Overtime can be a cost effective way to flex your workforce and increase your capacity, when needed, to meet demand.
But too much overtime—especially unplanned overtime—can become an ineffective and expensive fix for problems that, if left undiscovered and unchecked, can reduce your competitiveness.
It important to recognize that 50% or more of overtime is due to lack of labor planning, failure to meet performance expectations and lack of real time visibility to work progress. Managers often do not have sufficient insight and control of labor productivity, utilization and scheduling to get a real handle on reducing overtime hours.
There is clearly an opportunity to leverage labor management technology to improve planning and boost visibility to performance—and utilize those capabilities to take the specific actions that can offset the need for overtime:
- Gain Real Time Visibility to Performance. Your labor management system can be instrumental in overtime reduction by simplifying and automating performance tracking and analysis. You can see and understand where and why you’re experiencing delays, bottlenecks or employee performance issues, as well as spot negative trends that can result in overtime.
- Get Leaner. By eliminating wasteful processes and non-value-add activities, a Lean labor management strategy can improve productivity and trim overtime. That’s a win-win.
- Emphasize Cross-Training. A labor management program usually includes establishing best practices and standard operating procedures. These SOPs provide a detailed guide for training—and cross-training—your associates. Once your team is trained to handle multiple jobs, it’s easier to reassign workload when faced with an unexpected increase in demand or staff shortage.
- Match Staffing Levels to Demand. For many companies, inefficient labor planning is the main cause of unplanned overtime. Manual scheduling can’t adjust quickly enough to fluctuating work demands, leaving some employees idle and others with too much work. By using labor planning software, it’s possible to dramatically reduce overtime by having better visibility and control of labor utilization. Plus, your labor planning system can allow you to define the skills required for each activity so the most qualified, most efficient employees are on each assignment.
- Pay More to Pay Less. Reward superior performance with an hourly bonus can motivate your associates to work at a higher level. This increased throughput can eliminate the need to add extra hours to the work schedule. And in many cases, the cost of the incentives will be far less than the overtime expense. (Read our white paper to review the cost comparison.)
As outlined here, there are many possible strategies for managing and reducing overtime, but it starts with understanding the reasons overtime is being used in your operation. Harnessing the analytical power of labor management tools gives you the data-driven insight into your operation to drill down and determine the actual root causes of overtime. Then you can put the right strategies in place.