How to minimize the effects of the labor shortage on your small business

We’re all feeling the crunch as a result of labor shortages right now, whether that looks like reducing business hours, increasing wages to keep employees, or trying to figure out how artificial intelligence (AI) can help get you by with fewer people without affecting production.

Or more likely, it’s all of the above.

As expenses increase with inflation and interest rates rise to combat it, small businesses are especially feeling the crunch. The labor shortage has a bigger impact when your team is comprised of significantly fewer people to start with. When you are missing even one or two people, the whole team feels the added burden.

So, what can you do as a small business owner?

Focus on your staff. It is typically less expensive to keep existing employees than to source new ones because it takes time not only to get a new hire in place and properly trained for their position, but also to help them truly understand how your business operations work. Not to mention, it takes time and energy to build rapport with your clients in a sales role or other customer-facing position. Also, that new employee will likely garner a higher wage expense when hiring from the market (or just stealing talent from the competition).

Review your systems and procedures. Before going ahead with hiring that new employee (and adding any benefit expenses that comes with that new hire), take a hard look at current operations and systems being utilized. It might make more sense to invest in a one-time expense on a system upgrade with additional capabilities or to streamline operations to cut back on expenses. Yes, training your staff and yourself on a new system will take time and may come with a few snags, but in the long run it will likely reduce costs, increase efficiency, and possibly even boost production.

Every business has that key employee (or employees) who it really does not want — or cannot afford — to lose. Consider ways to show your appreciation and solidify their relationship with your company. Some of the more obvious added benefits include pay increases, incentives/discretionary year-end bonuses, or both. However, it might be even more effective if you don’t assume. One especially effective approach is to tell that employee how much you appreciate them and simply ask what would improve their situation. Taking the time to ask them about their wants and needs will speak volumes about how you value them (and their opinion). Other “outside-the-box” benefits that could matter more to your employee than just an increase in wages include:

  • Paid life insurance policy to benefit their family should something happen to them;
  • Paid child care — there are programs available now that just need documents signed by the employer and daycare facility;
  • 401(k) or SEP plan;
  • Continuing education credits allowing for time off to attend class and paid credits;
  • Additional vacation time (paid and unpaid); and
  • Paid therapy or offered benefit plans that cover therapy services.

These are just a few suggestions that I’ve seen as additional desired benefits in our market and should not be considered a complete list.  You can also research to see what top benefits are being requested.

Review your position descriptions. Sometimes, a key employee retires, and you may not always have another employee on staff who can easily slide into or absorb that role. If that’s the case, take the opportunity to scrutinize that role and understand what you need from that position going forward. This may involve tweaks to the current position by decreasing tasks that can be automated or increasing tasks so that another role can be absorbed. Once you know what you really need, make sure you do some research to determine what market rates are for that type of role and then advertise for the open position in the most likely places that you would find a reliable match — your own company website, LinkedIn, college campus career service centers, professional recruiter, etc.

No matter how you decide to combat the labor shortages, you owe it to yourself and your team to make those decisions with the best information available to you. Lean on your business partners and resources, such as your banker, CPA, or business attorney. I am always happy to chat with my business clients and use my resources to help in any way I can.

Happy talent hunting!

Tara Grays is assistant vice president-business relationship manager at State Bank of Cross Plains and part of the In Business 40 Under 40 Class of 2022. In addition to supporting your business banking needs, Tara enjoys facilitating connections by providing introductions to people in her network.

Click here to sign up for the free IB Ezine — your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.