The economic landscape is dismal. Inflation continues to increase the cost of goods and services. Supply chain issues show little sign of improvement, and most businesses are struggling to stay afloat. Add the high cost of labor – if you can find it – and the rising cost of benefits, and many businesses large and small are looking for ways to cut expenditures.
The Buffalo News reported on data compiled from the US Census Bureau. A poll taken in April 2020 showed 90% of businesses reported a large or moderate negative impact as a result of pandemic. Today, that number has only dropped to 66%. Supply chain issues, particularly for domestic goods, work stoppages, and labor shortages continue to contribute to a gloomy climate for business.
Cost-cutting is always on the table for business. Running a lean operation is key to success in the best of times. When market conditions are poor, cost-efficiency can make the difference between weathering bad times or succumbing to them.
Vendors are passing along the pain of inflation
The goods and services you purchase are costing more than ever. You may be shopping vendors to try to find a better deal on everything you purchase, but often come up empty. The more it costs them, the more it costs you. As they pass on their increased costs to you, you’re likely passing on increased costs to customers.
The result may be your vendors and you may have priced yourself out of the market for some customers. Depressed sales may drive costs even higher as business works simply to maintain. The ripple effect of the pandemic, and the dire economic outlook, will likely take years to reverse. In the meantime, you’re charged with cutting costs without threatening your business.
When expenditures have to be cut
Depending on how you ran your organization pre-pandemic, there may be some cost cutting options that are easy to make. Getting rid of the free juice bar, selling off the sleeping pods, and letting the floating employee massage therapist go may cause employees to balk, but they’re probably not going to resign.
For the rest of us who work in the real world, cost cutting is not as easy. Most businesses don’t over-indulge staff or spend on unnecessary goods or services. These organizations lead with responsibility. They put their dollars where they’ll pay dividends: on employees, products, and productivity tools.
Headcount may have been reduced during the pandemic – and may still not have returned to normal. Existing staff may be working harder with fewer coworkers to help, but their maintaining the status quo. Personnel costs are one of the highest line items for business. In service-driven industries, payroll, and the benefits associated with it, can reach 70% of operating budget. Running as lean as possible with staffing levels is key; running with too few employees is costing you in productivity and sales.
Inflation and HR
The temptation to cut spending in areas without a seemingly immediate return on investment is strong. For many businesses, the entire HR Department seems like a cost center rather than an income-generator. But without HR, there are no employees: without employees there is no productivity: without productivity there is no business.
When HR is charged to find ways to cut costs, they may look to vendors for help. In today’s market, the time is ripe for HR to start shopping around for service providers willing to meet your needs for less.
With an increasingly challenging talent pool, you may be tempted to save a few dollars and skip the background check and screening processes. There are so few candidates to choose from, you may believe you’re lucky to get anyone at all. That kind of instant gratification can be costly – in the short-term and into the future.
The high cost of a bad hire
Some estimates calculate that leaving a position unfilled costs businesses about $450 per week in lost productivity. The cost to recruit talent can reach $4,000 per hire, and take up to 52 days, according to Glassdoor.
Consider the impact of a bad hire. Once you’ve determined how much that open position is costing, add the cost of selecting the wrong candidate. A bad hire no only wastes the initial recruitment expenditure, it doubles it by restarting the process over again.
Cutting the cost of background screening may seem like a short-term fix, but it can be a costly mistake within days or weeks. A bad hire may stop the daily loss of productivity or may worsen it. A bad hire may be problematic because they’re unqualified: but there may be more worrisome issues that have gone unnoticed.
If the newest member of the team has significant issues that weren’t uncovered by screening – a history of violence or abuse, theft, or other potentially harmful concerns – you may be putting your staff and your business at risk. If they have a social media presence that speaks of racism or illegal behaviors, your organization’s reputation could be at risk. The cost of carefully screening talent is worth the price if you’ve invested wisely.
Start smart shopping
Instead of skipping the important step of screening potential hires, work with existing and shop new vendors to find services that meet your needs and your budget. ‘We’ve always used xyz company’ doesn’t work in today’s competitive market. There may be new services or products your existing vendor doesn’t provide. There may be a vendor that can work faster. Getting the results you need quickly can mean you don’t lose top talent to the competition. The time is right to analyze all the services you purchase, and upgrade as needed. Background checks and pre-screening should be at the top of your list to preserve and renegotiate if necessary.
Of all the cost centers in your organization, the most valuable, costly, and riskiest investment you have is in people. In difficult times it’s important to work with screening and background check services for the best return on investment. You will be ensuring your organization hires the right people for the work, for the company and for the safety of your staff.