With so many businesses shut down as a result of the COVID-19 pandemic, many building service contractors have seen revenues plummet. Because janitorial firms typically run on lean margins, often a company’s first cost-cutting instinct is to slash its workforce.
But there are short and long-term consequences to sweeping layoffs. And there are alternative steps you can take that aren’t as traumatic. Furthermore, with a little help from technology, you can determine your best strategy before you take action…and with so much at stake, why wouldn’t you?
Why “Peanut Butter” Layoffs Aren’t So Sweet
The “peanut butter” approach to workforce reduction means spreading even cuts across the organization—say, slashing every department by 10%. It’s simple and fast, which is why it appeals to companies operating in crisis mode. At a glance, it also may seem “fairest” to the workforce, because everyone shares the pain equally.
However, long-term, this approach typically will inflict the greatest pain on the company. It doesn’t factor in that some teams or departments are more profitable than others—or more essential to rebounding quickly down the road. In addition, traumatic layoffs can damage your brand. They can also depress morale among remaining employees, lowering productivity when you can least afford it. That’s why it pays to explore other options.
Alternative Cost-cutting Strategies for Janitorial Firms
So, what can building service contractors do to reduce labor costs, without enacting sweeping layoffs? There are numerous options, including:
- Eliminate contingent labor—i.e., contractors and temps.
- Eliminate overtime hours.
- Reduce work hours for hourly-paid employees.
- Temporarily freeze bonuses for management and sales.
- Freeze hiring, and let attrition do its work. (Although workers are less likely to resign during uncertain times, turnover is notoriously high in this industry—and fear of exposure to COVID-19 may elevate resignations now.)
- Make company-wide salary cuts, with deeper costs for top earners.
In addition, you can make thoughtful, surgical cuts to your workforce, eliminating non-essential roles, so you’ll reap the greatest advantage while doing the least harm.
Of course, the more you know about your workforce—the better your data or metrics—the more informed decisions you can make. Furthermore, janitorial firms that use workforce analytics find this is an effective cost-cutting strategy in itself.
Cut Labor Costs by 5% Using HR Analytics
As management theorist Peter Drucker said, “If you can’t measure it, you can’t improve it.” HR analytics allow employers to track everything from turnover rates to hiring time cycles, so companies can continuously improve their work processes over time.
Furthermore, analytics solutions with a strong workforce management component can help employers find and cut waste in their time and labor protocols, cracking down on issues like excessive overtime, time theft, meal break abuses, and sloppy time-tracking practices.
In addition, by calculating labor costs and measuring them against sales and operating costs, analytics allow employers to track and improve human capital ROI for each worksite, shift, or manager.
For example, EPAY customers who use our workforce management analytics save an average of 5% on labor costs every year. And that’s not all.
Use Predictive Modeling to Weigh Cost-Saving Options
There’s no question that janitorial firms can use HR analytics to improve operations and save money year-round. During this difficult time, they can also use that data to engage in predictive modeling—to see how each proposed cost-cutting action will translate into dollars and cents.
Say, your company has determined that it needs to cut labor costs by 25%. Predictive modeling would allow you to calculate the financial impact of various factors—eliminating contract workers, enacting hiring freezes, anticipating natural attrition, tweaking salaries—etc. It would allow you to experiment with various what-if scenarios until you find the solution that makes the most sense for your business.
Before You Act, Get a Basic Modeling Feedback Session—On Us
We know many businesses are struggling to make big cost-cutting decisions now, and we’d like to help. That’s why we’re offering you a complimentary feedback session, providing metric-based insights into your cost-cutting alternatives.
There’s no cost or strings attached to this session. It’s simply a service that our HCM analytics team would like to provide.
Here’s how it works:
- Request a Workforce Realignment Feedback Session, and we’ll send you a short intake form, asking you to provide a few key metrics.
- Our HCM analytics team will run some basic modeling for you.
- Then, we’ll set up a phone call with you. In response to your proposed course of action, we’ll identify targeted areas where you can reduce labor costs with minimal long-term damage.
- We’ll also recommend some key metrics you can track to better forecast your labor costs and make more timely, informed interventions.
To request a feedback session, fill out the form here. With so much on the line, why not make the most informed decision you can?