Agency costs refer to any kind of expenditure made by the leader in the attempt to avoid any moral hazard for the agent or to prevent any problems for the organizations. Among these, we can find monitoring, incentives, budgetary constraints, technical devices, compensations, etc. Even though there is no single mechanism to reduce agency cost, there are still some steps people take to achieve this goal. Today we are going to have a look at how can agency costs be reduced in a couple of simple steps.
How Can Agency Costs Be Reduced? A Brief Guide
1. Understand the Issue at Hand
One of the first things you need to do is to understand the issues you have with agency expenditure. A good thing to do is to ask all the managers what problems or concerns they have. It might be surprising, but in this way, you can find out a lot about what’s currently going on. One relevant example is that of the NHS. They surveyed their managers and then came up with a solution: e-rostering.
E-rostering is a digital database where they can keep track of the substantive and temporary staff. All the decisions are more transparent, so you can see any increased spend.
2. Manage and Take Control of the Processes
The next step you need to do is to standardize processes such as:
- Annual leave;
- Flexible working;
- Personal shift requests, etc.
Once you set targets for each of them, you can monitor the activity weekly. If you keep everything under control, you can avoid unplanned spending or delays in what concerns project delivery. It may take some effort at first when you implement the centralizing system, but it will all be worth it. After everybody gets more familiar with the system, managers can point to places where work can be made more efficient and thus, save some more.
3. Manage the Workforce
To implement new ways of managing the workforce, you need to gather some data. See how the entire workforce is used, which includes:
- Substantive, etc.
It’s important to know that with this step, you can’t consider each of them separately, you just need to take them all together. The e-rostering system we mentioned above was successfully applied by the NHS, and they managed to keep track of their entire workforce. This centralization helps you foresee any other spending. For instance, you can predict how much more you will need to pay if you hire X more employees. Not having a standard in place encourages managers to overspend.
4. Work Together
The next step on how can agency costs be reduced is to work collaboratively. For this, you need to get together the managers on all levels. Have a roundtable talk with support teams in IT, the finance departments, as well as the HR department. There are various benefits to making teams work together: they feel more comfortable with one another, they’ll be more motivated, plus you have the chance of hearing and even implementing their ideas.
A great opportunity you shouldn’t miss is cutting down on the costs by making teams work together. Depending on the nature of your work, you can save money and time if you choose this way. Quit externalizing services that could be carried out inside the agency as well. Sharing resources between various departments is yet another useful tip if you’re wondering how can agency costs be reduced.
5. Engage with Your Staff
While making these changes, it’s important to offer support to your staff. Big changes can confuse a lot of people, which may, in turn, lead to losses. For this reason, it’s important to offer complete information to all the staff. Make sure they have where to go in case something’s unclear. Engage with them, ask them about their opinion and see what their feedback is on the changes you implement or intend to.
6. Be Strict and Flexible
This may sound a little bit confusing, but you need to be a little bit of both to obtain the best results. The idea here is that you need to be stricter when it comes to the budget if you notice there is unnecessary spending. Find all the areas where you could cut down on the costs and include some changes.
At the same time, try to be flexible. Long hours of work render your employees less productive, so be flexible with their schedule. It’s important to make them aware of the importance of their job, but don’t overdo it, otherwise, they’ll be stressed and perform worse at work.
7. Be Up to Date
Nowadays, technology is evolving fast, and every day we see new robots, systems, and technologies being implemented by various companies, whether they are private or state-owned. They can help you cut down on a lot of costs, and even restructure the employees’ arrangements. Of course, this might imply some time and money investments in the beginning, but the long-term results can prove to be more convenient than the current situation.
At the same time, don’t forget to consider the maintenance and operative costs of the machines. Calculate how long it will take for your investment to be recovered and whether it’s worth it to invest in new technologies.
8. Look at Other Competitors
Regardless of the field you’re in, it’s essential to look at other competitors you have. Whether you’re looking at the country or outside of it, try to learn as much as you can about their organization and structure. Most likely you won’t have access to their internal documents to see how they manage their funds, workforce, schedule, and so on, but try to gather as much information as you can. Get some inspiration from them and try to adapt your own management to new strategies and techniques. You may even be surprised by the efficiency of some ‘imported’ processes.
To sum up, there is no single solution if you want to know how can agency costs be reduced. However, there are a couple of steps to help you head in the right direction. From using e-rostering to making people be more efficient at work or making teams work together, these suggestions can have a large impact on your agency.
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