Effective Labor Scheduling, Paul K. Anderson, published by the National Association of Chain Drug stores under a grant from SmithKline, Inc., 1980.

Presentation made for former Chairman of Shaw's, David B. Jenkins to the New England Association of Supermarket Financial Officers, 1979.

LABOR PLANNING - A PROGRAM FOR PROFITABILITY AND PRODUCTIVITY

This afternoon I plan in the next 30 minutes to present Shaw Markets, installation of Management and Personnel Training - a program of labor scheduling and operational planning which has produced substantial benefits for our firm. From this presentation, I hope that four questions will be answered.

1.What is labor scheduling? 
2.Is it right for my firm? 
3.How do I install a program? 
4.What can I expect to get from it? 

What is Labor Scheduling?

"Good labor scheduling is really the full application of the principle of management by exception to the field of store operations." It is first a rational system designed to quantify' labor used in the stores with a common method and a common vocabulary which allows it to be analyzed much more effectively in much greater detail than the normal industry averages.

But it is more. It is a program which at Shaw's we call management and personnel training that is really a methodology. It has the really simple elements of any problem solving. There are four elements:

A. Decide what is to be done and how often.

B. Measure how long it takes to do those tasks. 

C. Design a plan based on those measurements.

D. Close the loop by reporting on the performance of that plan.

Decide, measure, operate a plan, track your performance. When I say it is a methodology, it is certainly much broader than one that involves labor alone. It is a logical approach to assure that management's operating  objectives are defined, carried out, and measured at the level where the work is actually accomplished. further it provides at each level of management within an organization, a tool to examine its own performance. The result is that it enables each manager to be a planner, a decision maker, and be an executive, down to the  department heads at each store. This most significant sharing of one of the major controllable costs, labor, allows hundreds of individuals to operate as a team member and as such builds an organization by strengthening its people.

A third element of labor scheduling beyond the fact that it is a rational system, beyond the fact that it's a method of operation and philosophy; it is also an attitude that everyone in your organization is important and has a job to do. To do that job well, he must know what is expected of him and you both understand how long it should take to do the job properly. He then should he allowed to do that job and be measured against a reasonable standard.

It is not so much aimed at getting him to do more but getting him to do well a planned activity. This attitude of mutual respect and sharing the responsibilities and rewards of management must start at the very top, and permeate the whole organization. Indeed, i~ is not the method itself that causes this program to work but it is the attitude with which the program is approached and developed within your firm that makes this a sharp or dull tool with which to carve out your company's future.

Why Should Your Firm Tackle This Project?

It occurred to me today that this may be the right speech but to the wrong audience. As treasurers, you are expected to watch the bottom line, to be more concerned with assets and liabilities than morale and productivity, and salary rates rather than salary earners However, this old fashioned view of the green eyeshades does not fit the audience I see before me. Clearly, no one in the organization understands better, the leverage that labor cost has on the P & L and no one has had it more often demonstrated to him. You may be the wrong audience if I asked you to install the plan, but you're clearly the right audience to appreciate its need and perhaps to be able to create the climate or at least recognize whether the climate is correct in your organization, so that a rational plan for labor use could be established.

The background paper on labor prepared by the Food Marketing Institute, December, 1977, makes several important points. "Food distribution is a labor intensive industry and this is especially true at the supermarket level Wages and fringe benefits for store personnel account for more than half of the supermarket store level operating expense. When warehouse and headquarters personnel of a supermarket company's work force are included, labor accounts for approximately 70~ of the total operating cost." The average hourly wage in the supermarket industry has increased 58% from 1970 to 1976, a yearly rate of approximately 10%.

That’s the outgo side but that is only significant in relation to what you are getting for your labor dollars. A disappointing fact is the real sales per person hour from many years until the 70's "showed almost steady annual increases. The improvement in productivity was a credit to the work force and it contributed to two decades of relatively stable food prices, but from 1971 to 1974 the real sales per person hour actually decreased 11.7%." The real sales are deflated and the numbers expressed in constant dollars. The 1970 real sales per person hours was $30.53 and in 1974 $28.O4 and in 1976 $31.19, less than 1% increase/year.

