Even as small to mid-size companies benefit from increased growth they are increasingly intent on controlling costs, according to a survey of more than 400 business executives by Phoenix-based TAG Employer Services.
Respondents were asked their biggest challenge regarding business growth and profit. Topping the list of concerns was “creating greater efficiency,” which was cited by one-third of respondents.
  Greatest Challenges in terms of Business Growth
        and Profit in the year ahead
  Creating greater efficiency    33%
  Attracting new customers    31%
  Growing market share    23%
  Using technology more effectively   21%
  Launching new products, channels or markets 14%
   
“After the long recession many smaller enterprises are growing once again, but this time want to avoid previous mistakes,” said Joe Johnson, Chief Operating Officer for TAG Employer Services, an administrative services organization that serves mid-tier employers nationwide. “In past years most employers focused on gaining new customers but were careless when it came to controlling the costs that come with growth.”
Johnson identified three areas where mid-tier companies should look to create greater efficiency:
o Payroll. For businesses with fewer than 100 employees payroll is always the biggest expense, up to 50% to 70% of their operating budget. Many firms are quick to hire new people when business shows signs of improvement. However, many companies tend to solve process problems by hiring additional people, rather than look at which processes can be improved.  For example, why does a company have five people all doing a piece of payroll and benefits processing, when other companies have just one doing the same work?
o Low-ball orders.  For a light manufacturing business the pressure for growth may prompt the salesforce to accept a lot of custom orders, where the costs of fabricating non-standard items almost always exceed the estimate. This means lead times stretch out, labor costs rise and margins are squeezed.
o First-line managers.  More often than not newly-promoted supervisors and first-line managers have little or no training on how to manage costs. Their response to new business may be just to add more people. They may fail to weigh the costs of expanding an already large payroll, which ultimately harms growth and profit. First-line training is essential in this situation.
Many employers today, Johnson observed, are able to track labor costs thanks to availability of new workforce analytical tools. “They’re now able to see what’s going on, but may not know what to do with the data. Their challenge is less about bringing on new people than about making sure existing employees perform up to standard.”
The survey of 423 executives at mid-tier organizations was conducted between November 4 and December 5, 2014