In most companies, the largest expense is their employees. Now, I want to frame this article with a clear understanding that your team is essential and indispensable and, in that sense, really not an expense. Still, I want to share with you eight sure-fire suggestions for controlling your staffing costs.

  1. Tie compensation to value created, not time served.
    Too many businesses reward staff with raises, bonuses, and perks (e.g., vacation time) on the basis of years of service. I strongly encourage you to shift the conversation to value creation.
  2. Bonuses and benefits are not rights but tied to performance (both individual and company).
    Any bonus that is regular and expected soon becomes base. How do you frame your bonuses? Are they a right or are they a reward for value created?
  3. For creative and interesting work, let intrinsic rewards rule.
    This means, don't try to find financial incentive systems to control or encourage behavior. Instead, for interesting, creative work, let the work itself (and the feedback your team gets) be the driving force.
  4. Consider cuts to your administrative staff, or at the very least, grow this part of your team more slowly than your sales staff.
    Most service and administrative departments can be cut by one in four with no impact on quality of work. Many can handle a one-in-three cut with no significant negative impact. Remember, work expands to fill the time, and not all this expanded work creates value.
  5. Stop all make-work. 
    This is a follow-up to suggestion four. The best way to cut make-work is for your staff to have full plates that force them to prioritize and leave lower-level items undone, or done well enough. Also consider your company's culture. Is it encouraged in your company for lower-level team members to powerfully champion cutting low-value legacy make-work?
  6. Cut wasteful meetings (or at least cut the time in half).
    Do you really need all the meetings you have each week or month? Couldn't you cut the attendance list or meeting time by half and still get the same or perhaps a better result? Clear agendas and firm facilitation make the meetings you do have more productive.
  7. Twice a year, issue a full-benefits report to every employee.
    On that report, lay out the full financial value of all benefits your company pays to staff members, directly and indirectly. This includes the dollar value of their salary, bonuses, medical benefits, vacation time, FICA taxes, etc. The reason to do this is to keep all employees clear that the money they receive twice a month in their take-home pay check is just part of what the company pays to them.
  8. Cut your low-performing team members now.
    Get over your fear of firing people (low performers cost too much to carry). As soon as you know you have a team member who just isn't going to cut it, make the decision to help the person move on to his or her next career position rather than staying in limbo with you. It's better for the employee and it's better for your company, too.

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Published on: Jul 1, 2015