Having a budget in place, as well as a forecasting model that analyzes and sets out future costs, is vital for any growing business. That said, any business owner will tell you that budgeting is hard because while fixed costs such as rent or lease payments can be predicted with some accuracy, variable costs, especially those around staffing and payroll, can be much trickier.
Variable costs are expenses that change over time. You may set a fixed amount to spend per quarter, but then your company’s staffing needs change or the cost-per-hire rises. Do you cut back in other areas to spend more, or do you scale back teams and talent resources? The unpredictability of outside forces also makes variable expenses tricky to plan for — tricky, but not impossible.
Break annual budget down into smaller periods
To get your arms around variable expenses for staffing, for instance, break out your payroll budgeted figure by quarter. That gives you a more bite-sized method to look at those expenses, and if you are wildly over or under for a quarter, you can take steps in the ensuing time period to bring things back into line.
Utilize outside resources to boost strategic planning
Getting variable (and fixed) costs in line is also where a recruitment process outsourcing, or RPO, partner can add value. RPO firms have experience working across industry sectors and are skilled at helping HR and executive teams understand staffing costs, and how to budget for them in order to maximize flexibility around recruiting, onboarding and retention.
Flexibility is a feature, not a bug, of variable costs budgeting
Above all, keep in mind that the world changes. Staffing needs can fluctuate based on economic or other external pressures. For example, a health care system may have relied on agency or contract nurses to ensure quality staffing levels, but can shift to filling Full-Time, Part-Time, or PRN positions. This is where a professional partner, one skilled at evaluating workforce-related peaks and valleys, can help with some needed clarity both in the current moment as well as in planning for the future. In the manufacturing space, we often see surges depending on the time of year. During holidays or seasonal changes, RPO partners can supply additional resources ensuring organizations never face a shortage of qualified employees.
There’s no magic bullet when it comes to factoring variable costs into operational budgets. Still, there are some guard rails that can be erected in terms of flexibility and a willingness to look at efficiencies that may not always equate staffing or salary reductions (the old adage of spend now or pay later is worth thinking about).
And then there are the obvious strategies, such as continual pipeline development and recruiting, which blend both fixed and variable costs in different ways depending on your corporate setup. So yes, it’s complicated. It’s also something we deal with every day, from startups to legacy companies across many different business verticals. Want to talk strategy? Let’s get that conversation started.