Watch this video to learn the only two reasons for hiring employees, how to calculate your company salary cap and how to control labor costs. Also review three examples of success controlling labor costs.
Labor costs are usually the biggest cost item for a service business, and the second biggest cost for a business that sells products. But rarely does the owner make a serious attempt at controlling it. They may work at controlling overtime and insurance costs, but they seldom do a staffing review to ensure they are not overstaffed.
The business owner should be doing a review at least once a year.
- Scrutinize every job in your company to determine how it fits into the entire operation in accordance with your company’s long-term objectives. Probe all aspects of each job—its basic function, the level of work being performed, its relationship to other jobs, and so on.
- Decide if any job should be eliminated and those responsibilities shifted to someone else in the department. Can this job be outsourced? Has anyone been performing work that lies well outside of his or her assigned responsibilities? Do all positions require full-time workers or can one or more be filled with part-timers?
- See if you need to hire additional employees so that critical jobs are being staffed properly.
Don’t get lazy and don’t dodge the tough decisions. The key to running a profitable business is keeping your costs under control.