I don’t know how to manage the workforce in the slow months. Trying to hang on to when we’re slow has left us stretched for cash. Now we’re going into the next busy cycle. But it’s getting harder to find and keep good people after we’ve trained them. I also don’t want to get caught short with too few people to handle our next busy period.
Thoughts of the Day: Manage the workforce with a full-year game plan. Especially for businesses with bust and boom cycles. Be realistic about what you can afford. Figure out why it’s so hard to make enough profit and then work on that root cause.
Manage the workforce through bust & boom business cycles
Peaks and valleys of income can be really hard for a variety of reasons. Employees cost money even when they’re not working full tilt. Businesses look most profitable at the end of a busy season. When they’re about to become least profitable because of a down season. Overhead costs don’t go away just because the volume of work drops off. Escalating vendor costs chew up profits when sharper negotiation would have headed those costs off. Few businesses have enough in reserves, nor do they have a plan to build more. Some owners take too much out of the business at the end of a busy season and get caught short. Last, of all, most business owners don’t understand how much profit they really do, or don’t, earn.
You do have options. Flex hours, job sharing, telecommuting, sabbaticals, time off for education, and extended vacations can all be tools in your arsenal. So can looking to share employees with other companies that have cycles opposite yours. And of course, unemployment insurance is meant to soften the blow for employees who have to deal with seasonal work opportunities.
Reimagine how the work gets
Know how much you can afford in excess payroll during the slow months. Build a plan to keep people busy with cross-training, skill-building, and vacations. Ask people if they want to take off extra time, on their dime —you may be surprised to find that extra time off is valuable — especially to millennials.
Manage the workforce and the total workload. Schedule service and other routine work for slow times. When busy, resist the temptation to go to overtime, which burns up cash. Put busy time profit into reserves to make payroll when it’s slow.
Make sure employees understand and are supportive of your strategy. Make it clear they can’t have it both ways; lots of overtime or excess spending during busy periods eliminates the possibility of full pay during slow times. If cuts are necessary, ask employees to choose: let go of some people, or share the pain by reducing everyone’s hours enough.
Do reviews of job profitability and overall employee performance at the end of a busy season. Match reviews up with work downturn and makes tough, but necessary, decisions on whom to cut.
Understand goals and objectives
Set a goal for the payroll-to-invoices ratio. As work winds down, have a plan for who goes and who stays. Resist the temptation to wait too long; every week you overspend on payroll eats away at reserves.
If you do furlough people you’d want to bring back when it gets busy, make sure to get their slow season contact information. Start recruiting for the busy season when things are really quiet. Don’t wait to manage the workforce. Stagger employee returns, a few each week, until you’re back at peak workforce.
Make sure you’re actually charging enough for the work you do. It costs money to flex a workforce up and down. If the business winds up unprofitable at the end of each season, ask your employees to help you figure it out. Focus on fixing the root causes, so you don’t have to keep dealing with the craziness of the ups and downs. After all, your job as owner is to be realistic and manage the business for the long term.
Looking for a good book? Try “Strategic Workforce Planning: Guidance & Back-up Plans” by Tracy Smith.
