Creating an accurate labour budget for each year is one of the toughest challenges that large retailers face. Economic disruptions, variations in labour availability, and fluctuating demand all take a toll on planning. However, with an accurate labour model, your company can implement a budgeting strategy that considers all those variables.
A labour model uses simple mathematical modelling to calculate how many staff your company needs during the year. Using a bottom-up approach, a labour model provides a scientific basis for calculating your staff requirements and removes guesswork or gut feel.
With a more precise way of determining your labour supply and demand, retailers can produce more accurate labour budgets, analyse accurate what-if scenarios and provide actionable recommendations for managers on the ground to hit their labour targets. In this guide, we’ll be stepping through how developing an accurate labour model for your business can dramatically improve productivity and protect profits as well as how to build your own.
What is a Labour Model?
A labour model encapsulates everything happening in the business that impacts staffing requirements. This includes the following;
Demand Drivers – the source of demand in your business such as sales, orders or footfall
Business Characteristics – store size, location or layout
Labour Standards – the time it takes your time to complete each task required to run the business
Staffing Requirements – minimum, maximum or statutory requirements for staffing that limit the range of staff required
Combining these factors, a labour model can help you to calculate the workload undertaken to meet your future demand, as well as the headcount required in the business to get this work done. While a labour model is a powerful tool for calculating headcount, the accuracy of these predictions rests entirely on the quality of the model. For a labour model to be useful, it must be able to accurately represent the complexity in the business.
How to Build Your Own Labour Model
Although considering all this complexity will take a healthy amount of effort, it’s well worth the time you invest in creating an accurate labour model. The increase in ROI that maximising productivity and minimising overstaffing gives you is well worth the work you put into it. Here are the steps you should take to build an accurate labour model for your company.
First, Map Out Processes and Tasks
Start by listing all the processes and repeatable tasks your employees do during the day. Organising them by category, location, or other business characteristics can help jog your memory. Then, go on several walkthroughs in your physical locations during various times of the day and at different times of the year to ensure you’ve included all the relevant factors.
For example, for a brick-and-mortar store, the checkout process might include scanning a customer’s purchases, taking their payment, placing items in bags, and the delay before the next customer arrives.
Seasonal variations will likely affect the time it takes for each of these parts of the process. During the pre-holiday season, for instance, the delay between customers will likely be minimal. However, the time it takes to scan might take longer if you’ve hired temporary help with less experience in finding the scan codes on each item. All these variables must factor into your calculations.
Additionally, if your company also engages in e-commerce, the checkout process will involve automation and different employees, so you’ll need to list that process and its parts in another category. Be sure to consider all aspects of your operations to ensure that your labour model is accurate.
Next, Determine Labour Standards for Each Process and Task
After you’ve listed all the processes and tasks that occur during your operations, calculate the labour standards for each – the time it takes to complete each process and task. A qualified process engineer can conduct a time and motion study, timing each task under various conditions to arrive at a statistically significant estimate.
Alternatively, you could hire a time and motion consulting company to provide a set of benchmarks derived from industry average numbers for tasks commonly performed in your retail niche.
List the Business Characteristics for Each Labour Standard
If you organised your list of processes and tasks by category in the first step, this task should go quickly. Look at each labour standard and list which business characteristics determine it.
For example, each store’s layout might determine how quickly stock personnel restock the shelves. Seasonal variations, too, can impact scanning time and employee experience.
Management experience level can affect the time it takes to make a refund decision, while a customer’s average spend could change the amount of time a commissioned salesperson might spend with a high spender. Including all these factors will provide you with a more accurate labour model – and an improved ROI for the year.
Finally, Build Your Labour Model
Once you’ve collected and organised your processes, labour standards, and business characteristics, you can begin to create your labour model. While a smaller business might be able to get away with using Excel or another spreadsheet application to create a labour model, larger retailers usually end up choosing a dedicated strategic workforce planning tool for their ability to handle the scale of complex calculations required.
Overcoming Common Challenges to Create a High-Performing Labour Model
In addition to the complexity and scale involved in labour scheduling for large retail operations, two other common challenges face retailers building their labour model.
Building a labour model is a complex process. However, some businesses make their model overly complicated, adding too many labour standards and business characteristics to make it accurately reflect the truth on the ground.
Too many variables make the resulting model more challenging to test or debug if issues arise, and may increase the time it takes to calculate what-if scenarios. Instead, use the minimum number of labour standards and business characteristics your model needs to accurately predict the ideal headcount and workload, avoiding the diminishing returns of increasing model complexity.
Misusing Labour Standards
When a business first builds their labour model and defines their labour standards, they can fall into a trap of using labour standards that are not granular enough. This can happen for instance when a business uses a single labour standard for the checkout process, rather than breaking the checkout process into its individual sub-processes, such as loading items, scanning and payment.
Because labour standards vary based on business characteristics, this can lead to significant errors when standards are applied across sites with different layouts, mix of skills or locations. By definition, a labour standard should be the same whenever it is applied, so to avoid errors ensure labour standards are broken down to their lowest level of granularity and ensure accurate time measurements are recorded for each.
Simplify and Streamline Staffing with an Accurate Labour Model
Building an accurate labour model will empower your company to accurately predict headcount and product labour budgets that avoid both overstaffing and understaffing. With a strategic workforce planning tool like Quorbit, you can streamline your workload and increase your labour model’s accuracy.
Designed to serve the retail, hospitality, and logistics industries, Quorbit employs AI to optimise staffing decisions and support managers on the front line to hit their labour targets while aligning to the company strategy.
Additionally, Quorbit can align management across finance, HR & operations through dashboards that display real-time staffing information, along with suggestions on what types of staff to hire, when and where you need them, and whether you need full-time, part-time, or temporary workers. It’s the single source of workforce truth across the enterprise, keeping everyone informed.
Want to build an accurate labour model that accurately predicts the optimum number of staff and the budget it will take to support them? Discover what Quorbit can do for you today.