You are probably aware of, our source of numbers. In the abstract, they are understandable but each of us assumes that we are part of a well run company and that we are somehow different. Six decades of productivity measurement in the industrial field makes several points clearly. All operations can be improved. Nonmeasured operations can be improved immeasurably. The supermarket industry in my limited experience in it, is surely an unmeasured industry. A conservative view of the payback on a well run labor planning program, all other benefits aside, is 1% of your sales. 1% of your sales must be an attractive number to you, since we are in an industry that nets 1% of our sales currently. You should clearly asked the question, why not get involved in such a plan?

Being sober, rational treasurers and accountants, I am sure you will not get on your horse and ride off madly in all directions but in case you are tempted, let me raise some questions for you to answer before you apply the spurs. I suggest we take a look at the four elements of the planning process to see whether you feel your company is ready and would be willing to install such a program. Since there is no free lunch, substantial benefits will not be gained without substantial efforts.

As you may remember the first step is to decide what you want to have done in your stores. What are your management ojectives? This is not a list of abstract and high sounding principles of management; specifically how do you want the fruit rotated and how often should the deli case be cleaned. The task of defining what needs to be done involves all operating departments. It requires a great deal of thought. Much of this may be written down within your company but experience tells us both that much is not followed carefully, if at all. The result, however, is not an abstraction but a specific clarification of responsibilities and tasks by job, by department in clear policy statements. Have you got the time? Will the results be worth it?

The next step in the planning process once you have decided what you want to do is to measure how long it takes to do it. The first thing you discover when you go out to measure how long it takes is that you find that many of your people don't know how to do the things you are now asking to have done. You will find that methods need to be changed or simplified. A fresh look must be taken. Why are we doing the task? Do we need to do it that' way? Do we need to do it at all? This will challenge a number of assumptions but before you can measure the work, you have to define the method by which the work is to be accomplished. The second thing you find when you go out to measure the work is that they know how to do it but it just isn't happening. What you find is that you are not in touch with what's going on. Can your company stand the truth?

Finally when you add up all your measurements, can your company stand the cost of following your own policies? Measurement holds a mirror of reality up to what we think is taking place and we find the pictures do not coincide at all. If we make, as an industry, 1% on the reality we think is taking place, could we afford the reality that we desire in our stores? Our experience would be a very clear yes but the risks are substantial because the costs of this program on the front end and the results may be slow in coming. Is your firm patient enough for the third step in the process which is to share the planning? This requires not only a sales plan by department but it requires a trust at the department level and a respect for the ability there. Do you allow the managers and department heads to run their store? Is your company ready for this kind of responsibility at those levels?

At this point we have covered three steps; like a race we have said on your mark, get set, go. The race itself involves the last step of operating the program, in closing the reporting gap from plan to results. A successful program is only the start of an extended process of measurement, correction, and control. To achieve success,
you must first have top management's firm support and commitment. Second, you need to have a solid middle management who will take the stresses that fall upon them to make the program run. These stresses fall primarily in the operating and merchandising departments who must work together closely to recognize the cost of what's required and the potential benefits that will be derived from various programs. Third, it will require a work force that will trust you enough to give you the opportunity to show them, the program works as well for them as it will for the company. If these three elements top management, middle management, and rank and file are not ready, forget labor scheduling and start on something else. You surely don't need the confusion, chaos, and disappointment of an unsuccessful program.

Shaw’s Experience with Management & Personnel Training

First, briefly some information on Shaw's. We're a company of 33 stores with an average weekly sales volume in excess of 4.6 million. These stores are spread from Augusta in Maine and No. Conway in New Hampshire into southeastern Massachusetts. They are serviced by a 400,000 sq. ft., distribution center and offer the customers service deli and fish in all stores, bakeries in most stores, and cafeteria or lunch counters in eight. You must decide what of this is generally applicable to you but surely a rational labor planning system is applicable to all. There are perhaps six clearly defined steps we took to install a plan.

1.Select a consultant to help you install it. I'm sure I do not have to tell you to avoid consultants who carry black books with secret formulas. There is no such thing as a fast answer unless it be that your operation can benefit from a sound program. However, there are a number of good companies offering this sort of organized approach to labor management. We talked to a number of them and we visited their customers for a performance evaluation. We chatted sufficiently with them to be sure they were on our wave length. The different strokes for different folks certainly applies to the kind of program and the kind of attitude the consultant has and will create in your own company. More specifically, checkout carefully which individual will actually install the program if they got the job and follow up with the last several jobs he worked on. What have those customers felt about him personally? What sort of leadership did he provide? 

