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Here is an all-too-often familiar scenario.
Your organization has just completed a project to develop engineered labor standards, either because you’ve never had labor standards or you haven’t revised them in quite some time. Obviously, the project was not merely an intellectual exercise to keep your engineers busy. There was a strategic reason for developing or updating the standards.
Now that standards have been developed, what happens next?
There are typically two broad categories of application for labor standards.
Using labor standards to help generate schedules for stores that are unique to their individual labor demands.
Using labor standards to help forecast the actual cost of labor for different budget scenarios.
You may have one of these areas in mind as your primary focus, but with the right workforce management system, you don’t have to pick just one. Operational improvement on both ends is feasible.
Accurate labor schedules underpin effective store operations. The process of generating effective schedules can vary from retailer to retailer. Mall-based retailers with small footprints may be able to get by with predominantly “fixed” schedules that ensure minimum coverage during open hours. Larger retailers will be highly variable depending on customer flow, product flow and activities like visual merchandising and marketing. For most retailers, it’s best to employ a WFM system to help managers generate accurate schedules.
WFM systems use labor standards, coupled with a forecast engine, to determine when certain drivers—customers, shipments, plan-o-grams, etc—will occur. They’re used to determine finite labor demand, often down to the 15-minute increment level. Other factors such as skillsets, scheduling rules, job roles and availabilities transform this demand into the shifts and schedules stores run on.
Let’s assume you already have a WFM solution in place to generate optimized schedules for your stores. You must now integrate your newly developed labor standards into the WFM solution. Most WFM systems default to a static table within their software to house labor standards. Another option is to house your standards in an external system or database, then integrate it into the WFM through a robust API.
Why use ANOTHER system to house labor standards? It’s understandable to think that adding applications on top of applications will complicate the matter. The truth is, the RIGHT application can do just the opposite.
The optimal way to manage labor standards within a WFM environment is to have them reside in a tool or application specifically designed to house labor standards and to seamlessly integrate into a WFM application. The primary benefit of using a tool like this, since such tools are designed specifically for labor standards, is that it makes maintenance much easier. In any business environment, changes will occur that require you to make updates to your standards.
For example, a process may change due to a technology enhancement. This may involve making a change inside the standard rather than making a wholesale replacement or global update. These changes can be made manually if you do not have a tool, it is just a much more arduous process, which often leads to the changes not being done on a regular basis, and opening you up to operator error. Labor standards tools facilitate these changes very efficiently.
Another benefit of using a purpose-built labor standards system is that it facilitates functions like peer grouping and store attribute tracking. There are normally physical, demographic or technological differences between stores that change the labor requirement for similar tasks. For instance, a mall location might experience much higher traffic, but lower conversion (i.e. more “browsers”). The standard for recovery per traffic might be different for mall stores versus stand-alone locations. This requires that these attributes are housed in one location that can be easily monitored and audited when changes (i.e. relocation) occur. Having “one source of truth” in a labor standards system facilitates this process.
Finally, labor standards systems typically have been designed to integrate with most of the major WFM solutions on the market, so the process is straightforward to achieve integration. If you do not have a tool and you are using, for example, Excel, integration can still be achieved by an export and manually inputting the file into your WFM application. This is certainly not the optimal method, but still feasible. The point is, you should be thinking ahead at the beginning of your labor standards project to how you will ultimately integrate your standards into a WFM application.
It is critical to remember that standards are only one piece of the puzzle and the hours that are used to schedule will be different than the simple application of forecasted drivers to labor standards (also known as “Raw Hours”). Typically, the hours scheduled will be higher. There are various reasons for this. Let’s examine a few:
Minimum Staffing Requirements
There are many reasons why a retailer would want a specific store or department staffed with a minimum number of store associates regardless of what the forecasted labor demand is.
Safety-related concerns—you may never want an associate working in a store alone.
Loss prevention reasons—maybe you have a high-shrink department.
Strategic reasons—you want to grow a business segment.
Physical space—due to an area’s size, it may be more desirable to have a minimum coverage requirement.
If you have minimum staffing requirements, you would then configure your WFM scheduling application to ensure there is always the required staff schedule even during times when the workload, as determined by standards and driver forecast, would not dictate those hours.
Business Rules
When you configure a WFM scheduling application, you must define specific business rules to adhere to. You may establish a minimum shift definition of four hours. This means that even though your labor forecast may only show a spike for a specific time for two hours, you might schedule to the demand with a minimum shift of four hours. You may have a rule for minimum hours that a full-time associate can be scheduled (typical ranges are from 37 – 40 hours weekly). This means that even during a slow business period, if your staff is heavily weighted with full-time associates, you must schedule their designated weekly minimums regardless of workload demand. These are only a few of many possible business rules that could have a significant impact, all of which can be better handled by the WFM system in the schedule generation process.
Idle Time
Idle time can be a little more challenging to handle. Idle time is simply the time in a store when a manager or associate is not performing productive work. Productive work is defined as any activity dictated by the needs of the business, such as customer service, freight processing, administrative, or cleaning and maintenance.
It can be difficult to quantify unless you have conducted a utilization study. This type of study involves observing and tracking all activities performed by an employee. Data collection typically takes place seven days a week across all store hours to obtain accurate data. Retailers are commonly surprised at the amount of idle time that exists in their stores. Although it varies greatly by company and type of retailer. We typically see idle time in the range of 5 – 30%.
There’s no simple, one-size-fits-all answer for how to address idle time. The decision will vary for each company depending on their service model, labor management system, customer expectations and objectives. Labor planning for idle time is not as simple as reducing hours. Some companies prefer not to reduce labor hours from historical levels and would rather re-purpose idle time to higher-value customer-facing activities to drive conversion and top-line revenue growth. Others may see this an opportunity for payroll reduction. Remember that the business rules as they are defined may “force” idleness as well. Many high-service models require that salespeople stay within a certain area, and when no customers are present, they may be “forced” into an idle situation. There is no one correct answer to addressing idle time.
Process Inefficiencies
Typically, during the process of collecting labor standards, observations are made about process inefficiencies that are documented and reported as improvement opportunities. There are also situations where some stores may be doing activities that are above and beyond what is required for the company’s standard operating procedures (SOPs). Examples may include doing a SKU-by-SKU detail check of new receipts even though the procedure calls for full assumed receiving or only scanning in new receipts at the carton level.
Another example may include districts or regions initiating cycle counts that are above and beyond what is driven from corporate. Leaders should ask themselves whether such activities are a valuable use of time. In such cases, idle time may even be preferred. Going forward, you would not want to allocate labor to support these inefficiencies and would limit labor to what’s dictated by the standard for the process as it should be performed.
Without factoring both operational and financial elements into your equation, your schedules and your bottom line may suffer. You may experience hours that are significantly lower than you are currently using. You may arrive at the false conclusion that the labor standards are not accurate. The reality is you must account for minimum staffing, business rules, idle time, and process inefficiencies that reside outside of “raw hours” to create a schedule. Labor standards are a critical component of accurate labor forecasting, but other levers are also part of the complete labor model.
Ultimately is it critical to remember that engineered standards are a means to an end. In order to take advantage of this incredibly powerful tool, it must be effectively integrated into your operations and financial planning process. Store payroll is not only the largest controllable store investment, it is the largest single asset and differentiator that an organization must rely on to drive sales and maximize positive customer experiences. Getting the right people in the right place at the right time not only saves money and makes the store easier to run, it makes for a better customer experience. WFM is your tool to bring it all together and create a great place to work, a great place to shop and a great place to invest… isn’t that the reason we’re all here?
