Overtime. Friend or Foe?

If you are forcing your people to work overtime you may be forcing them out the door

During what looks like an economic slowdown and an ongoing struggle to find people to fill key positions, decisions about how to manage staff becomes more important than ever. When the work force is inadequate to meet demand it taxes the entire team, requiring more from everyone.

In the past, companies may have increased staffing levels as a solution for handling increased demand. However, because of the current employment climate many businesses cannot add the qualified staff they need. Such a situation leaves few options, of which none are good for business.

One option is to hire underqualified staff. While this may seem like a viable option, some never develop to the level necessary to achieve expected results and others have been found to be very unreliable. Both situations cost money and result in a negative impact to the customer experience.

The Overtime Decision

The easiest, yet costly alternative to the above is to pay existing staff to work additional hours for a pay premium. At first glance this appears to be a win for the company, its customers, and its employees.

The Effect of Overtime

There is no doubt that a decision to mandate overtime is done with the best intentions. There is a need to meet demand and because of that need a business pays employees accordingly. It sounds simple and straight forward and certainly fair. However, there are unintended consequences that arise from such a decision.

Businesses are living and breathing organisms brought to life by the people inside. Like a family, a business must be nurtured, developed, and cared for with compassion and concern. Attention to the mental and physical health of the employee must be a management priority. When overtime is assigned, the extra hours can be effective for covering demand. However, kept in place for too long, overtime can have a negative effect on the business and its culture.

1. Morale Takes a Hit - Most employees understand the need for overtime from time to time. They know that there will be times when demand increases and that increase in demand must be met. However, employees can only do so much physically and handle so much emotionally. Employees also have demanding lives outside work. If not managed well, overtime can drain employee’s energy and result in negative behaviors. All of us need time to recharge our batteries. Business owners must make sure that care is given to protect that personal renewal time.

2. Productivity Decreases - If overtime is not managed well employees can begin to slow down. This can result in less-than-optimal performance. Over time (no pun intended), a 10-hour work day can equal the same level of productivity as an 8-hour day, resulting in a net zero productivity gain.

3. Employee Turnover - Due to the constant grind of long days people may begin to search for other employment options. Employee turnover has huge consequences for every organization and is certainly more costly than adding staff to handle short and long-term demand issues.

4. Quality Drops - Because people become tired and feel overworked, morale takes a hit. Quality of work can take a hit as well. When quality decreases it negatively impacts customers and the company. This can result in an increase in reworks and returns. This is not good for the company or its customers, nor is it good for the employees who have historically taken great pride in their work.

5. Profits Decrease – Because of the above, overtime can result in a loss in profitability. Lower per item profit essentially means that the organization is gaining less than what was expected from the overtime decision. This can be one of the first indicator’s that overtime has been in place far too long.

The Purpose of Overtime

Overtime was originally designed to meet temporary demand, not to be a long-term solution. Labor laws were put into place years ago because the effects of long days were incredibly taxing on the labor force. Those effects are still relevant today even if the employee is compensated accordingly. You can't change the laws of nature through increased pay. When making the decision to assign overtime, think through the natural consequences.

In the end, most employees understand the need for overtime and will gladly accommodate. However, they can't maintain such a demanding schedule forever, nor should they be made to. Think strategically and have a well communicated plan for overtime. Doing so will ensure that the purpose for assigning the overtime is achieved.

Randy Stepp is a Principal with Renaissance Leadership Group. RLG is a full-service medical aesthetics practice and business development firm committed to helping owners achieve long-lasting success and sustainability.

Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more.