© Ceridian Corporation. All rights reserved. How to save 2% or more of your wage bill through...

© Ceridian Corporation. All rights reserved.

How to save 2% or more of your wage bill through Workforce Management (WFM)

Alan Christopherson


Content

• Economic and business background• Demand based operation• Information is the key• Flexible working must be part of the process • Workforce Management; managing the increased complexity• Identifying the cost savings• Labour cost management• Example analysis• Summary


Economic and Business Background

• 2 serious economic crisis within 10 years• Globalisation• Increased 24/7 working• Increased competition• Pressures to reduce supply chains


Operation on demand

• Businesses must move to be more demand-driven• Costs must move in line with this demand• Labour costs are the biggest single cost for many industries and

a significant cost for most others• Workforce flexibility is key


Linking the Business to Demand

• Improve customer service• Efficient supply chain• Labour costs closely aligned with demand


The use of information is the key

• Gather information on the key demand drivers• Convert this historical data into accurate forecasts• Analyse and translate the data into workload plans • Implement effectively and continuously monitor and improve


More flexible working contracts

• The standard ‘9-5’ contract has been joined by many other more flexible options:

• Internal Options– % Flexible hours, annualised hours, bankable hours, zero hours,

maximum preferred hours, floating hours

• External Options– Outsourcing, agency staff, freelancers

• Availability is as important as working hours


Employment Contracts Scale of Flexibility

Low High

‘9-5

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Employment Flexibility

• Creates cost saving opportunities by allowing for improved staff scheduling in line with workload demand plans

• Creates greater complexity in the workforce management process


WFM- manage and control the complexity

• Workforce Management (WFM) is the tool that businesses need to manage the increased complexity and to provide the on-going business information in a usable form for the managers on the front line to make the right decisions.


Solution Definitions

• Time & Attendance – The capture and management of time and absence data for an

employee and the allocation of that data to the appropriate pay codes for accurate and correct payment by the Payroll

• Workload Plan– Manpower requirements plan for task/job by time– No employee allocation at this point

• Workforce Management– Demand forecasting linked to workload plans to align as closely as

possible labour costs to the actual requirement linked to a scheduling tool to allocate staff.


Control &Compliance

Labour Cost Management

Labour Flexibility

Improved Service & Sales

% Labour Cost Savings

2% 4% 6% 8% 10%

Automation &Rules Control

Develop base week plansContract hours alignment

Staff Scheduling to demand basedWorkload Plans

Increased service levels& sales

Identifying the Cost Savings & Service Improvements


Recent Retail Industry Analysis- Kurt Salmon Associates

• LABOUR HOURS MISMATCH: mismatch between the labour hours allocated to stores and actual hours needed means UK retailers are wasting about £2bn a year, some 7.5%, of their annual wage bill.

• TIME SPENT IN BACK OFFICE: level of wastage is exacerbated as typically 40% of store hours used in back office support, frequently involving duplication of tasks and inconsistent procedures

• BOOST CUSTOMER CONVERSION RATES: Retailers can potentially boost customer conversion rates by at least 10% by focusing employees on customer-facing activities


Control & Compliance


Automation & Rules Control

• Reduced Administration Costs– No data re-keying, no checking– Significant reduction in payroll queries

• Cost Control– 6 fold ‘before & after’ error reduction– Incorrect payments– Incorrect holiday entitlements– Leavers overpayment & Holiday overpayment– Wage & Salary rate control


Automation & Rules Control

• Compliance Management– All rules complied with across the business– Audit trails of all activities– Avoids Manager’s Interpretation

• Reduced Outlet Administration– Manager time spent more productively

• Lost Working Time (Time Recording)– Eliminates ‘Time-theft’– Ensures correct holiday & absence recording


Labour Cost Management


Labour Cost Management-Retailers utilise the Base Week principle

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240%

ofb

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salary trade

• Base week hours & salary geared to, say, 10th lowest week’s trade.• Cost budget fixed at Base week salary for many weeks of the year, as staff can

cope with, say, 10% more work without resort to overtime• Reforecast regularly – things don’t stay the same


Workload Plan Options

• Local Management Estimate - up to 20% of cost savings• Basic Template Approach - up to 50% of cost savings• Templates with more science – up to 80% of cost savings• Build Sophisticated Model- up to 100% of cost savings


Establishing the Ideal Workload - considerations

• Profile / phasing across day, week, year• Distinguish between minimum “base week” and variable

“higher than base week” work• The level of detail:

– whole store v key activities v task

• Time specific / narrow window activities (e.g. service) and anytime / wide window ones

• Company policies: – level of service v cost of providing it– Consistent service offer across all outlets, or local control?


Staffing contracts must be realigned closer to the “ideal” base week requirement

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Ideal

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• Ideal workload profile takes account of all key drivers, not just sales

• In this example (much simplified here) there seemed to be mainly understaffing before noon, and overstaffing afterwards

• So the wage bill is too high and sales opportunities are missed

• Realigned staff contracts is clearly the answer…


Benefits of Aligning Contract Hours to Base Week

• For Customers:– Staff presence when and where you need it – improved

customer service, every day, every week.

