Your Company Needs an EWW Policy

This article adds an item to my business consulting checklist. Here I argue that SMEs need an Extended Work Week policy.

EWW, It’s Benefits, and The Mechanism

EWW also goes by a number of other names such as Straight Overtime. The idea is that salaried workers are exempt from overtime regulation, but you can optionally choose to implement a policy around overtime for such workers if you want.

Many firms opt not to create an EWW policy because:

  1. It’s additional work that’s not legally required.
  2. EWW policies result in extra pay to workers.

Both of these are obvious errors on the economic view of business. The budget reflects lower expenditure without EWW, so don’t do it, right? Wrong. The marginal benefits far outweigh the marginal costs.

Firms come up against unexpected work requirements. It’s too expensive to simply have additional workers on hand for when the need arises. The firm needs to be able to elastically increase and decrease labor force as needed.

A current technique to is to hire contractors. These contractors are paid hourly and can work a somewhat flexible number of hours rather than a fixed 40. An EWW policy is an alternative which allows firms to elastically expand and reduce total product of labor when the need arises. EWW is preferred for several reasons:

  1. With contracting, you are gambling on the productivity of unknown laborers. EWW expands on the known productivity of current employees.
  2. In addition to 1, EWW allows you to skip onboarding costs that comes with new hires.
  3. In addition to individual productivity from point 1, there is additional overhead, paperwork, time cost, and process regulation from coordinating with one or more outside firms.
  4. With contracting, you are paying markup on salary to a contracting firm.
  5. With EWW, you increase your pay to current workers which effectively improves retainment, disproportionately influencing retainment of your best employees.
  6. EWW allows you to have fine-grained control (read: less variance and higher ROI) over labor productivity. You don’t issue EWW to all employees, you selectively execute EWW as needed and in practice you select only high-productivity employees. This results in a better ROI compared to contracting, but also when compared to something like a broad labor category pay increase.

A final point is that large enterprises like Deloitte, SAIC, and others already have EWW policies. Any business person is familiar with this line of reasoning: Large enterprises can serve as role models and establish industry practices. In particular if you are having to compete with these companies directly, you want to make sure they have no advantage over you.

This is not to say that contractors and recruiters have no role. Indeed, large enterprises use them as well. The role for contractors and recruiters is to step in and assist when a firm is unable to find talent in a cost-effective way. They are labor search specialists. If your firm cannot identify talent, a recruiter can help. That’s not your situation if you lack an EWW policy. If you lack an EWW policy you have one of these two situations:

  1. You have great talent on staff but you are under-utilizing them because you don’t want them to quit due to long extra hours without pay.
  2. You are unable to acquire new talent or you keep losing your best employees because your firm is in the habit of working employees long extra hours without pay.
    1. “New talent” means hiring quality workers compared to the industry average. I don’t mean you can’t find anyone at all.
    2. You may be able to hire college grads who have no other option, but they rapidly leave around the 6 month to 1 year mark after there resume is respected by better employers.
    3. You may also be able to find low productivity workers, compared to industry average, who stick around for a while. This is not a good thing.
      1. Some of these employees want to work as little as possible and so EWW is not a perk in their view. This sort of employee should not be preferred in your view either.
      2. Another category of employee here is the kind which is only able to produce at average levels by working extra hours anyway. Their willingness to work these extra hours without extra pay simply shows they are low productivity. This kind of employee is OK, but this employee cannot elastically produce extra labor when needed. Indeed, EWW for this employee would be a bad investment from the firm’s point of view.
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