Lesser Can Be Better — Did I Say that Right?

by Keith Basik on January 31, 2012

Lessons In Business:  

This blog is the second of a series highlighting key lessons learned in business. They are lessons that apply to all businesses, regardless of the type or industry of the business. The goal is to have business owners, buyers or sellers of businesses, and other readers comment and share insightful vignettes or short stories that have changed the way they do business. Comment or submit your story to info@westpointbusinessbrokers.com.

 

Lesson – Lesser Can Be Better

The old adage of Bigger is Better, is just that, an adage. It is something you take with a grain of salt (another play on words) and not to be viewed as an absolute. I guess, in business, just like many things, nothing is definite. By throwing in the “Can Be” of the “Lesser Can Be Better,” I take out the absolute and leave myself some breathing room.

After that lengthy introduction, the “lesser can be better,” in this case, pertains to hiring a lot of employees at the start or the opening of a business.  In short, there is a tendency to hire too many people. It sounds rudimentary, doesn’t it? Just do not hire too many people. Simple. Keep cost low. This is a basic businessman’s mantra.  Why would anyone do something contrary to this?

Well, my friend, there are many that surprisingly do act contrary to this basic mantra and for seemingly good reasons. I have seen it a number of times and with plausible explanations by very smart and logical business owners. The number one reason for hiring too many people is that they do not want to open a business understaffed and thus the customer service quality is negatively impacted.  So there. There is a good reason to over hire.

Well, not so fast. Perhaps there is merit to this practice, but the problem is that it continues all too long. As such, labor cost yield a crushing blow to profitability. I have seen this happen all too often. The owner hires the employees, gets use to having the extra hands, becomes hesitant to let them go or feels the business can not function without them, and then the cost mount up and profitability goes down.

Recently, I have seen this in a retail, as well as in a pharmacy setting. In both cases, the concern going into the opening was that they were going to get inundated with customers and were fearful that  the customer service would be jeopardized if they did not have more than enough employees manning the deck. As time went on, they did not adjust the numbers to their actual needs.  In the case of the pharmacy, the cost continue long enough to cause the partners to waver in support of the  pharmacy and close it down.

In addition, one of the main problems with over staffing, aside from the huge costs incurred, is that the owner does not learn to run the business efficiently.  As people can attest to in today’s environment, many–from both an individual, as well as from a business standpoint–are learning to do more with less.  From a business perspective, they have come to realize that certain employees were not needed and adjustments to certain systems and processes could further reduce the payroll.

In the end, there are times where you need to have employees to ensure good customer service is adhered to–part-time employee may do the trick.  However, if you start too big, you can lose sense of what is needed and what you can do without and, being humans–like we are, we tend not to want to let go of things. For the most part, start small (have a couple part-timers in the wing) and gradually and efficiently build your business; hence, “lesser can be better,” or is it “less can better,” not real sure.

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