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You would expect these companies to be at the forefront of labor management, but surprisingly, most are still very tactical in the ways they manage labor. While they track labor costs and variances closely, they have been slower to adopt advanced technologies and processes. Early adopters of strategic labor management report measurable improvements in business and financial performance. As market shifts and minimum wage increases bring more attention to labor issues, companies see labor management as a key to maintaining profitability. FocusED sat down with leaders from three hospitality companies that have developed successful labor management strategies. They share the technology tools and management practices that have helped them achieve significant improvement in labor performance.
FocusED: When did you first begin to implement disciplined labor management and what were your early expectations for those efforts?Mike Straube My experience began in late 2003 – early 2004. Scheduling labor was very subjective and inconsistent in the company I was working with at the time, and we were trying to find something that would help us be more systematic. Our goal and expectation at that time was simple: “better than Excel”. Excel wasn’t doing what we needed. We were in the early stages of trying to build a digital toolbox to help our managers work smarter. Our ultimate goal was to find ways to save on labor costs, but at that time, we were most concerned about getting our arms around what was actually happening so we could evaluate effectively. Andre Zotoff In 2007, while I was General Manager of the Fairmont Millennium Park in Chicago, we implemented a labor management system. Initially, our motivation was strictly financial – we were focused on reducing labor costs. We had good managers, so we wanted to give them better technology tools for scheduling. We knew that our managers were busy with their day-to-day workloads and didn’t have a lot of time to look at ways to be more efficient, so we partnered with our solution provider on a full review of our standards and processes, to help us find ways to cut costs. Vincent Hubrich I was the Housekeeping Director at the JW Marriott Austin in 2016, when corporate made the decision to implement a centralized labor management process and system. We had been using a homegrown solution that merged actual labor spend with financial budgets and provided basic labor standards benchmarking, and schedules were created in Excel. There was always a delay in reporting with the homegrown tools. The company wanted to give managers access to real-time labor data and reporting so decisions could be made in time to impact labor costs. Labor management isn’t filling out a spreadsheet - there’s a holistic aspect to it. ~ Mike Straube, CFO, Standard International FocusED: Did you meet your early objectives? What factors contributed to your results?Andre Zotoff We actually exceeded our objectives. As we went through the process of implementing the solution, we learned the importance of focusing on optimizing labor rather than cost cutting. Of course, we still wanted to reduce labor costs, but when we focused on staffing at the right levels for the business volumes throughout the day, staffing was more efficient and we did a better job of meeting guests needs. Satisfaction increased and costs decreased. We added millions to the bottom line. There were two things that contributed to our early success. The first was that the system helped us significantly improve the accuracy of our forecasts. If you don’t get forecasting right, staffing won’t be either. The second was management buy-in. GMs worked closely with their department heads so they understood the value of the system – not just for the company, but for each of them in terms of saving time and giving them real-time reporting so they manage better. Mike Straube For us, I would have to say yes and no. We definitely achieved the implementation of a tool that was better than Excel, but early on we were focused on mechanics and configuration. We had the mentality that we put in the application and boom, it’s on autopilot. We lacked understanding that there needed to be a cultural change. We had to educate the organization – especially management – on the importance of the application and processes. Labor management isn’t filling out a spreadsheet - there’s a holistic aspect to it in terms of evaluating results. We missed that piece. We saw some early administrative benefits, but the big impact to productivity took time. Vincent Hubrich I had a very challenging experience. The initiative didn’t work at all in the beginning. Consultants built labor standards around ones we already had, but we didn’t see results immediately because managers resisted changing. Being forced to rewrite how you approach scheduling is difficult. Some managers adjusted more quickly, but we had a hard time getting most of them to let go of Excel. Change management had to come into play. Obviously, we got through those hurdles and are now ahead of the curve in optimizing labor. What was the key? Sticking to it. Having a set of leaders who understood the value and were committed to getting the program established – then building on it to make it better. Sometimes it takes tough love. I went as far as deleting the Excel files from the shared drive and then went on vacation. There was some fallout, but after a few scheduling cycles, they became accustomed to it and that’s when we started seeing results. People tend to revert back to what they know. We had to be determined to go forward.
FocusED: What advances in technology or other capabilities does your organization depend on most to help you optimize labor productivity?Andre Zotoff The fact that the system can generate very accurate forecasts and automate scheduling is what we depend upon most, and that requires Artificial Intelligence and Machine Learning. Because AI is a background function, it isn’t as obvious as other technology advances, like mobile, but it is the most valuable in terms of optimizing labor performance. Mike Straube For us, having a real-time architecture that gives us immediate access to very detailed reporting has been critical. Most workforce management tools give access to at least some real-time data, but there are limits to the level of detail you can access. Because we are focused on optimizing, we want to be able to access detail on demand and ensure that our managers have what they need to make decisions before something like overtime becomes an issue. Vincent Hubrich Accurate forecasting and automated scheduling became table stakes for us very early in our efforts to improve labor productivity. More recently, we have begun to rely heavily on mobile as an extension of our scheduling. It streamlines a lot of paper-driven admin tasks. Staff can make all of their schedule requests or changes to availability digitally, which eliminates errors with lost pieces of paper. I sat down with a manager who was still using post-it notes and asked what happens when a note falls off – those things create a lot of frustration for associates and managers. Managers can also review and approve requests from their smartphones wherever they are, so staff get approvals much faster. It also just makes it easier for managers and staff to communicate, and that is really important when you are trying to fully engage your team.
