As every business owner will have heard, the greatest asset in your business is your staff… In many ways I support this comment – having benefited from having some truly exceptional people work with me, and for me, over the years. However, the evolution of business over time has meant that the traditional staffing structures now are getting questioned – and they need to be challenged in many businesses to ensure the viability of the business.
The traditional business structure surrounded itself with paid full-time staff, supplemented with part-time and then casual staff, and for the rare occasion – then included subcontract staff for particular / very short-term needs. As the government ABS data continues to show, full-time jobs are no longer the most common form of new job employment. Part-time roles are now more common, and I suggest that many other roles which previously would have been designated full-time, are now also getting farmed out under some form of subcontractor arrangement.
For most businesses, staff or personnel costs (wages, super, WorkCover etc) represent between 30% to 50% of every dollar of sales revenue generated. So before consideration of any Cost of Goods Sold or other fixed or operating overheads, up to a half of every dollar of sales has already been paid away for staff. In an environment where technology, off-shoring, and reduced customer loyalty has impacted, business owners have naturally sought ways of reducing their personnel or staffing expense.
So, whilst many businesses historically would have had a large stable of full-time staff, many of the successful business models of today have the exact opposite. These businesses have minimised their full-time staff numbers, preferring to have a collection of either part-time or subcontract staff to supplement the needs of the business – as and when required. This ultimately means the businesses are obligated to have less paid hours per month, albeit the actual hourly rate maybe higher for this type of model. The key benefit is that the business is only paying for staff hours when they need them and when they can be highly productive.
This type of structure is not just a one-way street for the benefit of business owners.
There is a greater level of risk associated with a more transient staffing model. Unlike full-time employees who are more likely to be stable, longer-term employees of the business – the working relationship with a casual / part-time employee or subcontractors, means that staff member has a lower level of association or income reliance on the individual business. This means that the staff member has far less barriers to actually leaving and working elsewhere, and I believe, engenders a lower level of employee loyalty and sense of obligation to the business. Also for the staff member, is the potential flexibility across multiple employers and / or tax benefits.
So for business owners, my recommendations are simple;
- Stop and assess your business operations and the current associated staffing structure and ask; if you were to commence the business today, would you staff it the same way?
Then, consider what skill requirements you need to deliver on this revised structure.
- Complete an inventory of what skills and abilities are present in your business now – versus what you identified in 2 – as this is the gap which you then need to either train / develop in your existing team, or seek from the market.
Perhaps these are unfair questions, because you have other factors such as relationships with staff, tenure, experience in the role etc. However, I generally find that the answer from most business owners is that objectively, they no longer have the right team for what is required in today’s market.
The older businesses typically have a number of legacy roles which no longer align with the needs of the business today. This is because the functionality of the role has changed significantly, or the simple requirements of the role no longer fit with the current skill set of the staff member concerned. Often the business has simply continued to do things the way they have always done them, because that is what the staff member has always done / known.
Regardless of how long the change plan may be, or how significant the change required – my strongest recommendation is that owners do to not sit on their hands and do nothing. Standing still on issues such as this, (i.e. where you have 30% to 50% of your expenditure budget involved), in effect means that you are not keeping pace with the market – and hence, the situation will only worsen.
As always – for matters such as people and taxation I recommend strong, quality professional advice from those who are suitably skilled and qualified in those areas. Transformational change in a business can be difficult, so it should be well planned and then completed with the appropriate support.
The change in staff structure for many businesses will simple be the next “evolutionary” change required by the business for it to remain sustainable in the mid-long term. Embracing the changing forms of staff employment can provide significant benefits for all parties, so it is better to be active in openly leading this change – than being reactive when it is forced on you.