How to Prevent Lethal Overspending on Labor

When business is trending up and sales are high, few retailers lose sleep when they find that labor spending was over-budget amid a great season. But, overspending on labor when sales are down can be a lethal combination, and harder to forgive. As this past year has turned the microscope on expenses and productivity, the focus centers on labor as the largest controllable expense. So, how can retailers get the visibility they need to react quickly to their labor position? Regretfully, the last month of the year is too late to discover just how far off budget you are, when labor demand peaks. And while December is not the time to overhaul systems or processes, the season is ideally suited for identifying shortfalls and making resolutions.

The Guessing Game
The visibility problem hits many retailers hard at the end of year when they need labor most and they're struggling to hit their budget. Unfortunately, the challenge has often been mounting week-to-week, month-to-month throughout the year in concert with the cycles of retail.

There is typically a lag, where retailers don't know their payroll numbers until mid to end of the following week, forcing many to play catch up from week to week. If too much labor has been spent at the beginning of the week, some are forced to short themselves at the week's end to stay on budget (i.e. Saturday, the busiest and last day of the operating week for many). This trend continues to the last day of the month, the quarter, and now the year.

Alternately, some cope with lack of visibility by banking hours or holding these in reserve as a work-around, saving banked hours for future marketing initiatives. These practices have become second-nature and in many cases accepted as the only option for managing labor.

Now, more than ever, retailers must be able to allocate the right amount of labor. And, they need to clearly see what they are spending, when they are spending it and why. Only then can they effectively manage their labor budgets and have the ability to make almost real-time corrections when needed.

Expect More from Systems & Processes
There is no shortage of automated tools, systems, bells and whistles - so why is gaining visibility to the largest operating expense still on the wish list for many? In some cases, all the right tools are in place, but key systems are not integrated, such as payroll and scheduling. For others, implementation challenges or delays pushed visibility and reporting into the Phase 2 bucket for a later date. But for many, the bar has just been set too low, and old patterns of "this is how we've always done it" continue. Not demanding enough from automated systems or processes is often one of the greatest shortfalls identified by workforce management system audits. Simply raising the bar, expecting more, and configuring technology to pay back its full potential can make the difference between baseline automation and effective management of labor.

An integrated workforce management system that combines the elements of budgeting and labor allocation, scheduling, and time and attendance, with task management not only gives visibility to labor but also provides the ability to make corrections in almost real-time.

"A discovery is said to be an accident meeting a prepared mind." (Albert Szent-Gyorgyi ) -- so prepare your mind. Know that improved labor visibility is not only essential but very possible. Then use this time to sharpen focus on the gaps and condition your mind to expect more.

Coordinate an audit of processes and systems for the coming year, explore new approaches and demand more from your investments in labor and technology.
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