In my twenty or so years of managing people, I’ve worked in the hotel industry, food and beverage, quick service, and more formal settings. No matter which setting I have been in, there had always been intense pressure to reduce or eliminate overtime, due to it’s higher hourly cost (at least a 50% premium). However, to the point where inexperienced leaders will sometimes manage to the statistic, sometimes we fail to remember what we take to the bank, which is dollars. Those overtime dollars spent are sometimes more important, even, than sales and marketing dollars.
Understanding that any business wants to minimize expenses, most “bosses” will have a certain understanding that some overtime is “necessary”, although there are those who will die before they admit that. “Overtime is a symptom of a greater problem”, I once heard. The problem, of course, is an inability to predict the future with 100% certainty.
I will admit that consistent “abuse” (for lack of a better term) of overtime can be a sign of poor management. It’s very easy for a manager to allow an “open shift” to be filled by whomever wants it. And who doesn’t want to earn a 50% bonus for a few hours. However, what I will not endorse are the “bosses” (the managers of managers) to adopt a “Zero Tolerance” policy, or overtime that is managed based solely on the statistic.
Allow me to explain: Let’s say you have a “target” of no more than 0.5% of your labor that is allowed to be “overtime”. If we leave things as that statistic, then we don’t think of overtime as a cost (or dare I say a benefit?) of the business. I participated in many a conference call on Monday morning, where we reported our “overtime”:
“John: 0.1”
“Rob: 0.7 “, followed by, “Rob, that’s 0.2 over your target, or 40%. What Happened?” Rob replies, “We had an unexpected rush right before Tonya got off work, and she stayed to keep things moving for about 20 minutes, but it took her over 40 hours”. Rob is then reminded that exceeding overtime targets is not acceptable.
“Jenna: 0.5”
And so on.
I have always endorsed and viewed overtime in a different light. Admittedly, if there are better ways to do things, overtime is certainly more expensive than it needs to be. Overtime laws are designed to prevent abuses by employers, and in some cases, they do just that. However, let’s look at it more closely. For the sake of keeping things in simple math, let’s say that you are managing a team of employees who all make $10.00 per hour. Their overtime rate, in most states, would then be $15.00 per hour, an increase of $5.00 per hour (or 50%). “Yikes. I don’t get a 50% raise, no matter how hard I work. This is bad. We must not incur this 50% penalty.”
Really, overtime is just the extra $5.00. In most cases, a savvy manager will ensure that folks go home as scheduled, and not allow people to “milk the clock”. Not catching those sorts of infractions are truly larger (and different) problems. Assuming that we are using overtime only to fill in when somebody is ill, or when the staff is needed, you are replacing a $10 slot with a $15 wage earner.
However, sometimes, we experience an unexpected rush. That extra $5 in labor buys you sixty minutes of a higher quality of customer service, rather than being short handed. Surely, by having that staff, you will make an extra $5 in sales, either in terms of being able to spend a few more seconds with each customer, to suggestive sell another item, or (gasp!) to have someone not walk out because the line was too long. Having run very lean operations, I will testify that one person can sometimes make or break your operation at a critical time.
Now, let’s jump back to our “target” of 0.5%. Let’s say you have 200 hours per week of labor. That 0.5% is one hour. Our conference call, above, asked somebody to define why they went over at 0.7. yes, 40% deviation, at a cost of…… $2.50 in labor, more or less. Just discussing the issue cost about $20 in management time, at least.
I specifically remember having a boss who, one day, made things very clear to me: The statistic was more important than anything else, including customer service. I asked, if I had to make a choice between sending somebody home because they had just hit 40 hours for the week, or allowing them to finish helping customers, I was told they had to walk away from their customers. It wasn’t this particular boss, either…it was a cultural thing in the company, and this was where I realized that we had a difference in culture: I wanted to be successful on paper, but not at the expense of customer service.
I always found the $5 investment in the extra labor, when that choice had to be made, was nearly always rewarded in terms of the sanity of the other employees, and the ability to maintain a higher level of customer service. In the long run, turnover will remain low, and customer service will remain higher.
In the end, overtime can be a sign that something else is wrong. However, the investment in overtime is, many times, a smarter decision than adopting a zero tolerance policy, and spending hours discussing the “problem” when you could be doing what every business should be doing right now, and that is focusing on customer service.
What part of your business will you manage?
