When It's Time To Hire

Too many employees leads to lower productivity, yet too few lead to problems as well, particularly over the long-term.

I worked for two Plants seeking higher levels of productivity.  The common thought was that cutting hours was the only way.  However, productivity levels remained constant even when there was a reduction in hours.  This occurs at some point, because there can be inefficiencies when too few people run an operation.  Machines take a certain number of people to run efficiently and safely.  Bouncing people from one spot to another, to extreme, is inefficient too.  If you’re running too lean, overtime may creep up.  In addition, if overtime creeps up too high, occurs too often, and lasts too long you risk lower morale levels.  Unfortunately, lower morale inevitably leads to higher sick leave percentages, higher accident rates, and greater employee turnover.

In my experience, employees that work overtime for an extended period, grow accustomed to the extra money, and grow dependent on it.  The problem occurs when the overtime is suddenly gone as is often the case when a new machine or new people are hired.  Suddenly, the employee that is dependent on the extra money in their check is struggling to pay his bills.  Some employees will drag their feet or do things to undermine operations in hopes of working overtime.  A supervisor should keep employees aware of any future changes that are expected.  Inform them how that may affect them.

On the other side, you have the employees that don’t want to work any overtime.  They prefer to work their required eight hours and go home.  These people might have someone they have to take care of, children, or a spouse.  Maybe they just want a better balance between work and their personal life.  When this type of person consistently faces overtime, they are more likely to call in sick when they really need a day off.  After all, they know if they go to work, they are probably going to work forced overtime, regardless of their other obligations. 

The best option is somewhere between too much overtime and too little.  The absence of any overtime, where employees are not exempt, generally suggests overstaffing in production lines.  Likewise, excessive overtime generally becomes costly in terms of additional pay premiums, morale, and accidents.  Each company must determine the overtime percentage that triggers additional hiring or a cut in hours.  This point is found by determining the point at which the cost of an additional employee is cheaper than overtime.  For the company I worked for, we figured that at a consistent overtime rate of seven percent or more it was cheaper to hire another employee. If we were consistently under three percent we did everything we could to cut hours, because we knew things were slower than normal.  We tried to operate between three and seven percent overtime, believing this was the ideal place to be financially.

Note:  these percentage rates were determined under the assumption that everything else remained roughly the same (productivity, attendance, machines, etc.).