The True (and Hidden) Cost of Understaffing

You’re probably all too familiar with the phrase “Do more with less.”  With layoffs and downsizing caused by the pandemic, many employees and employers alike have had to do more with less. However, when you try to get things done with a smaller number of employees, the consequences can cost you dearly. Learn about the long-term implications of understaffing on a business.

In a tight financial situation, many business leaders take the downsizing route without fully understanding the implications—both short and long term—it can have on their organization. Make no mistake, companies have to make moves to survive during an economic downturn, but understaffing can cause the organization to lose money instead of saving it.

Understaffing makes a huge dent in your company’s ability to meet the needs of your clients and customers, and can negatively impact your reputation. It also carries a variety of hidden costs. These include the following consequences.

1. Higher Employee Stress

Yes, employees who are fortunate enough to be spared the last round of layoffs are grateful to have a job. But when a business is understaffed, these existing team members may still be expected to meet the same standards and complete the same amount of work with fewer employees. Having to deal with an excessive amount of responsibility over a prolonged period can take a huge toll on employees’ mental and physical health, and overall workplace morale.

In fact, a study conducted in 1997 revealed that psychological problems are the reason behind 60% of employee absences.

2. Increased Turnover Rate

Regardless of how great your company culture or benefits are, employees may not stick with you for long if they’re constantly burnt out. While they may not have many options now, they do have long memories—especially when management seems indifferent to their plight. Overworked employees may be planning their exit for when the economy recovers.

The most common factor among companies that experience high turnover rates is dissatisfied, overwhelmed workers who just can’t keep up with the unrealistic expectations and increased workload. Moreover, a high turnover rate can be a very expensive problem when you factor in the costs of recruiting and training new employees—not to mention the lost productivity during their learning curves.

3. Drop in Product Quality

When employees are under excessive pressure and are overworked, their focus gradually switches from getting the work done right to just getting the work done. The number of mistakes and errors increases and attention to detail goes out the window.

This leads to a noticeable drop in product quality, which costs the company more money and can damage its reputation and brand in the marketplace. Considering that people are able to submit online reviews of products and businesses, it could take years to neutralize bad ratings with good ones.

Brookwoods Group is one of the top executive search firms and professional recruiting firms in Houston, Texas. We have provided staffing and recruiting solutions, like permanent and contract staffing, to organizations in Houston, San Antonio and Austin since 1998. Let us help you find the best talent through proven recruiting strategies tailored to both your company and your position. Contact us today to get started.