Human Resources | April 2011 | By Marilyn Odesser-Torpey

Smart Tips to Save on Labor Costs

Many operators are resorting to cutting employees’ hours to save on labor costs, but experts say there’s a better way.

With expenses from commodities to health care continuing to put increasing pressure on margins, many operators are looking closer than ever at their labor costs and how to cut them. While the default action for most operators is to cut employees or their hours, workforce-management experts say the best answer is to instead schedule hours more wisely.

In a recent survey, store managers of one national retail chain told University of Chicago researchers Julia Henly and Susan Lambert they prefer hiring employees with flexible schedules. One manager said that if newly hired sales associates say they can work flexible hours, they should always be available to work or drop shifts. The problem, the researchers say, is that real life isn’t quite so cut and dry, and employers who don’t recognize this fact are likely to pay the price in high levels of turnover and absenteeism.

“The cost of turnover is often underplayed,” says George Kelsey, director of training for Wisconsin-based Culver’s, which has more than 400 franchised restaurants in 18 states. “Each employee we turn over costs us $1,000, so we treat high turnover costs the same as high labor costs.”

More than half of the managers surveyed by Henly and Lambert reported that “not getting enough hours is second only to wages as the biggest reason why employees leave.” Scheduling “unpredictability and inflexibility” are also important factors playing into a person’s decision to leave a job, says Dr. Joan C. Williams, founding director of the Center for WorkLife Law at Hastings College, University of California.

With today’s increasing demands on their time and their wallets, many employees regard thoughtful scheduling as “a form of compensation” and a “very tangible benefit,” says Lisa Disselkamp, president of the Virginia-based workforce management consulting firm Athena Enterprises.

Quick serves have a range of solutions they use to perfect employee scheduling. To provide all of its units with more accurate business and staffing projections, Culver’s uses an automated system to analyze the number of transactions and the number of employees needed to handle them. The data is gleaned from the company’s highest-performing stores over a set period of time, Kelsey says. Historically, the company has been able to make projections that are within 3 percent accuracy of transactions and the staff needed to handle those transactions.

In addition to effective business forecasting, Peter Riggs, vice president of the corporate business unit of Idaho-based Pita Pit, which has about 180 locations nationwide, says getting to know each employee’s personal scheduling needs and preferences has allowed his company to keep staff morale high and turnover low. Kelsey also says that communicating with employees has contributed to making the turnover rate at Culver’s lower than the quick-service average.

At Pita Pit, employees are encouraged to post requests for extra hours or to have their shifts covered on a specially designated board in each store. “This gives us a good idea of who to call first when someone calls in sick or we need to staff up,” Riggs says.

Pita Pit’s employee-inclusive system also works well on days when weather or other unexpected events require a sudden need to reduce staff, Riggs says. “Instead of telling the people who struggled to get here to turn around and go home, we ask if anyone would like to go home early.”

Volunteering to cover shifts is one thing, but there are usually certain employees whom colleagues call whenever they need shift coverage. These go-to people tend to say yes not necessarily because they want the extra hours, but because they’re team players and don’t like to say no, says Herb Fair, president of Restaurant Profit Management Services (rpm) and adjunct faculty member at Northern Arizona University’s School of Hotel and Restaurant Management in Scottsdale. To remedy the situation, he recommends creating a

formal on-call rotation schedule.

Wisconsin Hospitality Group, a franchisee of Applebee’s and Pizza Hut restaurants, tries to schedule separate on-call staffers for each shift, rather than tying up any one person or group of people for an entire day, says company director of human resources, June Weiss.

Many employees regard thoughtful scheduling as a form of compensation and a very tangible benefit.

Weiss says that cross training is a very effective way of balancing the restaurant’s need for flexible staffing and employees’ needs for hours stability. “If it snows, for instance, we’ll usually need more drivers than cooks, so we can send our cooks out on deliveries,” she says. The same concept works during crunch times for the cooks, she says.  

One issue many operators tend to overlook is the need to post schedules as far in advance as possible, Henly and Lambert write in their study. But in one of their surveys, the majority of store managers reported that they received their allotted employee hours two or fewer weeks before the end of each month. In turn, the majority of employees said they had one week or less notice regarding their scheduled hours.

It doesn’t have to be this way, the researchers say. A majority of managers reported that more than 80 percent of the total number of staffing hours they were allotted remained the same from year to year. “This could give managers the opportunity to create fairly stable schedules or at least provide workers with more advance notice,” the report states.  

To make scheduling quicker, easier, and more effective, Disselkamp recommends companies ditch their “primitive” paper and pencil or Excel spreadsheets and automate their employee scheduling. Recently, the National Restaurant Association officially endorsed a new online talent management system designed by the South Carolina–based software solution provider PeopleMatter that does just that. The “structured system” enables managers to post and adjust schedules and to interact with employees in real time “with a click of the mouse,” says PeopleMatter president and CEO, Nate DaPore. Associates can contact colleagues to request shift coverage and obtain manager approval via Web, e-mail, text, or any mobile device. PeopleMatter Schedule requires no software or license purchase and operates on a per-unit monthly fee that ranges from $50 to $150 per month.

“With smart planning, 90 percent of problems regarding scheduling for maximum profitability and meeting employee needs can be avoided,” Fair says.

And, Williams says, “even employers who consider it infeasible to enhance work-life fit by offering additional benefits, can improve their bottom lines by enhancing schedule effectiveness.”