than 100 hours of overtime on the Rock Hill Logistics project… and of course, those overtime hours proved expensive.
The good news was that Charlotte Printing got the reports completed in time for the shareholder meeting. The bad news is that a couple of the graphics included errors, and they printed Rock Hill Logistics’ logo in the wrong color.
Charlotte Printing Company tried to make things right: They spent a few hundred dollars printing corrected reports, and they also refunded Rock Hill Logistics 50 percent of their total cost. But even so, Rock Hill Logistics was unhappy. They vowed that Charlotte Printing had lost their business for good.
A few weeks later, one of Charlotte Printing Company’s long-time clients, Ballantyne Community Credit Union, asked if the company could help design and print an update to their account opening form. At the same time, a local dry-cleaning company, South Park Cleaners, inquired about getting a new coupon book printed. Both projects were time-sensitive, but Charlotte Printing Company was so understaffed and overbooked that they had to turn one of the clients away.
They ultimately told South Park Cleaners that they wouldn’t have an opening in their schedule for another month. South Park decided to take their business elsewhere. Not only did Charlotte Printing Company miss out on that business, but the opportunity to continue to work with South Park Cleaners when they went to one of their area competitors. In short, Charlotte Printing Company didn’t merely lose business; they lost market share, ceding ground to a competitor.
A Closer Look at the Costs of Understaffing
This case study illustrates the myriad ways in which understaffing can cost your company. Let’s break it down even further; here are some of the main categories in which understaffing might cost you.
The Cost of Making Mistakes
For one thing, an understaffed team is going to have harder time meeting deadlines while ensuring high standards of quality. This can come back to bite you in a big way, especially when you make mistakes on the work you produce for your clients. Even if the mistake is small, you may wind up needing to redo part of the project, which costs you more money in labor and materials. You may have to offer a partial or full refund, which obliterates your profit margins. And even if you do all of these things to make it right with the client, all the hassle may mean the client searches for a new vendor rather than paying you any repeat business; as we saw in our Charlotte Printing Company case study, businesses can spend a lot of time and money trying to make up for their errors, and even then it may not be enough.
The Cost of Missed Opportunities
Most business leaders are disinclined to turn down new clients, or to forgo opportunities to close new accounts. However, if your staff is too small, you may run into scenarios where you just can’t complete the trial project or the product demo that you need to in order to win new business. In other words, understaffing may result in you turning down new opportunities… and that means losing a chance to add new revenue sources. Again, consider Charlotte Printing Company, where lean staffing made it impossible for them to accept all the new work opportunities coming their way.
The Cost of Low Morale
When you try to do a lot with a little, it can sometimes mean stretching your existing team members just a little too far. Indeed, understaffing has a disastrous effect on morale, leading to employees who are stressed and anxious. This can manifest in a couple of ways. One, your team members may not work to their full potential, as the pressure to meet deadlines keeps them from optimizing their performance. And two, you may have a higher turnover rate, as talented employees leave for a workplace where they’ll feel better supported.
The Cost of Competitive Disadvantage
All of these factors, from low morale and high turnover to increased customer dissatisfaction, point to a simple reality: If your business is understaffed, you lose a lot of your competitive advantage. Other companies in your field may be better prepared to accommodate client needs, and as you lose business, your competitors stand to gain. Over time, these trends can become difficult to reverse, as your competitors will earn their reputation as major players within the industry.
The Cost of Being Penny Wise, Pound Foolish
The bottom line for business owners is that, in trying to run a tight ship and keep employee overhead small, you may save some money in the short term… but over the long haul, you stand to take on some significant losses.
Performance Staffing Solutions Can Help
Don’t let understaffing cost you valuable opportunities to do good work, impress customers and clients, and grow your business. Performance Staffing Solutions can help you build the workforce you need in a way that’s flexible and cost-effective. We can help you maintain your nimbleness without stretching yourself and your existing employees too far. Whether you’re looking for temp, temp-to-hire, seasonal, or direct hire options, Performance Staffing Solutions can assist.
If you’d like to talk with us about developing the right team, reach out to Performance Staffing Solutions today. Contact us in Rock Hill, SC or in Charlotte, NC.