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Labor Management Is Not for the Birds — Industrial Engineering Can Help

Trying to manage labor challenges is enough to make most foodservice and retail operators want to stick their heads in the sand. Doing so, however, creates other opportunities for the business to fail. That's where applying activity-based labor management techniques, a core principle of industrial engineering, can help foodservice and retail operators eliminate at least one bull's-eye.

What is the best way to resolve labor challenges? Drive sales.

But foodservice and retail operators often find themselves in a quandary when dealing with the following dilemma: What comes first, the labor or the traffic? This question drives many a debate in the boardrooms of countless multi-unit operators. They realize that without labor, retail and foodservice professionals at the store level will tell you that they cannot drive sales. In contrast, without sales, these operators cannot afford the labor. So, which comes first: the labor or the sales?

Fortunately, while the marketing pros can determine how to drive sales from a customer demand perspective, the foodservice and retail operators can take certain steps to get labor to the right size in the units. For starters, as mentioned in a prior article, operators should embrace the need to determine the labor requirements based on the staff's actual work content or activity level. Using this approach to manage labor will help the operation make effective and efficient use of its resources while driving traffic, which in turn will drive the need for more labor. Using an activity-based approach to managing labor can be the first step to resolving the prior quandary.

Using an activity and work-content based labor management system offers foodservice and retail operators a variety of benefits, including:

• Thorough understanding of the labor breakdown

• Framework for process reengineering

• Optimum distribution of labor under financial constraints

• Deeper staffing details for the foodservice operator

Having a thorough and detailed understanding of the specific labor breakdown by task allows companies to create a very accurate cost accounting of the labor required to deliver each menu item. Typically, operators can pretty accurately determine the food cost of an item, be it new or existing. In contrast, operators tend to be somewhat approximate about how much labor really goes into making a specific menu item. A work-content and task-based system serves as the right baseline to develop these details since it accounts for all the tasks and can even go so far as to break them down into direct labor, such as guest service, and indirect labor, like prep, opening, closing, etc.

This information not only provides a clearer picture of the operation's labor reality but it can also serve as the framework for any reengineering efforts necessary to refine processes and procedures with an eye toward improving customer service levels and reducing staffing costs.

To remain viable all commercial foodservice and retail operators need to make money. As such, many commercial concepts assign labor based on what the business can afford to spend. Business leaders have to work within certain financial constraints when managing and assigning labor. Undertaking a detailed labor management analysis can provide with the best way to assign and allocate labor based on limited financial resources. Without such detailed labor information, however, multi-unit operators often assign labor erroneously, typically giving too much to higher-volume units and too little to lower-volume ones. This approach creates a sort of death spiral, wasting financial resources in the higher-volume units and not being able to grow the sales in lower-volume ones. How can the lower sales units drive growth and increases in traffic, if they are always short-handed? The operation does not have enough labor to provide good customer service, but you can't afford it either. Is this the beginning of a real death spiral?

Many concepts are afraid to go through an activity-based labor management system, because they fear this process will reveal the chain is under-deploying. I call this the ostrich syndrome. You stick your head in a hole, not realizing that your rear end becomes a bulls-eye.

The benefits of a well-designed work-content and task-based labor management system extend beyond providing the operation with labor guidelines that can help manage the business on a daily basis. They also provide the framework for optimum use of constrained financial resources, as well as future reengineering efforts to gain operational simplification, that can drive sales and profits, to support brand growth. These are among the many additional benefits of having a labor management system that is derived based on the work required the foodservice concept needs to deliver. Managing labor in this fashion not only allows the concept to not be an ostrich, but also provides the best way to have the right labor in the right place at the right time to drive customer hospitality that drives sales and profits.