• For Cost Control:– Lower level of contracted hours – minimise fixed weekly

payroll cost– Greater ability to flex up hours without incurring premium

rate

• For Employees: – Busy and working their preferred hours as much as possible-

reduced labour turnover


Example Analysis work to improve service and reduce staffing costs


The High St and Out-of-town Stores have a fairly similar spread of weekly shift lengths

Store 417 - Distribution of Weekly Shift Lengths

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

> 0 up to 5

> 5 up to 10

> 10 up to 15

> 15 up to 20

> 20 up to 25

> 25 up to 30

> 30 up to 35

> 35 up to 50

Store 461 - Distribution of Weekly Shift Lengths

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

> 0 up to 5

> 5 up to 10

> 10 up to 15

> 15 up to 20

> 20 up to 25

> 25 up to 30

> 30 up to 35

> 35 up to 50

High St Out of Town

• More than half the employees in both stores worked a range of weekly shifts between 4 to 30 hours

• So good progress has been made to reduce the number of full timers

• However the scope to realise the benefits that should be gained from a higher ratio of part time working is significantly curtailed in one of the two stores…


70% of daily shifts are 7+ hours long in the High St store – just 50% in the Out-of-town store

Store 417 - Distribution of Daily Shift Lengths

0% 10% 20% 30% 40% 50% 60%

> 0 up to 3

> 3 up to 4

> 4 up to 5

> 5 up to 6

> 6 up to 7

> 7 up to 8

> 8 up to 9

> 9 up to 12

Store 461 - Distribution of Daily Shift Lengths

0% 10% 20% 30% 40% 50% 60%

> 0 up to 3

> 3 up to 4

> 4 up to 5

> 5 up to 6

> 6 up to 7

> 7 up to 8

> 8 up to 9

> 9 up to 12

High St Out of Town

Too many full length daily shifts means:

• Reduced ability to flex up a few hours at short notice

• Less flex for high peaks

• Increased likelihood of flatter staffing profiles

• Lots more meal breaks and paid breaks

No paid breaks

> 4 hrs = mandatory paid break

Lots of meal breaks in middle of day


High St store - Saturday's staffing profile

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Out of Town store - Saturday's staffing profile

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On Saturday, flexible shift patterns in the Out-of-town store- staff more in line with the customer transactions

Heads

Heads

Transactions / half hour


Both charts are drawn to the same scale, to make comparison easier:

• All but one of the High St staff work the full day (just 50% in the Out-of-town store)

• Relatively low staff : customer ratio (0.47: 1) over key 11:00 to 16:00 period

• Exacerbated by lunch breaks (hence dip in staffing)

• Relatively over staffed at start and end of day

• Out-of-town part time shifts carefully planned to match demand:

• Most part time shifts overlaid to match 12:00-16:00 customer peak period

• Lunch breaks covered

• Hours efficient at start and end of day

• Out-of-town had 24% more staff per customer than High St overall, but 42% more in crucial 11:00 to 16:00 period

Average 0.47 staff per customer 11-16:00

Average 0.66 staff per customer 11-16:00


High St store - Thursday's staffing profile

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Out of Town store - Thursday's staffing profile

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Weekday staffing profiles appear to leave significant scope for improvement in both stores

Heads

Heads


Transactions / half hour • High St manager supplements full time

shifts with 2 to 4 heads working 12 to 17:30 every day – hence skewed appearance

• Very unlikely that real work demands above and beyond customer service are similar each day, so very likely that hours can be better profiled and some removed all together.

• Out-of-town shifts are more in line with customer profile and clearly cater for longer opening hours

• But as with High St, basic shape is same each day

• Many half hourly slots have generous staff to customer ratios

Each store repeated its own staffing profile Monday to Friday:


The hours may not be appropriately deployed- High St does at least staff up for the most important trading day

Out of Town store - Daily staffing profile

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High St store - Daily staffing profile

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Mon Tue Wed Thu Fri Sat Sun

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Staffing Hours

Transactions • Good match with customer profile across the days of the week in the High St store

• The key conclusion for this store is that there is considerable scope to reshape the shift profile across the hours of each day

• Poor match against customer profile across the days of the week in the Out-of-town store

• Quite likely that Saturday staffing is about right, further reinforcing the contention that some weekdays may be relatively over staffed


Estimated Minimum Cost Savings

High St Store:– Improved service and sales on Saturday by replacing two full time shifts with four x 4

hour shifts deployed in line with customer profile– Across Monday to Friday, shorten two x 7.75 hour shifts to 4 hour shifts each day, thereby

saving total of 37 hours per week (7.1%). – At £5.80 per hour incl NI equals £11,000 p.a.

Out-of-town store:– For three days out of Monday to Friday remove one x 7.25 hours shift, thereby saving a

total of 21.75 hours per week (3.7%). Realign remaining shifts to ensure no deterioration in customer service.

– At £5.80 per hour incl NI equals £6,500 p.a.

Extrapolation of minimum cost saving benefits across 317 store chain:– Assume 1/3 of stores at 7.1% saving, 1/3 at 3.7% saving, remaining 1/3 at nil saving

– Total cost savings = circa £1,800,000 p.a.


Summary- Time & Attendance

• 1-2% labour cost savings available• Must be end-to-end automation from outlet/departmental

manager through to payroll• Must involve all stakeholders to agree and specify the rules• Needs senior management commitment to change


Summary- Workforce Management

• 3-5% cost savings available• Demand forecasting translated into workload plans is the

driver• Must go hand-in-hand with employment contract flexibility to

maximise the cost savings opportunity• The management of employee relations during the change

process is key• WFM Tools are essential to manage the complexity and open

up the staff scheduling cost savings• Don’t over-complicate the workload planning

– Focus on key areas– Small changes can have a big impact

• Create a process of continuous improvement

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