How Your Company Can Weather Inflation
Inflation is a word that sends a shiver down most company owners’ spines. The rapid rise of prices in the economy can be devastating to both large and small companies alike. But do not fear. You can take some steps to help your business weather the storm.
Dr. Jordan Sudberg explains how your company can protect itself from inflation.
How does inflation affect companies?
According to Dr. Sudberg: The truth is that most companies do not properly prepare for inflation. In a recession, fewer jobs are available, and supply chains run leaner and stiff competition. When this happens, inflation can increase by 20 percent in just a few months. This can be bad news for companies relying on high salaries to attract the best employees and give them a competitive edge over rivals.
What steps should companies take to protect themselves from inflation?
The first thing companies need to do is ensure that their financial projections are accurate. No matter how much analysis and number crunching you do, inflation is still uncertain. It can be caused by a variety of factors: government policy changes, currency manipulation, energy costs, and so on.
Companies should also start managing pay raises differently. For example, you want employees to keep pace with rising prices in the economy but still stay competitive with their peers at other companies.
Instead of giving a percentage raise yearly based on experience, consider boosting salaries with a salary review. This process lets your employees provide feedback about their jobs and helps you understand what they want.
Dr. Jordan Sudberg believes that the key is to ensure that your best employees’ salaries are not becoming outdated while the wages of your average employees are not falling behind.
What strategies can companies use if their competitors are not preparing for inflation?
The biggest strategy is to keep pace with competitors by adjusting their salary scales, especially if they have more authority over wage increases than you do.
However, you can also challenge your competitors by providing something beyond simple salary adjustments. For example, you can offer additional benefits that they cannot – such as a tuition reimbursement plan or a new computer system.
Is there any legislation that can help companies protect themselves from inflation?
Many countries have legislation in place to help protect workers from inflation. The most prominent is the Davis-Bacon Act protects employees and contractors working on federal public works projects. It requires contractors to pay laborers and mechanics at least the wages prevailing in the locality where work is being performed. It means that contractors cannot pay workers less than their competitors for comparable work just because it provides savings for the company.
It is important to remember that inflation is good for the economy. It keeps companies on their toes and provides competition to incentivize them to make themselves more productive. While it can be problematic at times, it also allows companies affected by inflation to learn how to keep up with the market and stay ahead of competitors.