Labor Market Uncertainty: 4 Strategies to Balance Staffing and Profitability
June 12, 2023 by Gordon Advisors
The current labor market uncertainty has presented a significant challenge for medium to large-size businesses as they strive to balance hiring and staffing with business profitability. And, in a time when lack of talent is making headlines, businesses are asking themselves, “How do I ensure my business remains financially stable and staffed during these unpredictable economic times?”
With vacancies remaining unfilled for extended periods and difficulty finding qualified candidates for the job, businesses are currently forced to walk a tightrope to ensure that they have enough staff to meet the demands of their customers, while avoiding a situation where labor costs become unsustainable.
In this blog post, Gordon Advisors business consultants explore a few strategies medium to large-size businesses can employ to balance hiring and staffing with profitability during labor market uncertainty in 2023 and beyond.
- Invest in Employee Retention
While investing during market uncertainty can sound like a contradiction, one of the most effective strategies to manage labor costs during labor market uncertainty is to invest in employee well-being and retention. An employee retention program is a set of strategies and initiatives that a company implements to encourage its employees to stay with the organization for an extended period. Many successful businesses understand that keeping great employees is a cost-saving measure because it avoids creating periods of unproductivity while training new workers.
An employee retention program aims to create a positive work environment, increase employee satisfaction and foster a sense of loyalty to the company. When employees feel valued and appreciated, they are more likely to remain with their current employer, reducing the need to hire new staff regularly.
Employee retention programs can take many forms, including training and development opportunities, flexible work arrangements and recognition and reward programs. By investing in these programs, businesses can improve employee satisfaction, reduce employee turnover and improve overall productivity, which ultimately translates into increased profitability.
As part of an employee retention program, consider assessing your employee benefits program. Aim to create an EBP that is not only attractive to new recruits, but also keeps existing employees satisfied. For more information on employee benefit plans, read Gordon Advisors’ blog, Competitive Employee Benefits Help Companies Retain and Recruit Employees.
- Consider a Flexible Staffing Plan
Another strategy that medium to large-size businesses can employ is to develop a flexible staffing plan. Flexible staffing, or the use of temporary or contract workers, freelance or part-time employees, can help businesses reduce risk and save on labor costs. A plan should consider the business’s peak periods and staffing requirements and adjust staffing levels accordingly. Businesses with fluctuating or seasonal workload can particularly benefit from flexible staffing, including in retail, hospitality, manufacturing, startups/small businesses or healthcare.
A flexible staffing plan can include a mix of permanent and temporary employees, as well as cross-training employees to perform multiple roles. By adopting a flexible staffing plan, businesses can ensure that they have enough staff to meet customer demands while avoiding overstaffing during slower periods, which can lead to increased labor costs.
This strategy should be carefully considered and is not appropriate for every business. For example, flexible staffing may not be appropriate for companies with work that is highly specialized or niche. Flexible staffing may also not be appropriate if a business has strict confidentiality requirements or values a strong company culture – as these things can be more difficult to manage with temporary staff or create extra risk.
- Utilize Technology to Streamline Operations
There are several ways medium to large sized businesses can use technology to streamline their operations, increase efficiency and reduce labor costs. Technological advancements have enabled businesses to automate many of their operations, reducing reliance on human labor. For instance:
- Businesses can invest in customer relationship management (CRM) software or a marketing automation platform to automate sales and marketing operations.
- Businesses can also use automated inventory management systems to reduce inventory holding costs and improve inventory accuracy.
- Project management software can help businesses more efficiently manage tasks, collaborate and improve project timelines.
- Online payment systems can simplify payment processing, reduce errors and improve transaction security.
- Finally, consider moving from an on-premises server to a cloud computing option, which provides businesses with a range of software and data storage solutions, eliminating the need for IT infrastructure and related maintenance costs.
By utilizing technology to streamline operations, businesses can streamline operations, reduce labor costs and improve overall efficiency.
- Consider Outsourcing
Outsourcing non-core functions can be an effective way to manage labor costs during labor market uncertainty. Businesses should carefully consider the cost vs. benefit of outsourcing to ensure that it aligns with their overall business strategy.
Consider the non-core functions of the business, such as accounting, IT support, human resources and marketing. Accounting and marketing are the most commonly outsourced business tasks, for instance.
For outsourcing suggestions, read the Gordon Advisors blog, 5 Key Tasks Your Business Should Outsource
In certain scenarios, it may be appropriate to hire an outside accounting firm with specialty expertise rather than keep a full-time staff accountant or team, such as during tax season, audit or review engagements, during expansion or growth, or for internal controls and risk management.
Outsourcing to a certified public accounting (CPA) firm can offer a business many benefits including specialized expertise only when you need it, accounting efficiency, flexibility to scale efforts and a wider variety of business and industry expertise. Hiring a CPA firm, like Gordon Advisors, can help your business develop a long-term financial strategy to achieve your goals and create confidence and certainty for your business health during economic uncertainty.
Contact Gordon Advisors Business Experts
Managing labor costs during labor market uncertainty is a significant challenge for medium to large-size businesses. By investing in employee retention programs, developing a flexible staffing plan, utilizing technology to streamline operations and considering outsourcing, businesses can balance hiring and staffing with profitability.
Contact Gordon Advisors CPAs today to discuss your business’s long-term financial strategy and how best to weather labor market uncertainty: