Labor Optimization- 7 Creative Strategies

Labor Optimization January 08, 2021

Jin Hyun

Writer

Technology and workplace strategies are enabling businesses to keep their costs low while achieving the maximum quality and output from their employees.

Scaling can be a major financial challenge for businesses. While some companies believe that acquiring more customers require more employees, this isn't necessarily true. Oftentimes, the ability to grow as an organization depends on labor optimization.

The idea behind this approach is to reduce the amount of time employees spend on mundane tasks and match the labor output to the projected demand levels. When done right, optimizing a business' workforce can reduce overhead while increasing productivity.

What is Labor Optimization?

Labor optimization, also called workforce optimization, is made up of business strategies that are designed to increase employee efficiency. This approach aims to understand how the employees work and how the companies can best leverage and capitalize on these skills to reach their financial and organizational objectives.

Labor optimization pushes organizations to work smarter and allocate the correct resources at the right place and time. This will require management to predict their weekly, daily, and even hourly staffing needs based on customer demand and match the appropriate tasks to the appropriate employee skillsets.

Labor optimization is most often used by businesses in retail, manufacturing, and financial services.
The motivation behind the strategy is to allow a company to balance different key performance indicators such as customer satisfaction, service levels, and operational costs to make the most of the workforce at any given time.

This data-driven approach to labor allocation can help businesses to become more efficient and cost-effective. The key is to use performance metrics and demand forecasts to reach organizational goals.

7 Creative Strategies for Labor Optimization

To effectively optimize labor, it is important to have a clear plan. The following are 7 creative ways to optimize a business's workforce.

1. Establish Baselines

To track the effectiveness of optimization efforts, businesses need a clear understanding of where things may be falling short. This requires gathering sales data, examining business performance goals, and determining industry benchmarks. Additional factors to consider at this stage include-

How much each employee makes in sales

How much they make during each working hour

Company turnover rates compared to retention rates

Look for any patterns in the information or correlations that stand out. Consider what sales goals are possible given the setup of the store or business. While it may seem overwhelming to gather so much data, it is important to understand what the gap is between what a business is capable of and the current performance.

2. Gap Analysis

The purpose of a gap analysis is to uncover any gaps within business processes that could be opportunities for performance improvement. Some of the key aspects to review during this analysis include-

Tasks - Consider the responsibilities or duties of each employee during a shift. Write down the tasks that are performed for different roles. This can provide additional insight into processes that may not be necessary or can be simplified to reduce labor hours.

Labor - Gather data about how much is paid out in wages each year. A further breakdown of how those hours are spent can help to uncover wasteful activity. Businesses can then consider automating repetitive tasks using robotics or software to help cut down on inefficient labor hours.

3. Employee Productivity Technology

Technology can help improve efficiency and performance for a business by freeing up employee time to be spent on more complex jobs.

For example, kiosks and self-service checkouts have become more commonplace at restaurants and stores. These devices can help a business make the most use of their employee's time, which is the core goal of labor optimization.

Other technology, such as forecasting software, can project consumer behavior. Predictive analytics uses historical data along with other information such as weather or traffic patterns to identify demand trends. This can help a business make the most of their employees by scheduling staff members in accordance with demand.

4. Employee Engagement

A key ingredient in labor optimization is employee engagement. It is important to keep the lines of communication open and to update all relevant staff members on any upcoming changes.

Additionally, allowing employees to be heard by offering tools for feedback will enhance their engagement and satisfaction with the business.

5. Company Culture

Creating a company culture means going beyond writing a mission statement. It involves actively living out the values of a company. While some businesses may see this strategy as unnecessary and costly, cultivating a positive company culture should be seen as an investment, not an expense.

Businesses that develop progression plans for employees can also create an element of gamification for daily tasks. Gamification can motivate employees by making work feel more like a game and encouraging them to improve their own KPI scores.

Defining targets and progress metrics can make employees feel like they are having fun while working hard and moving up within a company.

6. Management by Objectives

The philosophy of management by objectives (MBO) creates a merit-based system within an organization where the best-performing employees can advance and elevate themselves regardless of their seniority.

By recognizing and rewarding the top performers within a company, businesses can create a peer-to-peer coaching system where middle and low-performers are encouraged to work towards that same level of success.

7. Organizational Design

Companies that regularly reconsider their workflows and existing systems are more likely to find areas for improvement and room for optimization.

As new technologies are brought into the workspace, some businesses will find that they need to update their systems and restructure organizational charts to optimize their workforce.

Many businesses want to keep their costs down without affecting the quality of customer service. Through labor optimization and careful workforce management companies will be able to improve productivity, increase revenue, and cut back on overhead expenses.