Facing the clock is a constant in every employee’s life, but it doesn’t have to be the same clock face for everyone. Developing an optimum schedule ensures that a facility can operate at peak efficiency
It’s the best of time or it’s the worst of time in a contact center or distribution facility, depending on how carefully you design employee work schedules. These timetables are the crucial link in determining how effectively and efficiently you serve your customers.
Whether your company has an online presence or not, customers frequently demand that you adapt to their specific requirements. In fulfillment, next-day delivery is no longer exceptional, and customers want to be able to reach you 24/7, whether by phone, fax, or chat. The challenge is how to meet these customer expectations while simultaneously running cost-effective operations and retaining good employees. When schedules are mismatched with business requirements, a facility incurs huge unnecessary costs, poor customer satisfaction, and low employee morale. Schedules that are properly designed for a unique facility, taking into consideration service-level agreements and fulfillment strategy, can unleash the full potential of a facility and its personnel.
An optimal schedule can save a typical facility 12% to 19% in annual labor costs, defer millions in capital costs, and decrease turnover. In addition an optimal schedule will better meet customer demands by allowing a facility to respond to changes in volume on a seasonal as well as a daily or even hourly basis. You can apply the approach outlined in this article to any business, but the focus here is on contact centers and distribution facilities.
Definite possibilities
Far too often companies view schedules as merely shift lengths (e.g., eights, tens, or twelves) and day-on, day-off patterns (e.g., five on, two off). While this may be acceptable for an employee, management must have a more sophisticated understanding of the impact of a schedule. To help understand the true effect a schedule can have on a facility, consider the following definition:
A schedule is a system for deploying capital and personnel with employee buy-in, specific work, pay, and coverage policies.
Schedule is NOT a shift length
Schedule is NOT a day-off pattern
If any part of this system is out of balance, a facility will not operate at its maximum efficiency. Many companies base their schedules on tradition, copy them from a competitor or a nearby site, or apply “best practices.” Perhaps they designed them around negotiations that took place in a different business environment. This approach handcuffs management from being able to run the facility in response to its unique needs. Managers then spend endless hours becoming experts in making the wrong schedule work for their facility, instead of focusing on managing the optimal schedule for their facility. This creates a situation where the wrong schedules not only contain hidden costs, but also missed opportunities.
Hide and seek
The first step in determining whether you need new schedules for a facility is a quick evaluation of possible savings and an assessment of the percentage of each type of savings that can be recaptured. Every facility has distinctive savings opportunities, but some of the more common indicators of “hidden costs” in schedules tend to show up in many facilities with mismatched schedules. If a facility is experiencing some of these symptoms, a better schedule can unlock the savings. Some common indicators of hidden costs in a distribution center are shown above.
If operations in a facility demonstrate several of these characteristics, you can and must determine costs associated with each characteristic. If turnover is 35% or more, and you have 100 customer service representatives (CSRs), what would be the associated cost savings for each 1% reduction in that number? What about a 25% reduction?
Such savings are attainable through optimal scheduling with employee buy-in. Now add up the different possible cost savings to determine the total opportunity. If the savings is in excess of 5% of your annual labor cost, it should be worth the effort. To begin to design the best schedule for a facility, you should examine and then deliberately blend three key considerations as foundations for a schedule: business needs, employee preferences, and health and safety.
Hard times
Any new schedule must first meet your business needs. The current schedule all too often has become nothing more than a collection of quick fixes to keep things together. To determine business needs, conduct an analysis of the deployment of capital and personnel. For a distribution center, analyze your capital deployment, starting with how many hours each day, week, and month the facility is being used; the number of forklifts; bottlenecks in the process; how loading docks are laid out; how the trucks in the fleet are dispatched; the utilization rates for all of the above; and so on.
For contact centers, are you making optimal use of your real estate? What is the right number of centers? Is seven too many while two are too few? If you have multiple centers, are they stand-alone, or are they linked virtually? Do employees have their own workstations? How big is that footprint? What are your hours of operation? Do they meet customer expectations? All of these areas must be explored in detail.
Now determine if there is a benefit to running the capital equipment for more hours. Can a planned capital purchase be deferred or can several facilities be consolidated? If you are not running 24 hours per day, seven days per week, the answer is probably yes. New schedules can defer planned capital purchases by utilizing the full capability of the current facility. Are the conveyers being run the right number of hours each day? In many facilities certain days require vastly different solutions. Monday may be the busiest inbound day, but outbound, the big day is Friday. Each facility has unique requirements that the schedule has to accommodate.
