80 Ways To Reduce Expenses, Part 1: Labor
By Dr. Michael Mahoney and Dr. John Crossley
Editor’s Note: This is the first installment of a four-part series that will explore 80 ways to reduce operating expenses. In these difficult economic times, these ways could be the difference between having a profitable year and one of significant financial loss. After all, every dollar of reduced operating expense goes straight to the bottom line of an annual profit-and-loss statement. Take these suggestions at face value, or modify them for your agency. Either way, please take a look. Shaving a few dollars here and there might just save a job.
There are many well-known and obvious ways to reduce expenses.
For example, it is fairly common knowledge that hiring two or three part-time employees to replace the work done by one full-time employee who has left the organization (due to retirement, another job, termination, downsizing, etc.) will cost less. The hourly wage rate is likely less, and there is also a savings on employee benefit costs.
But take a closer look at your labor expenses. Although some experienced managers may already know about and/or utilize some of the following strategies, these new ideas are worth consideration.
It is important to note though that every strategy presented in this series can potentially have an adverse effect. For example, continuing with the part-time/full-time strategy noted above, several problems may develop. There are additional training and supervisory costs in hiring new part-time employees, there may be a potential for lower-quality work, and the practice may violate a labor-union contract.
Therefore, it is important to weigh the pros and cons of each strategy before implementing it.
1. Sick-leave incentive program. Create a program in which employees can opt to exchange a certain number of unused sick-leave days for a payout at 25 to 33 percent of a salary per day. This is an incentive to employees who continually use sick-leave days for questionable excuses, and often on days when you need them most.
The adverse effect may be that some employees are motivated to come to work on days when they are not productive--or worse--spread the flu or other ailments to other employees.
2. “Personal days” instead of “sick days.” This is an alternative to number 1. Instead of allocating days for sick leave, provide a lower number of “personal days” that allow employees to take off for any reason.
However, if the ratio of personal days is only half as many as the sick days, then you won’t save as much as with a 25- to 33-percent payoff on unused sick days.
3. Staggered-shift scheduling. Track facility daily-use patterns carefully, and note the busiest and slowest times. Then schedule different shifts of employees (combined full-time and part-time) to overlap during the peak times, and reduce during slow times.
An adverse effect may occur if you are wrong and/or use patterns change; you could be caught short-staffed at busy times.
4. “On-Call” staff: For facilities such as theme parks, beaches, and water parks that are weather-dependent, schedule some employees (typically part-timers and/or seasonal workers--not key employees) to be “on-call” on days when the weather forecast predicts inclement weather. Pay those employees one hour’s wage to be available to work if you call them at the beginning of the day.
However, weather can change, so this strategy can backfire. Additionally, some employees may be unhappy with reduced hours.
5. Sending employees home early. This is an alternative to number 3, or can be used in conjunction with that strategy. If the weather turns bad, and/or the expected number of customers does not show up, some of the less vital employees can be sent home early.
But this also can hurt employee morale, so be sure to fully explain this practice when making an employment offer.
6. Job sharing. Use one employee to cover similar jobs in different divisions of the organization if the workload doesn’t justify two full-time positions, and you don’t want to use part-timers.
However, the employee could be stuck between two supervisors with different management styles and priorities. Coordination and flexibility between the two supervisors are essential.
7. Commissions instead of a salary for sales jobs. Paying commission (or commission plus a small base salary) for sales employees gives incentive to the more productive employees, and saves money on those who are low in sales productivity.
Adversely, some employees could give less effort to important tasks that do not lead to commission (service issues, repair questions, customers with less sales potential, etc.).
8. More customer self-service. Think creatively about tasks customers can perform to save on employee wages, such as automated ticket machines.
But there could be more customer theft or abuse of the equipment. Also, some customers still want to interact with an employee.
9. A bonus instead of a raise. In difficult economic times, many employees understand that annual pay raises may not happen. However, to encourage productivity and still save money, give bonuses to exceptional employees. The cost of a bonus does not carry over to the following year like an annual raise.
