Businesses across the US are now absorbing higher costs created by increased minimum wages. Fifteen states plus additional cities raised their minimum wage in 2016, with more following next year. Some economists predict the potential for millions of jobs to be lost as a result.
The momentum won’t slow any time soon. California and New York City have established scheduled increases to achieve a $15 minimum wage by 2022 and 2018, respectively. There are new initiatives on other state ballots this November. Governing bodies may phase these in gradually, but with no end in sight this trend will have a serious impact on annual budgets for the foreseeable future.
In response, some businesses have announced proactive job cuts and store closures; while others have focused on driving operational efficiencies as a means to offset higher costs. Many opt for a combination of both, to avoid cutting too deeply into revenue producing activity.
Entry-level wage employers are hardest hit by these changes. Their choices made more challenging by an economy that evolves at an ever increasing rate of speed, by emerging competition from new channels of trade, and by a consumer who expects more for less. Private, independent businesses are already hard pressed to stay competitive while preserving their operating budgets to achieve a healthy growth. Large or small, businesses who have announced a strategy to compensate for higher labor costs find they aren’t often popular. Cutting costs, raising prices and controversially, slashing jobs, can have unintended consequences even though they seem the only viable solutions.
With businesses now running lean, and customer experience so important, are job cuts ever a safe choice? The Harvard Business Review doesn’t think so. A recent article suggests that low-wage employers should shy away from reactive job cuts and instead consider a more long-term solution.
If labor now costs more and cutting jobs isn’t a sustainable solution, how can businesses protect their bottom line from the impact of minimum wage hikes? The simplest answer is to increase sales. Of course, this is easier said than done in a slower economy where consumers aren’t always willing to part with their cash. The amount of growth needed to pay for increased labor cost is, at best, hard won and, at worst, not achievable without spending yet more to attain it.
As an alternative to expecting more from less staff, businesses can innovate to make their operations as efficient as possible. This will offset higher operating costs that may be business critical to create customer experience. The right solution will pay for itself.
The simplest way to drive operational improvement is to automate. Replace routine, payroll-intensive manual tasks with fast, efficient technology.
Retailers and restaurants across the country have embraced automation and are experimenting with various forms of self-service, kiosks and other customer-driven solutions. But it shouldn’t end there. As HBR recognizes, “self-checkout by itself does not automate the checkout process, it just outsources the task to customers.” And, where customer experience is key, costly initiatives like these have the potential to backfire, creating a negative impact on sales. Striking an effective balance between what staff offer customers and what customers must take care of themselves will define success.
As an alternate, first look to automate off-floor tasks that currently take your sales associates away from your customers, then reduce the time your managers need to complete tasks in their back office. Whether it is documenting, record keeping, reconciling cash drawers or preparing a deposit, a large portion of this time is typically spent on cash management. The good news is this can be changed, speedily and easily.
Spending time right now to streamline efficiency in future cash management may seem counter-intuitive, but it is a quick and simple way to drive long-term results.
Automating manual tasks like cash counting means that labor hours spent on these tasks can be cut or, better yet, reallocated to service, improving customer experience and driving sales. Why not keep your people and help them make your sales grow?
Efficient cash management pays other dividends. Automation eliminates the manual error that triggers avoidable bank fees. This can mean big savings. Unfortunately, internal theft remains the leading cause of shrinkage which costs retailers more than $123bn annually. Increasing transparency and tightening process can return money to the bottom line, protecting profit and revealing where changes should be made.
Increased labor costs are here to stay, and will benefit our neighbours, our neighbourhoods and the economy in a myriad of ways. Decisions on how to accommodate these changes must come soon for many businesses. Prior to implementing payroll cuts — potentially affecting morale, productivity, customer experience and therefore sales—please consider this: the business that spends time to develop a long term strategy of improved control and efficiency through automation will almost certainly gain the edge in the years to come.