Understaffing: Is it hurting your small business?

Understaffing is affecting businesses across the globe. In 2022, a survey of CxOs, directors, and VPs found that 78% of businesses self-identified as being understaffed. That’s 78% of businesses putting their employees—and their companies—at risk.

From stress to lost revenue and lower productivity, working understaffed has a lot of negative repercussions for a business.

We’ll look at some of those adverse effects and also dig into what you as a business owner can do to prevent understaffing. We’ll also share what you can do to manage an understaffed team effectively—because, despite your best efforts, you may find yourself with a shift or two that you can’t fully staff.

This guide gives you the strategies you need to meet your staffing needs.

What is understaffing?

Understaffing occurs when a business has too few team members working to cover the business operations.

It often results in a negative impact on business operations. When a business is understaffed, there aren’t enough employees to cover shifts, affecting employee morale, customer satisfaction, and your overall business.

In recent years, understaffing has become a serious issue across many industries, including healthcare, food and beverage, and education. While the pandemic has been the kicking-off point, understaffing continues to disrupt business owners.

Why does understaffing happen?

There are several reasons why a business may be understaffed. There are two main categories of understaffed companies: short-term and long-term.

Short-term understaffing happens when too many employees are taking time off simultaneously. This issue usually resolves itself when your employees are back at work, and it can be avoided with effective scheduling and planning.

Long-term understaffing requires a more hands-on approach to resolving the problem. There are a few reasons why understaffing happens to businesses. Thankfully, most are easier to solve with little preparation and planning.

1. You experience sudden business growth

What business owner doesn’t want to experience a little bit of sudden growth in their business? It’s great when your business starts to grow, but when it comes on suddenly, it can leave you understaffed.

If you extend your hours, take on new clients, or open a second location for your business, you need to consider your staffing needs. Your current employees may need help to keep up with the additional work and responsibilities. Without hiring new team members, you’ll likely create an understaffing problem at your business.  

2. Your business has a high turnover rate

When you can’t keep employees at your business, covering all your shifts can be difficult. In some industries, employee turnover is expected. But there are things you can do to reduce turnover in your business.

Here are five strategies you can use to decrease your employee turnover rate:

1. Create a hiring process that gives you the best chance of hiring the right people for your business.
2. Invest in onboarding and training your employees so they feel confident and comfortable in their role at your business.
3. Do your research and make sure you’re offering competitive compensation packages. This includes offering benefits, paid time off, and ensuring you pay your employees on time.
4. Create a safe and positive workplace culture. Employees who feel supported are more likely to enjoy their work and stick around.
5. Make flexible scheduling a priority. Taking into account the wants and needs of your employees while scheduling is another way to show your team that you care about them.

3. There’s a lack of qualified candidates

You may find you become understaffed while you’re looking to hire new employees. This can happen if you aren’t getting enough qualified applicants during your hiring process. When your hiring process takes longer than expected, you might turn to your current workers to pick up the slack.

There are lots of reasons why you might not be finding suitable applicants. You may need to reevaluate your job description, repost your job on new job boards, or even contact your network for referrals.  

4.  Your business has seasonal employment needs

If your business has a busy season, planning for that in advance is essential. If you know that the holiday season means you need four additional team members on the floor at all times, you should prepare for that in September, not the end of November.

Hiring seasonal workers is a standard need for many businesses. But if planning and hiring are left to the last minute, your current team may be left understaffed.

How does understaffing affect your business?

Temporary or short-term understaffing is an inconvenience for your employees and business. But because it’s short, it doesn’t lead to long-term consequences for businesses. Long-term understaffing, on the other hand, can have adverse effects on your business.

Understaffed and overworked employees experience high stress levels

One of the first effects of understaffing in your business is employee stress. It makes complete sense—your employees must pick up the slack when you are understaffed. More than half of employees stated that understaffing heightened their stress levels.

Workers being required to overwork for a prolonged period can create chronic stress. And chronic stress can have negative mental, physical, and emotional effects on a person.

Left untreated, the stress of understaffing your business can cause your employees to suffer from burnout. And the result of that? Toxic workplaces, and even more understaffing issues, since employees will need to take time off to recuperate.

Understaffing can lead to a drop in productivity and quality of work

If your business is understaffed, your employees get pulled in too many directions. This added work and responsibility could decrease productivity, and the quality of work your employees produce.

Think about it. Employees will be rushed, and when you stack more work on top of work, employees start to lose motivation to do a good job.

