Keeping the Law of Diminishing Returns from Hurting Your Business’s Productivity

The law of diminishing returns is something that all business owners are, or should be, aware of when it comes to hiring a labour force. This law basically states that productivity grows as the number of people working grows to a certain point. After that point, each worker added actually lessens the cumulative productivity. Reaching this point and not exceeding it is something that small and medium sized business owners should strive to do.

Know Your Business

While knowing your own business may seem self-evident, not all business owners know their businesses as well as they should. This could be because they are not actually at the site, they are always away trying to get more business for their company, or because they are passive owners. To stave off the effects of the law of diminishing returns, knowing the business is key.
Doing a plant tour, if your business is a factory, or a tour of the facilities, if your business is in another type of building, is very wise. Look at the facilities and think about how many employees the place can hold without it being too crowded. Is there room in each cube for two people if you need to increase your staff? Is there enough work for the number of people that you want to hire on a year round basis? Does your building offer enough bathroom facilities, break room facilities, and other perks that can be enjoyed by all employees if you hire a larger staff? All of these questions bring up points that can play into the role of productivity when hiring a larger staff. Above all, it’s important to create a safe workplace.

Improve the Hiring Process

This point aims not to just make sure there is enough room, but to make sure that you are getting enough bang for your buck, so to speak. Hiring quality people versus just doing a regular labour hire process can increase your productivity without having to add bodies to the workforce, thus reducing the effects of the law of diminishing returns. Improvements can be done to the labour hire process by hiring a time-tested HR representative, doing more follow-up calling with prospective employee references, and doing a deeper review of applications and additional interviews.
If a larger staff is necessary and your facilities are not adequate to take on the staff, productivity can be lessened if you go through with it. Making sure you have adequate facilities and the best hires available can ensure that your work gets done and your productivity stays as high as possible.
This post was contributed by Sarah Smith, a freelance writer for Carter Capner Law, a law firm in Brisbane.

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