Now that the current schedule is no longer a constraint, look for process improvements that you can make. Perhaps staggered shift times among certain departments would help alleviate a bottleneck and increase the flow. Perhaps shifts should overlap so that the employees can communicate any problems between the shifts. Other businesses may be better off with a gap between shifts to allow a brief maintenance window to keep the facility in top shape. Once you begin to question the old paradigms served by the current, inefficient schedule, many savings opportunities begin to emerge.
Next, look at the labor schedule itself. The labor schedule determines how well the workforce is matched to the workload. The goal here is to have the right people with the right skills in the right place at the right time. If you fail to achieve any one of these conditions, your schedule is not optimal. Do you have the same number of people scheduled for the same hours Monday through Friday, even though, like almost every service industry client we have ever seen, you have the “Monday Effect”? If there are certain days that are always a bit lighter, do the current schedules reflect that? Or do supervisors end up trying to find work for people? Optimal schedules can adjust these numbers on a daily as well as hourly basis.
Some facilities schedule the least-experienced crew with the least-experienced supervisor on weekends or at night. Other employees in support areas such as engineering are not usually present on “back” hours, so for as many as 98 hours per week (out of 168 possible hours), the facility is running with minimal skills. Schedules that are more attractive can help encourage experienced people to work some of these off-hour shifts, which helps balance the skills distribution.
Most businesses do not have a balanced workload. Instead, they have seasonal peaks such as the Christmas rush, versus a non-peak season that may swing 30% to 50%. Is the company currently able to meet this changing need without burning out employees and equipment? Perhaps the solution is two different schedules, one for the slow season and one for the peak season, which allows employees to plan for the variation. A better solution might be a schedule that guarantees certain blocks of time off for workers even in the peak season.
Happy times
The best schedule possible from a business standpoint will be severely limited if you cannot recruit people to work it or if employees break the schedule through high turnover or absenteeism. Attractive schedules are even more important in fulfillment, since they can require a great deal of coverage on evenings and weekends. An optimal schedule must be attractive enough to get people to take the job in the first place and to retain them over the long term.
While employees’ likes follow some general trends, each facility’s surrounding demographic profile must be taken into account. For instance, if you have two otherwise identical operations, one in Des Moines and one in Philadelphia, and you implement an optimal schedule in Des Moines, the temptation may be to think that the same schedule is optimal in Philadelphia. In fact, the demographic profile of each workforce might be radically different, which could save you even more money. Urban versus rural, young versus old, single versus married, kids versus no kids: All of these profiles can have a significant impact on your operation. The type of lives people lead outside of work has a dramatic effect on the type of schedules they prefer for work, and while you should consider the needs of current employees, you must also look at future hiring plans. The bottom line is that the demographic profile of your workforce and its preferences for work patterns can be at least as important as the equipment you choose to buy.
A classic example of blending business needs with employee preferences is the use of split shifts. Perhaps you know that split shifts would better match your workload, but you cannot find anyone to work them. What if we told you that there are some truly attractive split shift schedules that give employees 30% more pay (in the form of overtime, which is in fact more cost efficient to you than hiring an additional employee) as well as 150 days off a year? Do you need everyone to like that schedule? No. However, only a small percentage needs to choose that schedule to save you money.
Optimal schedules must also take into account health and safety concerns. A schedule that keeps an employee working too many days in a row without proper rest time can cost a business in quality, safety, and turnover. If employees are working “off” shifts (something other then day shifts) the schedule must take into consideration the body’s biological clock and circadian rhythms. Schedules that go against the body’s natural inclination increase fatigue. You must build in proper rest patterns to ensure alertness. This becomes an even greater issue when employees work rotating shifts — a day shift one week, an afternoon shift the next week, and a night shift the week after.
The final hurdle
Once you fully understand your business needs, know about employee preferences, and have carefully thought about health and safety issues, you can develop schedules by blending all three key considerations. However, there is still one last hurdle to clear. You must study work, pay, and coverage policies to determine whether they need to be changed to support the new schedules. These policies govern how overtime is paid, how vacations are accrued, and how sick time can be taken. Even slight changes in a schedule can have dramatic effects on how much your company must pay an employee if these policies aren’t adjusted properly. Benign-sounding policies can add millions of dollar to labor costs and become entitlements to the workforce.
