Review Your Payroll, It Is Probably Too High

It is a natural occurrence, it happens all the time, you slowly add positions thinking you are in need, or you are increasing efficiencies by creating administrative positions, to ease the burden of the higher paid employees so they can concentrate on their more valuable aspects of their job, and not be bothered with clerical work. Sometimes during a growth period you add employees to expand but when contracting you leave the employee base where it is.

Pay raises occur naturally every year over time, as if it is suppose to be that way irrespective of profitability and revenue.. Benefits costs increase annually adding insult to injury. People become irreplaceable because only they know exactly what they are dong, no written systems.

And on it goes…

There are a few principles at work here:
1. Over time employee costs naturally increase eroding profit.
2. Productivity naturally goes down, meaning each employee accomplishes less and therefor earns less for the company to spread around the available work so everyone keeps their job.

This kills good businesses, unintentionally but slowly and surely.

You must review productivity annually and keep reducing payroll. Keep reducing the number of employees, not increasing but reducing. What should be happening is the employees should be getting more efficient, better at what they do and becoming more productive. The company should be getting more profitable not less. By systematically reducing the number of employees you improve those that remain…automatically.

They get better and should be paid more as you weed out those that are not as good and reduce the employee force over time, increasing profit and reducing costs.

The big barrier is most employers do not believe the can do with fewer employees. They believe they need the work force they have and will crash if they cut people out, not believing those that remain will increase their productivity to take up the overflow.

The second big barrier is the emotional one, not wanting to hurt the person you are cutting so instead hurting the company putting everyones job at risk. This of course makes no sense, but is a very powerful and compelling issue that needs to be overcome..

Try it, You will see. It works.

Posted in BLOG.

Don Todrin