3 Ways to Improve Labor Efficiency Part 2


In most businesses their labor represents their biggest expense in producing the goods or services they provide. Consequently a businesses use of labor can make or break a business. Labor management is a ONE THING priority for most business owners.

Schedule to a forecast

If you are not forecasting for your business, hire or contract someone ASAP. Knowing how and where you should finish each month allows you to predict labor costs, price appropriately, pay the owner appropriately and so on.

Schedule at least one pay period in advance. When you read your production forecast (revenue dollars expected during the upcoming pay period) determine what your labor costs should be based on your previous results. For example if you average 20% of revenue equals labor hours. Schedule your upcoming pay period at 19%. Challenge yourself or your managers to schedule to the most efficient targets possible. Once you hit 19%, asks yourself. What's the ONE THING I can do to achieve 18%

Hold managers accountable to Labor Productivity Goals

Now that you have a productivity target. (I.E. 18% of Revenue) Setting KPIs (Key Performance Indicators) are critical for your middle management or managers who don't have the access to financials (almost everyone should by the way). In a coffee shop the metric can be simple as cups of coffee/labor hour. Pulling the appropriate data on this should be simple and easy to set new targets for employees and front line managers to understand. More importantly it should improve scheduling 10 fold. In our business this every employee is held accountable to labor productivity and paid appropriately based on the labor productivity results.

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