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How to ensure that your business is not overstaffed

Editorial Team
Last Updated: 28-07-2021 1:06 PM

It is very likely that most organisations are overstaffed in various roles for various reasons. Some could not react quickly when we went into the multicurrency regime. In some cases, regulatory and company procedures made it difficult to make changes in headcount in line the level of production or business activity. A high number of employees without corresponding productivity creates sustainability problems for the business. On the basis of this alone, a number of local organisations are in desperate need of a headcount realignment analysis.

The key challenge for most organisations is how you carry out such an analysis. I will outline here some of the procedures you need to undertake to ensure you have the right numbers for the volume of business you are producing or anticipating. These procedures have the effect of realigning your staff costs as well.

Step 1 - Analyse each role and see if there is a relationship between the number of people in each role and the key performance indicators in that role over time. The analysis results in an over and understaffing report. The report indicates by position or role, any of the three possible outcomes; understaffing, overstaffing and optimal staffing. Before you reduce numbers in roles that are flagged as overstaffed, you need to ascertain whether the overstaffing is as a result of headcount alone or lack of capacity. In our experience we often discover that the overstaffing is not in terms of quantity of people, but lack of capacity of people. You can have the right number of heads but lack in capacity. In such cases the consequences are the same; paying people when there is no corresponding output.

Step 2 – The rate of staff wastage – before you reassign or remove people from their various roles, you need to factor in the rate of attrition in each role. This alignment allows you to know which roles have stable staff and which roles have high attrition. In high attrition roles, for example, you can predict, with a high degree of accuracy, the number to be lost per annum due to natural attrition. In high attrition roles that simultaneously have overstaffing, you do not need to incur separation costs as the excess employees are likely to leave on their own. This is good if you are overstaffed but bad if you are understaffed. It is important to note that in some roles, even if you are overstaffed, you may need to hang on to some of your employees in their current roles, especially if it is difficult to develop people in those roles and if it is expensive to source people from outside. In this case, you are holding on to your priced talent, even if business is low in anticipation of an upturn in the medium term or long term. If you lose your experienced and talented staff through retrenchment, you will incur more costs to attract similar talent into those roles.

Step 3 – Optimisation techniques allow you to ensure that at no point will you have more employees than you require. The optimisation process takes into consideration the inefficiencies within your business to give you the optimum number of staff. With optimisation, you do not only look at staff numbers, but also at your cost. It is very possible that you could have the right number of employees but still not achieve optimum labour productivity as a result of inefficient deployment of staff. Furthermore, your cost structure may still be out of line in relation to your output. It is important to take into consideration your staff numbers and staff costs as the major constraints when making workforce adjustments to optimise your labour productivity.

It is important to note that the longer you take to align your headcount with your business activity the more your business suffers. It may not even recover leading to a shutdown.

Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant - Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone 481946-48/481950/2900276/2900966 or email: mnguwi@ipcconsultants.com or visit our website at www.ipcconsultants.com

Editorial Team

This article was written by one of the consultants at IPC

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