Let’s take a bookstore, for example. You may typically have four employees per shift who all take turns running the cash, restocking the shelves, assisting customers, and pricing merchandise. But if you chronically only have two employees on staff, odds are some things will fall through the cracks. Maybe customers have to wait longer to checkout, or they aren’t getting the personalized assistance they’re used to. Or maybe the shelves look bare, and products aren’t priced correctly.

Even if your employees try to keep up with the increased workload, there are only so many hours in a shift. If you need four employees, two won’t cut it. And you’ll see a drop in what is accomplished during a shift.

High turnover rates are linked to understaffing

Understaffing can cause a cycle of high turnover. We mentioned before that high turnover rates can be why you are understaffed. But on the flip side, understaffing can lead to even higher turnover rates.

The stress and lack of motivation that understaffing causes in workers can lead to more people quitting. You need to break out of the cycle and keep your business staffed to keep your employees motivated and happy.

If you find yourself in this cycle, making it a priority to stop it can help save your business from a litany of issues down the road.

Understaffing can lead to a loss of sales and customers

If the three reasons above haven’t already clued you in, understaffing can lead to losing sales and customers for your business.

Take the bookstore example from above. A customer comes in looking for some recommendations on a new romance novel. The two employees are busy stocking a shelf and checking out another customer. So the romance enthusiast waits. And waits. And waits. Finally, they’re able to speak to an employee and get a recommendation. But no one is there when they head to cash to check out.

You can see how this isn’t an ideal experience for a customer. An interaction like this can potentially sour them against your business for some time.

Did you know? 90% of Americans use customer service as a factor when deciding whether or not to do business with a company. When your customer service doesn’t live up to expectations, you may lose more customers than you realize.  

Understaffing can result in on-the-job injuries and accidents

As employees continue to work to cover the jobs of others, they become more stressed, overtired, and physically exhausted.

Tired and distracted employees are more prone to workplace injuries and accidents. Understaffing can lead to injuries and higher workplace compensation costs, as well.

Ultimately, understaffing can cause damage to your brand

When all of these factors converge together, the result is that your brand may start to be known for the wrong reasons.

Poor customer service, long wait times, and grumpy employees can lead to a significant drop in customer perceptions, an increase in negative reviews, and an overall decline in your business’s reputation within the community and industry.

While understaffing can be a complex issue to overcome, it’s got nothing on trying to repair a damaged brand. You’ll need to spend even more time, effort, and money to recover from what should’ve been an avoidable issue.

That’s why it’s important to tackle understaffing before it becomes out of control.

How to prevent—and manage—understaffing in your business

Having too much work and not enough employees isn’t an ideal situation.

But there are strategies you can learn that can help you prevent understaffing. And if you’re already finding yourself short-staffed, we’ve got a few ways to help. These five strategies can help you ensure your business continues running smoothly with a full team or with a person down.

1. Assess your staffing needs early and often

Before you find yourself scrambling to hire more employees, take the time to assess your staffing needs. Not only will this show you any places where you’re vulnerable to understaffing, it’ll also give you everything you need to create a plan to prevent understaffing.

Make a list of all the shifts your business operates, the tasks that need to be covered during those shifts, and how many employees it would take to complete everything.

From there, determine what can be managed by your current employees. You may need to contact employees directly to understand their availability and scheduling requirements. With that information in hand, determine your business’s minimum staffing level.

You can use your minimum staffing level to ensure that there are enough employees on your roster to cover all required shifts.

This kind of assessment can’t just be a one-and-done kind of thing. You need to reassess your staffing requirements often to make sure you can keep up with changes to your hours and employee availability and cover any turnover.

2. Ditch pen and paper scheduling systems and use technology to your advantage

A huge part of avoiding understaffing comes down to scheduling. Because even if you have enough employees to cover all your shifts, you may find your team is short-staffed if you aren’t scheduling correctly.

You can keep up with potential understaffing issues with digital scheduling software like Homebase. But the scheduling benefits don’t stop there. You can:

• Use templates or auto-scheduling to optimize your shifts
• Track availability and time off to avoid scheduling conflicts
• Build schedules in line with your sales forecasts and labor targets
• Track and optimize labor costs in real-time
• Adjust your schedule on the fly, anytime, from anywhere
• Get alerted when employees are late for shifts or approaching overtime
• Message available employees if you need coverage in an emergency

With tools like Homebase, you’ll know about potential understaffing immediately, giving you a chance to hire and reschedule employees before it becomes an issue.

3. Hire seasonal employees before the seasonal rush

Is your retail business always going flat-out during the holiday season to keep up with the rush? Or is your ice cream shop inundated with holiday-goers every year from June to September?

Start planning in advance if you know your business needs additional support during your seasonal rush. Share your job postings, contact your network, and start interviewing early.

