The Importance of an Accurate Labor Model for Scaling Retail and Restaurant Chains
Creating an accurate labor model is crucial for restaurants and retail businesses to manage staffing efficiently and control costs as they scale. By using data-driven insights to align staffing with customer demand, businesses can improve productivity, reduce expenses, and enhance overall performance.
Creating an accurate labor budget is one of the toughest challenges facing operations and planning teams in restaurants and retail organizations. Fluctuating demand, variations in labor availability, and economic disruptions force these businesses to react quickly to avoid costs spiraling out of control. At the heart of any agile planning process is a high-quality labor model that allows businesses to understand the relationship between customer demand and workload, and adapt their strategy to control costs and maximize performance.
What is a Labor Model?
A labor model, also known as a staffing model or labor matrix, is a mathematical formula that converts your business demand (usually expressed in sales or a volume measure such as transactions or customers) into the staffing levels required to meet that demand as efficiently as possible. This data-driven approach removes guesswork from the scheduling process. By calculating staffing requirements based on actual data, businesses can produce more accurate labor budgets and provide more actionable scheduling recommendations to managers.
Benefits of an Accurate Labor Model
- Improved Productivity. An accurate labor model helps businesses allocate the right number of staff to meet customer demand efficiently. This not only improves productivity but also enhances the customer experience, as there are always enough staff members to provide prompt and effective service.
- Cost Control. Labor represents one of the largest controllable costs in restaurants and retail. By accurately predicting staffing needs, businesses can avoid overstaffing and understaffing (which can lead to poor customer service and lost sales).
- Strategic Planning. A robust labor model allows businesses to model the impact of corporate strategies on staffing requirements. This foresight enables better planning for seasonal fluctuations, promotions, or expansions, ensuring that labor costs are kept in check while maintaining service levels.
The Process of Creating a Labor Model
Developing a bottom-up, activity-based labor model is a significant investment of time and effort, but it can be well worth it. Here are the steps you should take:
- 1Map Out Routines and Tasks. Start by listing all the fixed tasks and repeatable routines your employees perform during their shifts and organize these workloads by department. An example of a task might be opening prep and an example of a routine might be cooking a burger.
- 2Define Labor Standards for Each Routine and Task. Calculate the labor standards for each workload (the time it takes to complete). You may need to enlist the skills of a qualified industrial engineer or consulting company to conduct a time and motion study.
- 3Determine Labor Drivers. For each labor standard, determine if it should scale with a labor driver. For example, a store’s square footage might impact how quickly an employee can get through a cleaning task, or the number of burger orders will scale the cooking burgers routine.
- 4Build Your Labor Model. Once you’ve collected and organized your tasks and routines, labor standards, and figured out labor drivers, you can begin to create your labor model. You can use Rightwork to easily enter this data into an intuitive interface, while it handles all of the complexity and calculations. Once you are done, you can test to see the labor budgets that it outputs and make any necessary changes to fit your business.
Conclusion
Building an accurate labor model will empower your business to predict headcount and produce labor budgets that avoid both overstaffing and understaffing. By streamlining workload and increasing the accuracy of labor models, businesses can optimize staffing decisions, support managers in hitting their labor targets, and align staffing to the overall company strategy. Investing in a robust labor model is not just about cutting costs; it’s about enhancing efficiency, improving customer satisfaction, and driving overall business success.