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How do I get my increased wage bill reflected in sales and profits?

As businesses grow, so does the need to take on extra staff. But if you’re finding that your profits are not keeping up with your increased wage bill, it’s time for a rethink. Ally Maughan, People Puzzles founder, lists some of the things you could consider.

Be very careful where your increased wage bill is spent

It can be tempting to just replace a leaver or hire another person to join the team when things get busy. However, this is a missed opportunity; every time you have a vacancy, it is chance to review what good performance looks like, where and how work should be done best and what the right wage cost is for each element of the work.

Look at what is working and review what is not

In an expanding team, a truly brilliant performer should dictate the standard of the next person you want to hire, and might also give a steer for the approach and skills needed. They’ll also show up the poor performers on the team who need to either improve or leave.

Decide what could bring added value

As a team expands, you have the opportunity to have more specialised expertise, which should bring increased performance and efficiency. In a sales team, for example, you could bring in technical, international or sector-specific sales knowledge. However, if this isn’t leading to greater sales at the right margin, then the team needs further review.

Reward your star performers…

Keeping a close eye on your wage bill also means giving pay rises and bonuses when deserved to keep your good performers. Without keeping your stars, your margin will certainly suffer.

…but don’t just reward sales

Profit and margin are absolutely critical, it’s not just about turnover. Encourage good commercial awareness across the business, with regular commercial awareness training, and communicate where margin is boosted and wasted.

Look for greater efficiencies

A good way to increase efficiency in your business is to look at how work flows through it and where time or resources are wasted. The best people to do this with are those involved at each step of the process, ie your team. Getting input from them increases buy-in and awareness, which usually generates results.

Know how each role contributes to the business plan

Ensure you know what each role needs to deliver and review both the role and the person in line with the business plan. Decide what is business critical to deliver and what isn’t, and how each pound of your margin is spent to deliver benefit.

If your business market isn’t growing

Before you do anything drastic, make sure it’s not just a short-term dip (ie a month or two) due to an explainable event. So if you know that most big contracts are awarded in May, don’t lay off in March! Try instead to think about short-term strategies like unpaid sabbaticals or a shorter working week until things are back up to speed.

Review and restructure where necessary

However, if market conditions are really tough, you’ll need to have a business review and sometimes cuts will need to be made in order to have the right structure and a healthy base for growth going forward. Doing this thoughtfully and carefully is very important, as is caring for the employees that are leaving; your reputation is at stake so it’s important to get this right.

If you need help with a restructure or are looking for strategic HR to take your business forward, call People Puzzles on 0808 164 5826.

Lynn has been a fantastic support to us and an ongoing fountain of knowledge. If you have a business and/or staff you need to take care of, you need a Lynn on your team!

Kerry Berry, Director, S&K Berry Associates LLP

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