10 Ways to Leverage Labor

Automating key success factors creates a more productive hotel

The traditional measure of labor management in lodging is misleading and imprudent. Judging labor cost as a percent of revenues fails to show how to improve. What really enables operating managers to improve both customer service and labor cost is measuring productivity by the job and matching productive staffing to customer flows. That's what labor-management systems do.

Those lodging leaders that have implemented advanced labor-management systems correctly have achieved a fast payback plus a continuing ROI. They have staffed to the ideal service level with less total labor costs; they have adjusted expenses faster than competitors when demand became more volatile, as it has after 9/11.

And, according to IT Initiatives Grow Aggressive, a recent study from IT research and advisory firm Gartner, 42 percent of companies surveyed achieved a return on investment on labor scheduling initiatives in less than one year, and the payback for an additional 12 percent was within two years.

So which labor-management initiatives are successful at lodging companies? Hospitality Technology dug into this and found 10 success factors that enabled labor-management deployments to improve performance dramatically, both from the perspectives of customers and shareholders.

Map your current processes and automate data collection. By automating collection of labor data for payroll, lodging companies cut administrative costs and payroll errors for a fast payback while getting accurate records for labor management. According to APA's Best Practices Benchmarking study by KPMG, the median payroll payment error was one percent (and it ranges up to 12 percent) - a huge source of early savings. Automation also creates a base line for measuring and scheduling labor management improvements.

Get top management support for the labor management initiative. Top management may have to impress how labor management is critical to resistant business/department managers.

Identify quick-win opportunities. Some locations or departments will deliver the greatest gains in labor management. Achieving gains in targeted areas for the initial implementation improves ROI/payback while winning wide acceptance for subsequent implementations. After the initial reduction in costly payroll errors, the biggest sources of ROI in labor management are scheduling labor to match the timing/location of customer demand and providing near-real-time productivity performance measures to managers so they quickly see the opportunities for improvement.

Position labor-management systems as a tool for operational managers. Says Orient-Express's Steve Grainer, "Failure will result if managers perceive the system as either a replacement for what they have been doing or a challenge to what they have been doing. It has to be their tool."

Operational managers must participate directly in determining the system as well as the processes and standards on which it is based. Encourage management to win the buy-in from hotel GM's and departmental managers/ supervisors is the key to a successful implementation. Take time to celebrate managers' successes - and communicating them - is crucial.

Create labor standards for job productivity. Labor cost as a percentage of revenue hides where improvements will deliver high returns. Productivity metrics based on labor standards (e.g., time to clean a room, number of meals handled per server) identifies where each manager's focus will deliver the best return. Productivity standards also enable scheduling staff to accurately match forecasted customer demand.

Deliver near-real-time performance feedback to managers about labor-productivity standards. Top management, regional, property and departmental managers with access to real-time labor-productivity performance can act fast to curb inefficient labor expenditures. Real-time is critical. If performance measures wait until after payroll, it is too late.

Save time for operational managers, rather than adding to their burden. Most are already stretched thin. Three big time savers involve eliminating paperwork, getting employees to input their own schedule constraints, and using the computer to sketch out a schedule based on a best mix of forecasts of customer demand.

Centralize the labor-management data, rather than have a separate unit at each location, especially if some locations are within commuting distance. This cuts total ownership costs and achieves one server, one administrator, one source of the truth. It also simplifies reports/alerts to senior managers. Some lodging executives also recommend having a central, full-time labor manger to help operational managers improve.

Hold periodic reinforcement sessions that highlight what top-performing managers are doing. This spreads best practices across the organization and helps motivate weaker managers to raise performance.

According to one experienced resort executive, "A couple of our hotel operations resisted labor management. It was ego and turf battling: 'Don't take away my power. Don't imply I don't know how to manage my labor.' Labor management cannot keep going well without returning to basics. We get a set of mangers in a classroom to discuss how well it's going and to see other managers who are doing particularly well. That's the key to bring everyone into the fold."

Plan how to adjust expenses smarter and faster to avoid substantial fall-offs in total demand. For example, use the "what-if" capabilities of the labor management system to decide how to respond if another terrorist scare suddenly cuts business levels again. Or use the system to test how to phase opening times among multiple locations.

Labor-management initiatives deliver excellent returns when done right, especially in larger facilities that enable sharing staff between different departments. If you decide to take on leadership of a labor-management initiative, it might be smart to negotiate an incentive for yourself based on delivered ROI.

Top Service for Less At Orient-Express

Scheduling labor to match demand was the key to Orient-Express's excellent returns on labor management at its Charleston Place Hotel, located in Charleston, South Carolina, and the Windsor Court Hotel, in New Orleans. Says Steve Grainger, Orient-Express's director of financial management - North America, "We have managed to maintain or improve on five-star-quality customer service while reducing direct labor expenses 10 to 12 percent." The speed of payback was "well within 12 months."

The hotels use ADP (www.adp.com) Time saver hardware and UniFocus’ Watson software. Adds Grainger: "The managers deliver the gains. The technology is a tool that gives them the quality information they need to make good business decisions."

Orient-Express implemented the system from April to June 2001 at Windsor Court. Following initial information gathering, managers and consultants held a series of meetings that defined each department's customer service target.

Then they evaluated current processes, looking for further improvements. They calculated appropriate labor standards and input them into the system. Next, Orient-Express piloted the system in a test environment on site for two weeks. During this period, daily results were reviewed with managers, and the system was tweaked. It was implemented on-line, with the department heads held accountable.

Made famous by the Orient-Express train, the company operates luxury five-star hotels, cruises, trains, and game camps around the world. Grainger sees the next phase in labor management rolling out to extend beyond the larger hotels to a wide range of different operations over the next 12 months.

-By M. Frantz