Employee morale, however, may suffer without an anticipated annual raise.
10. “Merit increases” vs. “across-the-board” raises. Too many employees expect a substantial annual pay raise for mediocre productivity. To stop this practice, give raises based on merit to a pre-determined percentage of employees.
One adverse effect of this practice is that some supervisors may inflate employee evaluations while others will be stricter in their evaluations. Also, a small pay increase to cover part of the inflationary cost of living is usually expected by most employees.
11. “Furlough days” for full-time staff. Reduce work days and pay by a certain percentage (a 10-percent pay and work reduction is about two days per month). Carefully evaluate what the less critical tasks are in order to reduce work days.
However, you could be wrong about which tasks to eliminate or streamline. Plus, you could have a wave of unexpected early retirements, which may not be a bad thing.
12. Opening a facility in stages. Limit which parts of a facility are open to the public early in the day, such as a low-attendance aquatic facility. Use additional staff members when customer volume warrants it.
Some customers, though, will expect all facilities to be open at all times.
13. “Clock-in” and “clock-out” times. Some employees arrive at work early, clock in, and wait around for their shift to start. Similarly, an employee may delay “clocking out” at the end of the day. Both practices “pad” hours without contributing any productivity to an organization. Monitor this behavior to put a stop to it.
Be careful because some employees may think they are not being trusted and are being micro-managed.
14. Monitoring lunch times and break periods. Some employees take an extra 10 to 15 minutes for lunch regularly, or extend break periods. Monitor this behavior to prevent it.
Employees, however, may feel micro-managed.
15. “Trainee wages” for initial hirees. If an employee doesn’t have all the skills for a job, but has the potential to learn, offer the position at a reduced pay rate until he or she learns the skills.
Under a union contract, this may not be allowed for the job classification.
16. Requiring specific skills. This is the “flip-side” of number 15. Those who have all the skills needed for the job only need an orientation session and not a job-training program, which costs extra money.
If the applicant pool is thin, however, and the position does not draw the desired skilled/experienced employee, some training may be required.
17. Recording correct job procedures. Some employees may learn a job better through a video or DVD than from written instructions. Also, a video can be used many times if needed by an employee. This reduces the cost of face-to-face instruction.
Video production has a cost too, so use it for positions frequently filled by new employees. Also, it does not replace the need for an employee to demonstrate the correct job procedure under supervision.
18. Monthly payroll. Instead of weekly or bi-weekly pay days, run payroll just once a month to cut down on administrative costs.
Be aware that some employees don’t budget very well, and need a more frequent payday to manage expenses.
19. Reducing labor-intensive tasks. Some tasks can be completed more quickly and efficiently by automation through a machine or securing the right equipment for the job. For example, consider larger mowers for turf areas. Think creatively about how to reduce the amount of hand labor for each job.
Obviously, some unions resist any threat to employees, even with more efficient methods.
20. Bartering for services. You might be able to barter or use “trade-outs” for some services. For example, give a plumbing company free tickets to an attraction in return for some contracted work. Radio stations are also good with trade-outs.
However, bartering is receiving increased scrutiny from the IRS, so check with your accountant.
Not every strategy will work for an agency. Also keep in mind some of the “adverse effects” that may be serious enough to outweigh the expense reduction of the strategy. For example, many of the strategies lead to a reduction of the number of employees an organization needs.
Remember also that every “employee action” (new hire, suspension, reduction of hours, policy, procedure, termination, etc.) sends a message to all other employees, which can hurt the sense of job security for those who remain.
Next Month: Reducing operating costs for equipment and supplies.
Dr. Michael Mahoney is the coordinator of the Sports & Entertainment Facility Management emphasis in the Department of Recreation Administration at California State University in Fresno.
Dr. John Crossley is the coordinator of the Recreation and Leisure Services Administration program at Florida State University in Panama City. Both individuals have significant managerial experience in recreation and event management prior to their academic positions.