At Shaw's we picked a small firm in which the principals had all been active in installations. The program was very participative, based upon a small amount of consultant man-hours and a substantial amount of Shaw's man-hours. It was based on the premise that the average employee wants to do a good job, if he knows what is expected. It also was based on the understanding that the program would not create problems out in the field but would unearth them and it was management's job, not the program's to solve them. The program was simply a method by which this work could be done in an organized manner.

2.Once we selected a consultant, we had to select our own personnel, a management and personnel training team. In the stores we used a three man group, a store manager, a meat manager, and a produce manager. In the warehouse, in which we also put a program, a single assistant foreman was chosen. Selecting this team is one of the most important decisions. These people are the ones who have to carry the ball long after the consultants have collected their money and gone over the hill. In both cases, the consultant worked directly with these employees who first had to be indoctrinated in the program themselves before they could teach the program to the balance of the work force, then maintain it. 

3.Developing the program - The first step is a clarification of management objectives department by department. In the case of the produce department, policies were analyzed by the team member responsible, produce merchandisers including the department head, and operations people. They were guided by lists of every task to be done submitted by department heads to which they added their own ideas. The program is simply a framework. It is up to operations and merchandising to flesh it out with the policies they wish to have implemented. The program can be whatever the departments desire to be. Stores can be clean or dirty. Customers can be well taken care of or left to fend for themselves. One approach takes less time than another but all take some time and this time must be planned for. 

The second element in planning the program, therefore is observing how long each of these tasks take. Team members spend hours watching various operations because the labor planning is only as good as the observations that went into it. The technique is simple, no stop watches or MTM are involved, simply a gross observation beginning when the task is initiated, ending when the task is completed, pulling out only personal time and interruptions that are not part of the operation. One of the fascinating things to observe as the data starts to flow in is the wide variation in the methods various stores use to accomplish their tasks and the time taken. A constant search for the most relevant methods best suited for the operation was initiated. Some standardization took place with more communication as to what other departments were doing. Our consultants were excellent in forcing us to observe ourselves what actually was going on and we found there was a wide gap between what we thought went on from store to store and what actually occurred.

4. Explaining and Training - When the process of data collection was underway about four weeks, various personnel in the operating department as well as the merchandising area needed to be instructed as to how the program would operate and indoctrinated as to the changes that would be required to make the company fulfill its objectives. Though the indoctrination starts at the top, the principle method is three hour classes conducted in a central location over a period of eight weeks.

The program itself is explained. Department heads go out to make lists and collect times and sales patterns. These numbers are reviewed and agreed to both by the department head and supervision as well as a team member. Department heads are encouraged to question the program, the hours, and the methods. There is substantial opportunity to accept their legitimate criticisms and make
adjustments.

The training portion takes place simultaneously at these meetings. There is effort made to discuss what motivates people, how to he a manager, how to plan and then execute it, how to check on the execution of the plan by others. This involves a good deal of voluntary contribution by a wide range of people listening and participating in these sessions. At Shaw’s everyone from the president on down attended at least one of these meetings each week. Produce merchandisers always met with produce department people. Buyers often met with grocery, while store managers, service desk and front end managers met together. These groupings allowed much franker and more useful interchange. From the explaining and the training, the various department heads gathered the message that they are called department heads for a reason, that they must act as leaders and planners. Some accept this responsibility with enthusiasm but others were full of reserve and perhaps apprehension. 

5..Implementation - The plan was installed in three units, first unit of eight stores, and then two units of twelve stores each. The first installation took 12 weeks to be ready, the next two eight, because the data has to be developed for each store individually and are not composite numbers. The data established times both for fixed activities such as cleaning the cooler, sweeping the floor, unloading the truck and, variable times such as grinding hamburg, baking bread, and processing customers. To implement, each department develops the sales activity to determine how many variable hours are required. Fixed hours are added to that total. The combination tells the department head how many hours he has available to him that week. He is expected to add hours if he exceeds his sales plan and cut them if they do not meet his expectations but in no case is he allowed to touch his fixed hours. The observations of customer shopping patterns help him plan the hours on a daily basis and for a service department on the hourly basis as to when his variable hours are needed and when he can work at his fixed activities. The plan is installed at the pace at which the department is currently operating so there is no impact on the department for the first several weeks. There is a settling
down period, when the reporting that the department heads do daily and the summary report which they submit each week, becomes more familiar to him. These reports are reviewed carefully each week by a management group made up of merchandising and operations supervision. Where the department head reports that his planned hours goal was not met due to problems, they are identified on a Problem Identification Report. It is not the department heads responsibility to
straighten out all his problems, it's certainly management's job to help him. It is early in the program that management's good faith to straighten problems out becomes evident to the departments. 

