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Business case: How we determine optimal staffing levels for a local company in Zim

Memory Nguwi

The challenge
WE were recently contracted by a major player in Zimbabwe. The company wanted to know if it was paying unnecessary labour costs as a result of overstaffing. The exercise required us to go into each department and establish if the department was overstaffed in its individual roles and job families and was an opportunity to identify departments that were understaffed. In this post you will read how we cut costs and improved productivity by reducing overstaffing and eliminating understaffing.

How we intervened
Human resources practitioners have often been said to rely on subjective judgement when choosing when to hire, maintain or downsize their workforce. This leads to overstaffing or understaffing which in turn leads to unnecessary labour costs or failure to meet targets and deadlines. To avoid this, we developed a methodology that includes the input of subject matter experts (Heads of Departments — HODs) and statistical techniques in determining whether headcount adjustments should be done in each role.

Broadly speaking, our methodology is defined as follows:
Defining headcount drivers — Each role consists of a specific set of duties. If business activity related to these duties changes, the number of incumbents required in the role changes.

This is especially true for operational and tactical roles. For example, the number of required by a mine depends on the number of shifts it has. The number of human resources officers a company requires depends on its total staff complement. The number of shifts and the company’s total staff complement are the headcount drivers for the guard and human resources officer roles respectively.

Engaging HODs to provide data — We encourage the participation of each HOD in the data collection stage. This encourages buy in from these important stakeholders as it improves the chances of them implementing our recommendations. We explained to all HODs in this company the importance of providing accurate data and how it would be used. We requested the following information from each HOD:

Average number of employees per quarter in each role;

Headcount drivers — to analyse how many employees are needed to do the work;

Average tenure and average salaries of employees in each role. Retrenchment costs in Zimbabwe are linked to the number of years a person has worked in an organisation and their average salary;

Estimated cost of hiring an employee by role;

Data analysis — Where more than one headcount driver is provided, we combine the headcount drivers into an aggregate measurement of business activity using weighted averages. We then rank the resulting aggregate business activities for the period under study: for this particular exercise, we had 17 business quarters. If a quarter has business activity of zero percent (0%), it implies that the quarter has the least activity when compared with other quarters. If a quarter has 100% business activity, it implies that the quarter has the highest recorded business activity in the period under study. The resulting ranked business activities are labelled as relative business activity since they are a comparison of several periods.

We use ordinary least squares regression (OLS regression) to establish the relationship between the relative business activity and the number of employees in each role. Where the coefficient of determination (R squared) is less than 50%, we use simple proportion calculations to determine the required number of employees in a role.

The diagramme above shows an example of the relationship between relative business activity and the number of employees in the technician position.

To be continued nextweek
Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm.
https://www.linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: mnguwi@ipcconsultants.com or visit ipcconsultants.com.

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