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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.

Condense Hours

Open too many hours is one of the biggest violations of labor productivity we see. Review your reporting. When does your business have to be open? Is it necessary to be open from 7a - 7p seven days a week? Do I need a full staff during all hours of operation? How many people does it take to open? How many people does it take to close? At Westcade Capital we run four day weeks at six hours a day. The team is paid on production and rewarded on efficiency. It requires our team to become creative on how to get the most done in a minimal amount of time. Why do we do this? Multiple studies suggest that people are most productive from the time they wake up and in 90 minute chunks of time over the next 4 hours. The last few hours of the day are reserved for more mindless tasks that require less will power to complete. Challenge your team and your customers to do business when you do business. Create a demand for what you do.