You know how many people you need, but how do you fill those requirements: hire permanent or temporary employees, whether full or part-time; build and store inventory in low months; work overtime, outsource, or even accept backorders in peak months? Once you decide this staffing strategy, then you can move on to scheduling people.
Gather Your Inputs
Good decisions require good information. Gather some numbers, survey the market, and set some policies before deciding how to staff.
- How much does hiring cost: advertise, interview, background check, training hours for instructor and student, low productivity for the first few weeks/months, higher loss rate for new hires?
- How many people can you hire in a month? Limits include your HR staff and instructor training time available, and the ability of the production team to absorb new members.
- What does it cost to store a finished item in inventory? Interest expense on the delay in gaining sales revenue is probably the only variable cost, but you may also have to provide more storage space and warehouse personnel.
- What does it cost to work overtime? Note that often employee benefit costs do not increase for overtime hours. What is the limit on overtime, assuming excess overtime causes absence and quality/rework problems? My advice is to not exceed assume 20% of regular time, or 8 hours per week, for six consecutive weeks.
- What does it cost to outsource work? Are there suitable suppliers? What do they charge, and what is the shipping cost? Will you incur other costs to deal with them? Any union isues?
- Availability of outsourcers?
- Availability of other employers for employees feeling stressed by overtime?
- Prevalence of overtime at other employers? Do employees count on some level of overtime to make ends meet?
- Will your customers accept backorders for deliveries in peak months, or will they go elsewhere?
- When there are more employees than work, will you give them the opportunity to voluntarily accept an offer to go home early without pay?
- What level of certainty do employees expect about their scheduled hours of work? Can you change schedules every week, or do they expect to have the same hours and days off for months at a time?
Select a Strategy
Having gathered this information, you can select a staffing strategy. Most companies end up with a mixed strategy. They decide not to hire and fire according to monthly demand (“chase strategy”) due to the cost of taking on and training new people. They also decide that working the same hours regardless of demand (“level” strategy) is too rigid and expensive.
A mixed approach employs enough people to meet demand in the lowest month, and stretches to meet peak demand. Some stretch techniques are limiting off-line nonproductive hours, overtime, extending hours of part-time people, and/or hiring temporary workers. If materials are not a major cost element, a few more people can be employed to make extra product in low months, so that inventory is available in peak months.
If non-paid excused time is an accepted tactic, the number of permanent workers can be a little higher, but note that benefits costs apply whether or not the employee goes home unpaid. Outsourcing is not a good match for seasonal peaks because outsourcers do not like peaks and valleys either.
Part-time employees are an excellent safety valve, especially if their hours can be extended without affecting benefits. In addition, these people can be an excellent source of speedy replacements for departing full-timers. However, the downside of part-times is weaker communications, weaker cultural integration with the full-time workforce, and higher loss rates as they find full-time work. The same drawbacks apply to weekend-only workers.
Develop the Schedule
The art of scheduling is to balance the needs of customers, employees, and cost control.
- Customers want the product or service without waiting. This can cause scheduling more people than needed for immediate demand. Solution: build planned “ready-to-serve” idle time into the forecast of people required (see previous article).
- Employees want job security and a stable schedule so they can plan their lives. This creates the potential for too few employees at peak days or hours, and too many at slow times. Solution: use a stable schedule for most employees, and provide flexibility with voluntary unpaid time, part-timers who can extend their hours, and overtime.
- The company wants a perfect match between demand and workers at every hour. This can result in scheduling too few people, relying on “stretch” techniques to meet bubbles of demand. Solution: make a weekly forecast of hourly requirements for each day, using records of past daily and hourly demand. Adjust that demand upward at times when customer waiting experience shows that too few workers were available, because these shortages artificially reduced recorded demand. Then adapt the weekly schedule of offline time and part-timers to cover peaks and valleys within the week.
This approach blends a stable long-term schedule with active weekly/intra-day staff management. It becomes more important for both cost control and customer service as the business grows larger.
Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business, certified as a Turnaround Professional (CTP), Business Development Advisor, and SCORE Mentor. He can be reached at 630-512-0406 or firstname.lastname@example.org. See www.tom-gray.com. For Tom’s new book Business Techniques for Growth: More Tools for Small Business Success, and its predecessor Business Techniques in Troubled Times: A Toolbox for Small Business Success, see http://www.businesstechniquesbooks.com/