Setting Labor Expectations and Effective Retail Reporting: KPIs and Measurement Tips
Senior Manager, Product Management
In part 1 of this series on managing labor and retail reporting, we examined five common approaches to setting labor expectations. To recap, these include: Wage Percent, Sales per Labor Hour (SPLH), Fixed and Variable Factors, Dynamic Standards-Based Earned Hours, and Labor Task-Based Earned Hours With Production Planning.
Today we turn our attention to the second half of the equation: effective retail reports. Whatever your approach to setting labor expectations, give some thought to how, why and what you need to capture. We’ve compiled some tips and key reporting considerations below to give you a good start in bolstering your reporting game and to help you improve performance and analysis!
No time like the present: Reporting data in a timely manner
After you define and clearly communicate your labor goals, it goes without saying that you’ll need visibility into your stores’ performance against those goals. Here, timing is everything. Week-in-progress reporting is best, because this cadence enables your managers to make modifications proactively during the week, before it’s too late to adjust for events that affect sales. These impacting events may be the result of poorly accepted advertising/merchandising for the current week, or new competitor ads, or weather impacts and so on. Whatever the reason, week-in-progress reporting is essential so that labor can be adjusted as necessary, before the week is complete.
It is also imperative to receive and review reporting within a day or two once final data is submitted and processed. Getting information that is late or outdated doesn’t allow adequate time or insights for your managers to incorporate labor adjustments into upcoming scheduling. The old expression, “How do you eat an elephant? One bite at a time!” is true. In other words, managing in progressive, bite-sized steps streamlines and simplifies the process. It’s a lot easier if you have the visibility to identify an overspend of 40 hours by Wednesday morning—and can therefore remove 10 hours a day for the next four days ending on Saturday—than it is trying to remove 40 hours all on Saturday, the busiest day of the week. The same lesson applies to timely reporting for period, quarterly or year-to-date performance management: Time is of the essence.
Earned hours and earned hours variance should be a key reporting metric
No matter which of the five goal-setting approaches you use, reporting on the variance between earned vs. actual hours and calculating an “Earned Ratio” (ER) Percent is important in order to identify and understand over-achievers and under-achievers. Earned Hours Percent (or ER Percent) is calculated as follows: Earned Hours ÷ Actual Hours x 100 = Earned Hours Percent. It helps to remember that Earned Hours are simply the hours calculated using one of your approaches to labor.
Let’s illustrate with some examples to help understand the calculated ER Percent. Ideally, the goal for all stores and all departments is to achieve an Earned Hours Percent of 100 percent. This means that the Actual Hours are the same as the Earned Hours. If Earned Hours are 100 and Actual Hours are 100, the ER Percent is 100 percent. If Earned Hours are 85 and Actual Hours are 100, the ER Percent is 85 percent, or 15 percent below the goal of 100 percent. If Earned Hours are 100 and Actual Hours are 85, the ER Percent is 118 percent. Interestingly, an ER Percent that falls too far below goal or too far above goal are equally concerning. We’ll see why below.
What are the concerns with stores and/or departments achieving either too far above or below goal?
While on first thought it might seem logical to praise a store or department for achieving a much higher percentage above goal and “being so productive,” in reality being too far above the ideal 100 percent ER could be an indication that assigned tasks are not being completed. These might include critical tasks required to meet operational or food safety standards, merchandising standards, or—equally critical—tasks tied to delivering great service to your customers. A high variance may indicate that shortcuts are being taken, which could have longer-term effects on your business.
Conversely, being too far below a 100 percent ER could be a direct indication of poor performance and employees not having clear task lists or direction to complete those tasks in a timely manner. It may also be that the Earned Hours for that week did not take into consideration additional tasks that may have been required to be completed in that week. These unconsidered tasks might include things like a deep cleaning cycle or additional efforts to support a special promotion. This could have required additional labor in merchandising setup or even additional training hours required for special initiatives. Many things can come into play in both high and low ER percentages, but in either case, the situation warrants investigation.
Considerations on key reporting elements and types of reports
Reports should include the ability to look at a single entity across multiple weeks of time.
We recommend including at least 12 individual weeks. This type of report and time horizon help to identify trends, and the data across the 12 weeks gives insight into whether there is positive progress or negative progress on the set goals. This is particularly so regarding performance toward achieving 100 percent Earned Hours.
Another useful report view should include examining all stores across a single point in time, whether it’s by week, period, quarter, or year to date.
This kind of reporting allows all stores to be assessed in one view by each department. This data provides a solid view to identify and address over- and under-performance on the Earned Hours Percent (ER Percent). While a single week may be an anomaly, viewing performance by the period, quarter, and year to date can help to bring insight into a store or department’s longer-term ER Percent goals.
Ideally, many reports should include the name of the store manager, and in some cases the district manager as well. This enforces accountability for goals and achievements, and it provides direct ownership.
Additionally, reports should be available for metrics ranking across stores. The ability to identify top performers as well as bottom performers can be a powerful tool in labor management. Having this reporting capability either in-house or provided by your workforce management partner can be essential to measuring and improving the labor management process.
Ranking reports are powerful tools to motivate performance and prioritize support efforts.
To really do justice as a valuable tool, ranking report functionality should include the ability to drill into lower-level store data. As an example, viewing and sorting a ranking report by ER Percent enables you to quickly focus on those stores performing too high and also those performing too low. In a ranking report, you select the store you want to assess and drill down to that store’s department-level data. You are then able to review which departments have the greatest effect on the outcome of the ER Percent or other metrics you are reviewing.
To sum it up
In this two-part series, we’ve seen that the ability to define and support your desired approach to labor management along with the flexibility to adapt are very important first steps. We also hit on some key considerations that can help you take your current processes to the next stage. These include gaining and retaining timely visibility into key performance metrics, and ensuring you are measuring and analyzing important indicators that deliver clues into how you are tracking toward your goals.
With the right information at the right time, you can confidently report on progress and proactively course-correct as needed to redirect efforts. As they say, information is power, and that power is within your reach to zero in on and improve labor management performance across the board.