Businesses Trying to Profit on the Cheap

By Steve Wexler

Why do some businesses insist on running backwards? Or insist on underpaying and overworking employees? Or ignoring employee suggestions that will improve productivity? What gives? Ugh, it makes me sick.

It is very unfortunate that many businesses always want to get the cheapest means to an end, regardless of the consequences. Focusing on pinching pennies instead of offering a great product or service is a huge business mistake. A business will eventually fail if their focus is penny pinching. The clients/customers will see that many corners were cut and shortcuts taken, and often at their expense! Customers and clients are not stupid! Things like bad management and planning, understaffing, overworked staff, unequipped staff, inadequate facilities, faulty/counterfeit/cheap equipment, all contribute to a negative business atmosphere for workers and raises questions in clients’ minds.

First off, focusing solely on cost/expenses sends a strong message to employees that something is wrong: Is the company deep in debt? Is the company failing? Is something wrong with the product or service the company offers? This attitude will have workers more concerned with the security of their jobs instead of producing quality work, which reflects badly on the company itself. Such attitudes are the norm for “fly by night” shops and other illegitimate businesses. Why would you want your company to run like such a place?

One of the most destructive "cheap-outs" companies will use is the practice of firing workers and replacing them with cheaper workers, and I'm not talking about outsourcing. Basically, that means if someone is doing his job well, and is paid a fair rate, and someone is found that can do the same job, but will accept a lower pay rate, the first worker will be fired to save money. Some people call this "competition", just like one company offering a product or service cheaper than another company usually gets more sales. But this is not about a business competing with another business – this is about workers being pitted against other workers to reduce staffing costs.

Let’s look at worker living expenses - a worker who will accept a lower rate may live with family, multiple roommates, or have some other "competitive advantage" that allows them to survive with a lower wage. Why would anyone expect someone to live in unrealistic or unsatisfactory conditions to be competitive? As you can see, this kind of "competition" is quite absurd. Any company that employs a “cheapest labor” policy will end up paying more for it in the long run due to employee turnover and lost productivity.

Employees will lose morale as they see that there is no future for them at such a company; the more that they earn, the more they are at risk of being replaced by someone cheaper. One can never hope to retain quality, productive workers with such an environment. They will all leave as soon as they find something better. A good rule of thumb is: Imagine yourself in the position of your employees, and think of how you want to be treated if you were in their position. Remember, workers are people just like you are, and deserve to be treated as such.

Now, I am not saying that a business should throw money around, or use money to fix every problem; on the contrary, businesses need to plan carefully and spend their money very wisely. This is where good management comes in. Bad management and business planning will cost a company much more than paying a fair wage. Some signs of bad management are: Lack of planning, last minute project assignments, unrealistic deadlines, lack of communication, illegal business practices, not caring about clients/customers, willingness to provide half-hearted products and services, no desire for excellence or professionalism, just to name a few.

If you find that you can’t turn a profit without cutting corners or hiring cheap workers, you need to seriously question your management practices and possibly even your business plan. If you find your business in such a position, you have only yourself to blame, and a decision to make. Either you will be alarmed, and take steps to turn things around; or you will be apathetic, and do nothing, and continue to lead a mediocre business to its demise. The choice is yours.

Some steps to turn your business around are:

• Talk to your lowest level employees, and get their suggestions for improvements. Take their ideas seriously. After all, they are the ones doing their jobs, not you.
• Make sure employees are doing work that they are suited for. For example, don't put a Computer Technician in a Purchasing role. This creates a productivity drain, and job role confusion. Take advantage of your employees’ skills and experience, and you both win.
• Make sure job roles are specifically defined. Everyone should know specifically what they are responsible for, and held accountable. When people are not 100% sure of their responsibilities, things will be left undone, and finger pointing will ensue when the issue is brought up.
• Hire qualified, specifically experienced managers, or promote a qualified longtime worker to a management position - and make sure proper training and support is provided.
• Don't micromanage. Allow your workers to do their work on their own, and give instruction where it is needed. If you micromanage, you are not allowing your workers to learn and grow.
• Put yourself in the position of your clients/customers. Give them what you would want if you were a client/customer.
• Honesty is the best policy. If any aspect of your business demands dishonesty, then you should not be in business.