If you find yourself in an understaffing situation but aren’t sure your business will need the additional support long-term, consider hiring temporary employees. Temporary employees are a great way to get over a short-term staffing shortage.

And you might even find your next full-time employee, aka a temporary employee who is just too good to let go!

4. Create a hiring process that helps find the right candidates

Everything from how you write your job description to where you post your jobs can affect who applies for your open positions. Having a hiring process that outlines precisely how you approach openings in your business can help you hire the right people.

What should you consider when creating your hiring process? These ten steps will help set you up for success when hiring new employees.

1. Consider your hiring needs. Why are you hiring? How many employees are you looking to hire? What positions are you looking to fill? Once you’ve answered these questions, you’ll have a better understanding of your hiring requirements.
2. Write a fantastic job description. Your job description should accurately explain what you’re looking for in a candidate. A job description should give applicants a clear understanding of the job, giving you more qualified candidates.
3. Advertise the position(s). It’s time to get onto your favorite job boards and start sharing the news that you’re hiring. Post on online job boards as well as any local job boards that are relevant to your industry.
4. Use screener questions to identify the best candidates. Apply screener questions to your job postings to narrow down your search.
5. Review applications. Review the applications that have come through and eliminate any candidates that don’t meet your requirements.  
6. Conduct phone interviews/initial screeners. A quick initial phone or video interview is a great way to narrow down your candidate pool. Have questions prepared to help you quickly determine who may or may not be a good fit.
7. Move on to the interview process. You may only need one interview or require a few more to make a final decision. Whatever method you use, this is the stage of the process when you narrow down your focus to two to three candidates.
8. Conduct background checks. Depending on your industry, this may be a legal requirement for the position. If you aren’t conducting background checks, skip this step and move to #9.
9. Conduct reference checks. It’s always helpful to hear from past employers when hiring. Ask about job performance, experience, responsibilities, and any industry-specific questions related to the job. A great question is, “Would you rehire this person if you had the opportunity?”
10. Make an offer. From here, the only thing left is to offer the job to your preferred candidate.

5. Communicate openly and honestly with your team when understaffing issues arise

If you find yourself understaffed, don’t try to sweep it under the rug. Let employees know that you are currently dealing with a staffing shortage, and if you can, give them a reason why and an estimate of how long it may last.

Let them know that you appreciate all of the hard work they’re doing and that you’re making every effort to resolve the understaffing issues as soon as possible. Make sure your employees understand that you’re available to hear their concerns, feedback, and any suggestions they may have.

When it’s available, share your plan to resolve the understaffing issue. Above all else, you should also be a part of the solution. Nothing’s worse than employees working back-to-back shifts while the manager/owner is nowhere to be found.

Understaffing can happen to the best businesses out there. The issue isn’t a reflection on your management skills but on how you can resolve it. Take quick action to fix understaffing when it happens. And plan ways to avoid understaffing before it happens. Your employees will thank you.

Run a better team with smarter scheduling.

Optimize your schedule and prevent understaffing with Homebase. Simplify your schedule today.

Understaffing FAQs

What does being understaffed mean?

Understaffing happens when a business doesn’t have enough employees to cover the work needed to run the business. There are two types of understaffing—long-term and short-term.

Short-term happens when multiple people take time off at the same time. It’s easily resolved and doesn’t have negative effects on the business.

Long-term understaffing is chronic and does have a negative impact on both the business and the employees.

Why is it so common for businesses to be understaffed?

While the pandemic has had a significant impact on the business world, there are many reasons why it’s common for companies to be understaffed. Some businesses intentionally understaff shifts to try and increase their profit margins. But this never has the intended result and causes higher turnover, unhappy employees, and poor customer service.

In other cases, understaffing occurs because of a lack of qualified candidates to hire or because a business experiences sudden growth that they aren’t prepared for.

How can your business prevent understaffing?

Adopting sound scheduling practices is one of the best ways to prevent understaffing your business. Using a scheduling tool like Homebase, you can use templates or auto-scheduling to optimize your shifts and ensure you always have the correct number of employees scheduled.

With Homebase, you can track and optimize labor costs in real-time and build schedules aligned with your sales forecast and labor targets. It gives you a clear picture of your staffing needs so you’ll know of any potential understaffing issues before they happen.

Why are restaurants understaffed?

The pandemic is the main reason restaurants are understaffed. Before the pandemic, restaurant workers were happier with less than minimum wage and potentially unreliable hours. Many restaurant employees realized that they weren’t getting what they deserved from their jobs. They left the industry entirely or will only work for restaurants that pay more, offer reliable hours and scheduling, and treat them respectfully.