Workforce shortage is probably one of the biggest concerns for a new business. Having a shortage of labor can result in lost business, missed deadlines, and unhappy customers. A few internal methods to circumvent a shortage include:
- Offering overtime wages
- Authorizing job sharing
- Retraining employees
Internal solutions are the most cost-effective because you utilize the team you already have. However, these methods also include the highest psychological consequences for your employees. These consequences include more stress due to less free time, new learning requirements, irritability at work, and problems adjusting to new hours or tasks. A few external methods include:
- Hiring contractors or consultants
- Hiring temporary employees
- Hiring a full-time employee
Each internal and external method has its pros and cons, and it will depend on your industry and company to determine which method will be best for your business.
Navigating a Workforce Surplus
Uh oh… you hired too many employees. Now what? This article offers some methods for managing a workforce surplus. The opposite of a workforce surplus is a workforce shortage.
Unfortunately, you have fewer options with surpluses than you do with shortages. The methods are high impact on your employees and can lead to high costs for your company. As a result, it is important to expand your workforce in a careful and systematic manner, using workforce planning.
The methods to manage a workforce surplus include:
- Activating a hiring freeze
- Waiting for natural attrition
Downsizing your organization is the quickest method to deal with a surplus. It is also the most harmful method in terms of your employees’ satisfaction and trust.
If you are considering downsizing, plan your workforce very carefully. Rashly choosing employees to lay off can cut a drastic amount of critical skills and experience.
You will also need to maintain employee fulfillment as the highest priority. When conducting layoffs you should treat the existing employees with the utmost respect. Let them know the company’s situation and that their work, loyalty, and efforts were highly valued. Offer severance packages and best wishes. By conducting layoffs with deference you will let your remaining employees know that you care. You will also set up greater protection against lawsuits and bad employer reviews.
After layoffs occur, remaining employees will experience high levels of low morale and high distrust. They will also have more work on their hands. Be sure to redistribute work evenly and with great appreciation.
A hiring freeze is exactly what it sounds like: a stoppage on bringing on new employees.
Traditionally, hiring freezes only include non-essential positions. The definition of a non-essential position varies, but as a general rule, you can determine whether a position is essential or not by noting its relationship to the company’s strategic processes and immediate positive revenue. This typically means you can instigate a hiring freeze while still bringing on highly specialized or difficult-to-find personnel.
When hiring essential personnel during a hiring freeze, be sure to communicate your reasons for hiring a new person very carefully as there can be consequences. For example, if you have an administrative employee doing the work of two employees, that employee will certainly not see him or herself as non-essential and will wonder why other positions are being filled, while he or she is still doing the work of two employees.
A hiring freeze can bring great benefits to your organization. Your current team will have time to consolidate and you may have the opportunity to strategically restructure departments. You will also save costs on employee salaries and benefits.
Natural attrition is organic and gradual downsizing as a result of natural means such as retirement and voluntary resignation.
By waiting for employees to leave the company on their own accord you reduce headcount without using force, thus maintaining employee morale. Natural attrition is similar to a hiring freeze in that you must choose carefully when replacing employees.
Natural attrition can take years or even decades to produce the same results as downsizing or a hiring freeze. Because it takes so long, if you choose this method of downsizing, it is a good idea to plan your workforce expansion very carefully before a surplus can occur.
Elements of Workforce Planning
Workforce planning is the process of effectively scaling up a company’s team. Without workforce planning, a company could easily add new positions that are not effective in the long term. However initial human capital expansion is far too important to enact carelessly. It is thus very valuable and important to systematically accelerate growth through the use of workforce planning.
It is important for me to clarify that early-stage startups often have an immediate need that must be filled. Workforce planning is (usually) a process better suited for mid-stage startups who already have a core team and are looking to scale up while optimizing efficiency and longevity.