Why Labor Management is Important

The Situation

We’ve all been there…

A busy restaurant with no servers in sight, a wait list that causes even the most hungry patron to falter, empty tables not bussed, tickets in the window thick like flies, anxious diners reluctantly waiting, contemplating how many hands have touched the ketchup bottle, and left to ponder, once again, why they chose to eat here in the first place???

Well, maybe you’ve never had the compulsion to create a work of condiment graffiti to express your frustration.

There never fails to be an excuse for poor service:

• I can’t get anyone to come in and work for just a couple of hours…
• Perhaps there was a call-in, or two, or several…
• Maybe an unexpected run to the state finals for the local football team brought in a throng of hungry post-game revelers…
• I can’t afford to add labor in this economy…
• We’re usually much slower on (pick the day)…

Certainly, the proprietor did not purposefully understaff the restaurant…or did he? Unfortunately, that is precisely what occurs in restaurants everyday, when managers blindly copy last week’s schedule and post it on the wall. All too often, the excuses are used to hide the fact that the manager actually has no idea how many staff they need. We have often heard that ignorance is no excuse. This is no exception.

Promise of Labor Management

Alas, there is an answer to this dilemma. It is possible to objectively determine the amount of labor needed to service your guests. In fact, smart operators across the industry are doing just that all the time. The methods required to do so are collectively referred to as work measurement, or the science of establishing the amount of time necessary to complete a job, often called a labor standard.

These labor standards then form the basis of an enterprise labor management solution that is activity-based, and finally provides operators with the tools to manage labor costs, while simultaneously delivering great service to their customers. Coupled with a solid sales forecast, the restaurant manager can reliably predict how many employees they will need to schedule for each hour.

With an effective labor management system, the process of scheduling is no longer simply copying last week’s schedule, accommodating employee requests, and then hoping that you can handle what business comes your way. Now, the manager is armed with the knowledge to put the right number of people on the floor, at the right time. The result is better service and better costs!

There are other methods of labor management, including traditional labor budgeting, sales-per-man-hour ratios, or peer group rankings. These are certainly better than nothing, but they tend to perpetuate suboptimal performance. That is, these methods answer the question, “how much labor CAN I use?” instead of the more fundamental, “how much labor SHOULD I use?”

Why Do We Know It Works?

Work measurement (or time and motion analysis) has been practiced for decades in industries all across the world. It is the science that enabled Henry Ford to revolutionize the way his Model T was made, and usher in the age of industrialism. Since the early 20th Century, businesses keen on improving efficiency have measured how long things take to better balance resources with demand. It is a time-tested technique with proven results.

Although not as widely practiced in the foodservice industry, some of the most successful concepts have embraced work measurement and labor management practices to simultaneously control costs and improve service levels. Clearly, these concepts enjoy a competitive advantage in the marketplace when it comes to providing a predictable service level to its customers, and a healthy profit to its owners.

Labor management works!

How to Implement

Who sets the standards? Usually industrial engineers, who are specially trained and qualified to apply the most appropriate method to measure the task of interest. These experts have the experience to set accurate standards at a reasonable cost. Once labor standards have been established, it is possible to then model the restaurant’s total workload requirement for a variety of sales levels and other business environment factors.

Although straightforward in its overall logic, there are a number of nuances that dictate the ultimate success of a labor management system. Typical pitfalls include the writing of standards, the modeling of labor requirements, and the selection of appropriate software tools. Therefore, it is best to involve experienced, expert resources, so that the system is reliable and can be trusted by the field.

The most effective and scalable systems are deployed via specialized software. However, there are other, less automated means that can deliver similar results.

There are a variety of elements which characterize a best-in-class labor management system:

• engineered labor standards to drive labor requirements
• labor requirements engine that is sensitive to volume, product mix and other business factors
• accurate forecasting algorithm that factors in seasonality, trends and unique events
• user-friendly scheduling interface
• reporting that helps managers reconcile what they should have used versus what they did use
• restaurant level software that effectively integrates labor requirements, scheduling, and reporting
• appropriate integration to other business applications

Final Thoughts

“You’ve heard the platitude, ‘Do the right things, and the money will take care of itself’? Let me tell you this: the money never takes care of itself.

Never.

YOU have to take care of money. Daily.

In a free market system, money is the measure. Money speaks.

Don’t mess with that truth.”

– Michael E. Gerber in the E-Myth Enterprise – “The World’s #1 Small Business Guru” -Inc.

If you are serious about taking “care of the money,” then you must control labor costs, which is typically the largest (and most difficult) controllable line item on the restaurant P&L. And, if you are serious about controlling labor costs, then you must use a labor management system.

For more information on how you can implement a labor management system at your concept, please contact the experts at The Productivity Advantage.