The Costs of Being Understaffed: Including Upset Customers

It was a running joke with my family for years. Famous Barr was a department store in St. Louis, which was later bought by a competitor. While the selection and displays were decent, you could never find an employee to pay for your purchase(!). I can’t tell you the number of times Mom wandered around looking for someone at a cash register. At some point, she started avoiding Famous Barr and going to other stores. By not having enough staff, the cost to Famous Barr was the loss of a reliable customer.
A more extreme example is the airline industry. “The U.S. airline industry is profitable today in part because big network carriers shed more than 170,000 workers, or 38% of the total, between August of 2001 and October of 2006”. Today: “The pay is low, the work is tough and…airlines are having trouble hanging onto workers and finding new ones”. The cost? More service problems. Planes move to gates slower, service on flights is poorer and more weather delays occur. While airlines may be more profitable in the short term (lower salaries) they lose clients and have lower profitability over the long term.
The Lesson: Every business has a point at which they need to hire staff or replace existing staff with more effective workers. If they don’t, they will start losing business due to poor service. Losing customers (and trying to replace them) is much more expensive than the salary and benefit expense of new staff.
Your Homework: Think about your company’s staffing level. If you need more staff and can’t commit to full-time employees, could temporary or contract workers meet the need? Can they be productive enough to justify the cost?
(Source: “As Pay Falls, Airlines Struggle to Fill Jobs”, Wall Street Journal, 5/16/07)