Whether a small business or an enterprise, the workforce is the core of creating a successful organization. Without strategic planning, staffing can get out of hand, leading to wage overspending because of overstaffing.
Overstaffing is when a company or organization hires more employees than needed for smooth operations. It is a common problem that many businesses face. Most overstaffing issues result from poor planning, rapid growth, or sudden changes in workload.
For instance, in the retail industry, companies hire staff to meet the demand during festive seasons but are left with many workers after the demand declines. If not appropriately managed, overstaffing can adversely impact a company’s financial health, employee morale, and overall productivity.
This article explores the causes and consequences of over staffing and how to address the issue effectively.
Table of Contents
What causes overstaffing?
Before a company can manage its workforce effectively, it needs to identify the underlying causes of over staffing. While there can be some unique reasons depending on your industry and business model, here are some common factors:
1. Lack of workforce planning
The primary reason why companies overstaff is because they need to assess their current and future workforce requirements properly. Effective workforce planning is critical to ensure that the correct number of employees with the right skills are available when needed.
If your company fails to monitor changing market dynamics, seasonal variations in demand, or workload fluctuations, overstaffing is likely to happen.
To resolve this issue, one can utilize employee time and attendance tracking softwares that can monitor employee attendance, work schedules and track the time they spent on specific tasks. This data could then be utilized to monitor employee productivity and anticipate potential changes in workload.
2. Fluctuating demand
For some businesses, demand fluctuation is a phenomenon happening throughout the year. For instance, retailers need more employees during peak shopping seasons like Black Friday. The challenge is when some of these businesses retain additional staff even during decreased customer demand. This results in overstaffing, incurring high labor costs.
3. Uncertainty in project timelines
For some industries, the work-demands are higher. For example, the construction business is labor intensive and companies may be required to hire additional staff when there is more work to be done and tight deadline targets.
However, once project deadlines are met, this additional staff may no longer be needed.. If the company fails to assign this workforce to some other tasks, then it can lead to overstaffing and impact company bottom lines.
4. Ineffective recruitment
This situation becomes painfully clear in the aftermath of the hiring spree by big tech firms during the lockdown period. Organizations recruit employees hastily, neglecting to assess whether the new hires are genuinely required, resulting in mass layoffs later.
More staffing can also result if a company experiences high turnover rates and feels pressured to fill positions quickly, leading to a mismatch between staffing and actual workload.
What happens when a company is overstaffed?
Overstaffing can result in several issues at work that go beyond wasted labor costs. Overstaffed companies often see adverse outcomes such as poor overall efficiency, employee satisfaction, and financial performance.
1. Increased overheads
Overstaffing increases labor costs, draining company finances as you pay excess salaries, benefits, training expenses, and associated costs. Increased overhead can strain a company’s budget and reduce profitability.
2. Underutilized staff
When there are more employees than the tasks, it leads to underutilized staff. It can lead to boredom, frustration, and decreased job satisfaction, adversely affecting teams.
3. Decreased productivity
Similarly, the underutilized staff is less productive due to the lack of challenging work. This, in turn, can lead to lower output, missed deadlines, and overall reduced productivity.
4. Reduced employee morale
When workers do not find engaging tasks at work and are often less productive, it creates a sense of job insecurity among employees. It can negatively affect their morale, leaving you with workers who have decreased job satisfaction, lower engagement, and higher turnover rates.
5. Increased turnover rate
When there is insecurity among the employees, they seek work opportunities elsewhere where they can feel secure and stable. According to the Society for Human Resource Management (SHRM), the average cost per hire is nearly $4,700. Therefore, overstaffing can not only result in significant expenses related to recruitment, training, and onboarding, but it can also disrupt business continuity.
6. Slow inter-team communication
A bloated workforce also hinders the flow of communication and ultimately leads to bureaucratic hurdles and slow decision-making processes. The inefficient inter-team communication and collaboration can lead to poor teamwork and slow responses, causing business.
7. Poor customer satisfaction
Overstaffing introduces inefficiencies in teamwork, communication, productivity, and decision-making, leading to delayed responses to customer inquiries and unmet deadlines. Such subpar customer service can adversely affect customer satisfaction.