6.The Last Step - Follow Up and Up and Up and Up - Here begins the guts of the program itself, making it work. It involves problem solving and store keeping. It is a substantial period of stress as each department at its own pace with the guidance of the team and the management of the store works towards achieving 100~ of what reasonably can be expected, in terms of the time required to run his department at a given sales level with a given product mix. Since few of us would like to be
confronted with his own plans, what surfaces are all sorts of excuses, as well as many legitimate obstacles preventing what is planned from happening. Both excuses and obstacles have to be faced one by one over the coming weeks, months, and years. This is why the team is an ongoing project which has to be funded as long as you want an ongoing control program. Without their daily commitment, without their objective forcing all levels of management to act on its problems, the tool will become slowly dull and rust away. 

Is It Worth It? What Can I Expect to Get Out of This Program?

In answer to this question, Shaw's would reply, "Yes go ahead ~ but don't expect it to be easy." Depending upon the current efficiency of the firm, the payoff from such a program is substantial but the effort involved is also high. Managers learn to manage better and employees look for better methods to meet their goals with no more effort. All this training implies change and change creates problems and there are problems galore. The reality is that the problems were out there all along and we didn't know it. Management and personnel training has helped us identify those problems, isolate them and solve many. Here are the basic results of our stores program.

1.We have better control. The plan has turned out to be an excellent tool for judging the performance of a department comparing the hours required vs. the hours used. Though different conditions exist at each store, we can also compare departments chain wide because each is judged by the same yardstick. 

2.Our stores are cleaner. Time is allowed for fixed activities and the results are followed up. Most stores have a chart on the wall indicating what cases need to be cleaned and when the last section was done. The argument that you don’t have time does not hold water because fixed activities are always done in the plan, irespective of the sales forecast. When it is done, is fitted to the needs of the store, not just left for the part timers at night. 

3.We have attacked our problems. As I have said, problems are highlighted because the program is built on observations from which all problems are removed. A Problem Identification Report, which the department head files as needed, explains why his goals were not met. If you company is committed, action will be taken promptly on those PIR’s, moving the props from excuses and straightening out legitimate difficulties. It’s in this positive framework that the team and supervision join the department head and the department personnel in solving problems. Indeed some policies which were found to be unreasonable were modified or dropped. 

4.Employees now know what is expected of them. In the grocery department 40 cases per hour may be the reasonable expectation in a given store. The grocery department head knows how many cases came in for the aisle man and how much he is supposed to have put up. Both know how much time it took him to do the job. The employee and his supervisor are on the same wave length. 

5. The program outlines Shaw’s expectations. The program highlights the fact the each store is different. The data and the observations are collected at each store as are the shopping patterns. This is the only fair yardstick, not a company wide sales per man-hour or labor percent. Further, the program is developed for a particular chain. It is a matrix which is filled in by hard work and good ideas of the people within that firm. It can do what you want to have done if you are willing to define it and follow up to see that it gets accomplished. 

Finally, we would agree that sales increased. If you have better stocked shelves, better culled produce, better rotated dairy, if your shelves are cleaner and your front end is better organized, if employees are scheduled to meet the needs of the customer, you should have the people there to do the business. In fact Shaw’s sales have grown. It would be misleading to say the only source of sales growth has been this program because white the opposite is true. We have embarked on a major everyday low discount pricing philosophy which has helped raise our volume. On a 10% increase in sales we are using 10% fewer hours. Even if our labor resulted in no less hours, there is no question in my mind that the other advantages of the program which I have outlined would make this whole undertaking worthwhile. We are a better run firm because we have taken the time to educate ourselves as to what we are about.