Machete or Scalpel: Adjusting Labor Hours to Budget and Aligning to Goals
Senior Manager of Product Management
It’s a challenge to adjust labor in retail stores and restaurants to meet budgeted objectives. Annual budgets are written without a crystal ball showing what will happen through the year. Even budgets built weeks in advance may have unrealistic sales forecasts or be out of sync with the current business model. Some stores may have had unexpected competitive activity, while others may experience higher sales than planned. New service and merchandising programs may be engaged for a short time to meet a new corporate objective.
So you could well be playing catchup on labor prior to the end of a quarter with only 3 or 4 weeks to implement short-term goals to capture the gap. Sometimes that involves a reallocation of goals across stores to meet the district or division objectives, or efforts needed to overcome excess hours used in prior weeks. Some stores may gain hours, some stores get tightened. New goals can be set for a variety of reasons and may involve increases or decreases in store hours to meet the adjusted financial targets.
If you’re on an earned hours program built using engineered labor standards, you would never change your standards to accommodate an adjustment to hours to meet short-term goals. But missing short-term goals and financial objectives have real consequences. Bonuses may be at risk, or delivering profits to shareholders.
In this post I will explore traditional approaches to such adjustments, highlight their problems, especially relating to store scheduling. I will also suggest a more efficient, less painful, and likely more successful approach.
To add or subtract?
In a retail environment labor is typically adjusted by removing, rather than adding, hours. However, it’s a better practice to remove hours only where there are more hours than a location needs and add hours to those locations that are struggling. Either condition can be caused by unforeseen retail impacts, a poorly written budget, new programs or services and a variety of other factors. Adding hours can be as painful as removing hours but it still must be done. It is strategically essential.
Machete or scalpel?
What do I mean by machete or scalpel? You can remove or add hours strategically or non-strategically. If you only specify a total store hours adjustment by location, with no real direction regarding the areas or departments to which the change should be applied, that’s operating with a machete.
The most common way to handle short-term gap goals, though, is with a machete. It’s a top-down approach, assigning a certain reduction of hours to each store. Many organizations work through this process using spreadsheets and then communicate the hours to cut or the gap goal for the outlying weeks to each store manager. Usually this is done at a total store level, not even detailed by department.
Using this machete approach, each store manager is left to figure out where those cuts should be made. Because scheduling requirements haven’t been updated, automated schedules are created using the old standards, tied to the old objectives. Massive edits are often required to bring hours into alignment with the new goals. It’s not an easy or effective process, and the results may be highly inconsistent between stores. This approach is not fair to the managers, the employees or the customers.
Another traditional machete approach is to create a spreadsheet that can distribute the change in hours to specific departments. An improvement, but it can still be an arduous task and may only be giving direction to store managers on the hours change by department and not by labor task. Because the adjustments are being handled outside of the labor management system, the schedule is generated without this information, requiring the additional task of schedule edits that can have all kinds of ramifications.
Yet another traditional machete approach is to tighten everything up using a performance percent or to remove necessary allowances across all departments, jobs and tasks. Think about this. Is everything equally important and equally subject to hours reduction? Will it work to tighten cashier hours as much on your busiest day as on your slowest day? Should some tasks be protected while others could be temporarily reduced? Again, the store is either left to implement the machete approach across all departments and tasks or to figure out their own necessary refinements outside of the system.
Clearly, what’s needed is a scalpel.
The scalpel approach: creating a better process
A surgeon thinks in advance about how they are going to use a scalpel, just what incision is needed, and where and when. In the context of adjusting hours, this involves creating your strategy for adding or reducing hours in advance of the urgent need to implement and linking it to the way your scheduling requirements are created.
Each department would be set up with logic that fits that department. Logic for adding hours would likely be different than logic for removing hours. For instance, you could define a layered approach for removing hours. If hours had to be trimmed, the system would implement your first layer of changes. If more hours need to be removed it would implement the second, then the third, and so on. Each layer would allow you to define which tasks (or jobs) you would want to trim and to what degree (percent of hours), on which days, and in what sequential order.
Once the new goals are created and the variance to your normal standards-based hours can be calculated, the system would utilize your defined logic and would progressively work through each layer until the system can achieve the hours change specified. You can specify as many layers as you want, including a final layer that allows the system to do what it needs to achieve the hours change.
With such an approach, the system has what it needs to automatically adjust demand requirements for scheduling, to align them with the new goals, and to guide each store to the best path to achieve their new objectives. This allows your labor management system to do the heavy lifting to meet budgeted hours.
Remember, this is a temporary process, only used to override the normal engineered labor standards and done to efficiently align labor to budgeted objectives prior to short-term objectives. Longer term changes to the labor model are also necessary but would be handled through standards or frequency changes directly.
No need for machete hacking
Remember the machete and scalpel approaches. Just hacking away at hours and not having a connected process to carry out the changes in your scheduling system can be detrimental to your company and your customers. Consider the scalpel where a program within your labor management system allows you to upload hours change specifications and allows you to implement those goals in the most strategic way possible. With your pre-configured logic for each department, your system has what it needs to automatically implement the changes directly to your scheduling system, requiring either no edits or minimal edits to the automated schedules. This saves time and frustration at store level, and it only makes sense to do this process within a labor management system.
So, if your organization sometimes requires short-term goal implementation, sharpen your scalpel!