8 Ways to Deal with Overstaffing Problems
1. Recognize your current utilization rates
Most overstaffing problems arise from the need to assess utilization rates within the workforce. Companies must monitor the workload and productivity of employees to identify if some employees are overworked or underutilized and if some shifts have higher workloads than others.
Gathering utilization data can provide insights to rectify the mismatch and optimize resource utilization by the workforce. Some issues, like work schedules, can be fixed quickly, while others, like the health of overworked staff, will need more sustainable solutions.
2. Make a staffing plan
To avoid overstaffing at work, a well-thought-out staffing plan is required. A staffing plan details the hiring objectives by assessing long-term and short-term needs to project workforce requirements. With a strategic staffing plan, organizations can ensure their hiring goals are realistic, correctly aligned with anticipated demand, and don’t overhire.
A challenging and often frowned upon but albeit necessary step to stem overstaffing problems is to lay off or furlough excess employees. Layoffs must be carefully planned only after considering all other options and adhering to legal regulations.
Companies should provide support to affected employees. A more optimum solution is furloughing, which allows businesses to bench the excess staff without pay.
4. Work with contractors/freelancers
Companies with more project-based tasks can consider working with contractors and freelancers to meet increased demands. It is the best alternative to hiring full-time employees for specific projects or temporary workload spikes.
Hiring contractors helps manage workload fluctuations without overstaffing. This way, companies can retain talent for future needs without incurring the immediate financial burden of full-time employment.
5. Implement strategic recruitment
Overstaffing can be easily avoided if companies strategically hire workers. Aim for quality over quantity, employees who can add value to the company rather than just adding numbers to the payroll.
Organizations must improve their recruitment processes to find candidates with the right skills. Conduct thorough skills assessments and hire employees who can perform multiple roles.
6. Use a resource management tool
Resource management tools allow managers to ensure the right employees are in the right places at the correct times. Such tools help companies optimize workforce allocation by providing insights into workforce capacity. This results in better planning and resource allocation.
7. Reallocate employees
Layoffs or furloughs should not be the first choice to correct overstaffing problems. Organizations should consider reallocating employees to departments or projects with higher workloads.
Companies that have cross-training programs have employees who can perform multiple roles. This facilitates reallocation, ensuring existing staff remains engaged and productive while reducing the need for new hires.
8. Use shift scheduling tools
Shift scheduling tools are almost mandatory to distribute work among employees efficiently. Solutions like Truein are designed to create schedules that align with actual workloads and allow flexibility in adjusting shifts. It helps companies better manage overstaffing issues, especially in industries with fluctuating demand, such as retail and healthcare.
How Truein's workforce management feature can help businesses address overstaffing?
Truein is a cloud-based, robust time and attendance management solution that offers comprehensive workforce management features. With Truein’s time tracking data, companies can regularly monitor employee attendance and utilization. Its smart reporting feature helps companies identify overstaffed departments.
With a powerful scheduling feature, Truein offers insights into workforce allocation, allowing organizations to adjust staffing levels based on actual work needs. Its shift scheduling also accommodates contractual and distributed workers. Learn more about Truein’s workforce management features.
Overstaffing is terrible news for your business, requiring immediate resolutions. By recognizing the signs of overstaffing and implementing effective strategies, companies can safeguard finances, employee morale, and overall productivity.
Workforce management tools like Truein help companies optimize their workforce through data-driven decisions to avoid overstaffing problems.
1. How do you encourage employees when overstaffed?
When you are overstaffed at work, engaging employees with clear communication about the situation and offering training and development opportunities is essential. Reallocating employees across departments for meaningful work will keep them encouraged.
2. How do you deal with an unequal workload?
The best solution to address unequal workload is to use a shift scheduling tool like Truein to redistribute tasks among overstaffed departments, cross-training employees, and optimize resource allocation.
3. What are the advantages of overstaffing?
Though over staffing is a problem, there can still be advantages to overstaffing. It can reduce unnecessary workload coming on individual employees and ensure their healthy well-being.
As there are more employees at hand, a company overstaffed can handle unexpected work surges effectively. On top of it, it can handle sudden resignations and illness efficiently.
Also, as you’re overstaffed, you have time to cross-train your workers and grow into a versatile workforce. More minds can be applied to figure out creative ways to solve a problem.