Overtime vs Hiring
Overtime vs Hiring: A Case Study
Karla Buchting
BUS640
Dr. Steve McQueen
6/11/2012
Abstract This report aims to address the debate over whether it is more beneficial to hire new employees when faced with shortages, or cover the shifts with overtime. The issue is examined from the viewpoint of Columbia University’s Department of Public Safety, and takes into account factors and costs as found therein. This report includes a graphical comparison of the costs associated with each option, and analyses and discusses the greater expense of hiring.
One of the most debated topics in management is whether it is more beneficial to hire new employees or pay overtime to increase production or coverage. Many factors go into this decision, including benefits, duration of the period of extra work needed, and even type of work involved. In Columbia University’s Department of Public Safety, this issue gets more attention than at most places of business. Minimal staffing levels, union regulations, and round-the-clock posts – among other factors – conspire to make this decision one that is faced often. When all factors are considered, is it better for the department to hire new officers when coverage is lacking, or to utilize overtime to staff positions as needed?
Executive Summary In almost all instances, it is more cost-efficient to fill gaps in coverage with overtime rather than hiring new officers in this department. This report will examine the factors involved, analyze the financial implications, and discuss exceptions to the findings. Explicit and implicit costs to the department will be discussed, along with their relevance to the decision-making process. This report will also compare the costs of new hires and overtime to find an equilibrium point beyond which the decision should change, and introduce the concept of diminishing returns. Finally, it will summarize the process and discuss application.
Definition
In Columbia University’s Department of
Karla Buchting
BUS640
Dr. Steve McQueen
6/11/2012
Abstract This report aims to address the debate over whether it is more beneficial to hire new employees when faced with shortages, or cover the shifts with overtime. The issue is examined from the viewpoint of Columbia University’s Department of Public Safety, and takes into account factors and costs as found therein. This report includes a graphical comparison of the costs associated with each option, and analyses and discusses the greater expense of hiring.
One of the most debated topics in management is whether it is more beneficial to hire new employees or pay overtime to increase production or coverage. Many factors go into this decision, including benefits, duration of the period of extra work needed, and even type of work involved. In Columbia University’s Department of Public Safety, this issue gets more attention than at most places of business. Minimal staffing levels, union regulations, and round-the-clock posts – among other factors – conspire to make this decision one that is faced often. When all factors are considered, is it better for the department to hire new officers when coverage is lacking, or to utilize overtime to staff positions as needed?
Executive Summary In almost all instances, it is more cost-efficient to fill gaps in coverage with overtime rather than hiring new officers in this department. This report will examine the factors involved, analyze the financial implications, and discuss exceptions to the findings. Explicit and implicit costs to the department will be discussed, along with their relevance to the decision-making process. This report will also compare the costs of new hires and overtime to find an equilibrium point beyond which the decision should change, and introduce the concept of diminishing returns. Finally, it will summarize the process and discuss application.
Definition
In Columbia University’s Department of
Cited: Earley, S. (2001). An Analysis of the Utilization of Overtime Versus Hiring Additional Personnel. Riverside, CA. Thomas, B. (2006). Corrections Overtime Planning Study. Olympia, WA.