If the mistake is made up front, employees will see any attempt to recover as a direct “take-away.” Table 1 at the bottom illustrates several common mistakes.
Better times
No one likes change just for the sake of change. This is why you must first understand and quantify the elements contained in the definition of a schedule that we explored above. Employees will understand why change is necessary if you can lay out the terms of change concisely and decisively. Throughout the entire schedule-change process, communication with employees is the most critical issue. If the first thing employees hear about their new schedule is, “Here it is,” you are likely to start a small riot.
Changing a schedule is a significant emotional event, as people build their lives around their work schedules. Plus, it involves their paychecks. So when you start talking to employees about altering a schedule, you need to realize that they are going to be very wary about, if not resistant to, the change. To counteract this, you need to constantly communicate the need for change with employees. Even as you start this whole process, you should make sure that they are well informed. Tell employees why you are thinking of a change and how you will implement it. As you go through the process, you need to involve them at decision points. You need to let employees have a say in possible outcomes, although those outcomes must fit within a subset that meets your business needs.
As you discuss new schedules and shifts, partner with the employees who will be affected. Let them see a variety of alternatives. There are thousands of different schedules out there. Let them choose the type of shift length they might want. Let them choose the day-on/day-off pattern. As long as you get the basic requirements you need for your business, these elements should not matter to you. Whether you are a union shop or not really does not matter. This process works in a union or non-union shop, and if done properly it can bring labor and management closer together by creating a common goal to strive for.
Just as important as the floor-level employees are the managers. Too often they are the forgotten soldiers in implementing change. All managers must be involved in this process, since it is going to affect their personal schedule as well as the schedules of all their reports. They must be able to understand and explain the reasons and methodology behind exploring alternative schedules. Treated properly, the floor-level managers will be your biggest sales people for the floor-level employees.
Timely advice
Schedules, although often an afterthought, affect every aspect of an operation. It is important to remember what schedules are:
- They are not simply a shift length or a day-on, day-off pattern.
- They are a system for deploying capital and personnel.
- They require employee buy-in.
- They require specific work, pay, and coverage policies to support them.
- They can save or cost you millions of dollars each year.
It is only when you view work schedules holistically, in the context of your entire operation, that you can unlock the true potential of both your people and your equipment.
Ethan Franklin is vice president of delivery at San Francisco-based Coleman Consulting Group, Inc. He can be reached via e-mail at [email protected] or by phone at (312) 255-1646.
R. J. Ennis is a principal consultant who serves as contact center expert for Coleman Consulting Group. He can be reached via e-mail at [email protected] or by phone at (678) 494-9182.
Table 1: Hidden Scheduling Costs: Contact Centers
- Difficulty determining how to optimize service level data
- Low strategic use of overtime and low tactical use of part-time employees
- High amounts of “open” time (employees “signed on,” but no calls coming in)
- Sub-optimal work, pay, and coverage policies to support the operation
- High turnover
Hidden Scheduling Costs: Distribution Facilities
- Reduced productivity
- Low capital utilization (too much downtime)
- Excess capital purchases
- High overtime and idle labor
- Poor integration of maintenance/operations
- Inefficient relief systems
- Poor communication between and integration of day workers/shift workers
- Skill imbalance
- Low training efficiency
- Lack of a shift-work team concept
- Difficulty matching changing workload
- Low employee morale
- Constant bidding out of shift work
- Reduced alertness, health, and safety
- Management/labor strife
- Excessive start-ups and shutdowns
- Turnover/absenteeism
- Other
Source: The 24-Hour Business, American Management Association, 1995
Table 2: The Price Is Wrong
| Shift turnovers | $90,000 |
| Relief scheduling | $220,000 |
| Sickness policy improvement | $119,000 |
| Ancillary equipment usage | $400,000 |
| Boost utilization (holidays) | $285,000 |
| Modify in lieu of time off | $199,000 |
| Night shift retention | $121,000 |
| Modify shift differential | $305,000 |
| “44th hour” | $473,000 |
| Minimize paid breaks and lunch | $775,000 |
| TOTAL | $2,987,000 |
| Source: Coleman Consulting Group, Inc. | |
Mistakes toward the top are easier to correct, while those in toward the bottom are almost impossible to fix, because employees will view such changes as a pure pay “take-away.” This example represents about 350 employees and a total payroll cost of just over $20 million, so mistakes listed account for almost 15% of total payroll. Costs are about 6% higher than with an optimum schedule.