We have begun to rely heavily on mobile as an extension of our scheduling...Staff can ~ Vincent Hubrich, Director of Productivity Improvement, White Lodging FocusED: You’ve used the term “labor optimization” – how does that differ from labor management?Mike Straube Labor management focuses on the tasks required to actually schedule and manage labor. Optimization integrates evaluation, which looks critically at the desired quality standards or service levels and identifies ways to creatively deliver that service to meet guest expectations. Those become your labor standards. In labor management, you’re simply making sure you’re following the structure of the standards you’ve established. With optimization, you’re drilling down to make sure the labor standards are tight – evaluating whether those standards can be tweaked or improved. Andre Zotoff Simple labor management is what most hotels do today. They set budget and margin targets by department and give them tools to help build schedules, but it is a fixed way of thinking and operating. If projections indicate it’s going to be busy, managers will schedule the maximum shifts. Optimization asks, “How can we staff in the most effective way to get the right amount of people for the right amount of time?” “When should shifts start and end so guests get great service and staff make better tips?” “Do we need to change the way we execute certain tasks?” Then you analyze results and use that information to improve. Labor management assumes managers are task-oriented operators, but labor optimization helps them become better business thinkers. Vincent Hubrich Labor management focuses on cutting hours and meeting productivity targets. Making sure you meet your labor standard goal. Optimization goes back to putting the right person in the right place at the right time. You use more hours when you should be using more hours and less hours when don’t need those hours, rather than taking a rote approach to scheduling. For example, just because we’re sold out tonight, doesn’t automatically mean I need six housemen. If I have 1000 stayovers, I may only need four housemen to effectively meet guests’ expectations. This also helps maximize engagement by keeping staff busy without overworking them.
FocusED: How are you integrating employee engagement into your current labor optimization strategy?Vincent Hubrich Employee engagement has become an integral part of our labor optimization strategy. Our system allows us to get very granular in terms of identifying when to use hours in the right place and right time, but that alone doesn’t guarantee that our service standards will be met. We have to ensure that our staff are engaged so they are motivated to deliver great service and meet our standards. We also can’t build a standard that meets every single thing that occurs throughout a hotel’s year, but engaged staff who understand our goals, figure out how to get things done vs strictly managing to a specific service standard. We provide training to help them understand what is expected and empower them to take ownership in doing their jobs. We also conduct full annual surveys and mid-year pulse surveys of team members so we are aware as issues arise that might affect engagement. Mike Straube Engagement is a requirement for making your labor optimization strategy work. We have integrated this by spending time with managers and associates before we bring in technology, and engaging them during the process so they have buy-in. Then we focus on management training and education so that our managers have the skills to manage and engage their staff. Andre Zotoff Engagement is a priority and having engaged managers is the key to getting staff engaged. We work with our GMs to ensure they are listening to and supporting their line managers, which is the most important step to engagement. We also look at issues like getting staffing levels right. Understaffing creates a lot of stress, but overstaffing creates boredom and makes it harder for tipped employees to earn money.
FocusED: If you were advising another hotelier on selecting and implementing a Workforce Management solution, what would you say are the most important features or issues to consider?Andre Zotoff I have already emphasized the importance of accurate forecasting and automated scheduling; this is central to optimizing labor and will save your managers a lot of time every week. We also find that integrated labor budgeting is a very powerful tool. We can take our forecast and run it against our standards to ensure it is in line with the P&L so there are no surprises at the end of the month. Your managers also have to like the tool and find it easy to use. At the end of the day, it’s like any other technology: garbage in/garbage out. If managers aren’t using it, you won’t get the value from it. This also means that you have to build buy-in and ensure that managers are trained in using the system. If you are going to optimize labor, your GMs must lead the program and remain involved. The most important meeting in a hotel is the weekly labor review – this cannot be delegated. This is a meeting for the GM and department heads to sit together and have a meaningful business discussion about labor every week. Vincent Hubrich The most important aspect or feature is usability. Make sure that the tool you select can be used from the top down. The back end can be very advanced, but the font-end must be simple. If it is overly complex, people who are technologically challenged may not commit to using it. Also, make certain your solution provider has a robust training program to help users get up to speed and build confidence. You should have support from an implementation and setup perspective, and your provider should be nimble when it comes to interfacing with third-party systems so you get full data from your other solutions. A sophisticated workforce system isn’t one-size-fits-all plug-and-play. It’s plug/play and define/engineer as you analyze and evolve, so invest in a solution that will evolve with you. Mike Straube The first step you have to do when implementing a workforce management solution is develop the culture at the property level – with the scheduling managers. This is the voice of experience talking. I didn’t take into account the challenges we would face with our managers when implementing labor management. A culture of labor management is not intuitive in hospitality, you have to create an environment that assures your managers, “This isn’t going to be as difficult as you think”. Especially in Food & Beverage, where most managers will assume this means just cutting shifts. Find a solution provider that understands change management and cultural integration. At the corporate level, identify a labor champion, someone who can be dedicated to working with the properties to keep things on track. Then make certain that the forecasting capabilities of the system are advanced and will help you produce accurate forecasts. Take the little bit of extra time to configure the system or integrate the data that is needed to ensure that accuracy. To trust the system, managers need to trust the forecast. You can have all the labor standards you like, but they won’t mean anything if you don’t have good forecasting and a culture that understands and values optimizing labor performance.
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Regardless of market conditions, labor has always been a challenge for service-based businesses. This is especially true in tight labor markets. In sectors like retail and hospitality, there is the added burden of being perceived by many staff as a temporary stop on their way to a “real” career. Labor-intensive service businesses often find themselves in a perpetual state of being understaffed and struggling to adapt to the dynamic, real-time nature of customer demand in their businesses.