Labor Management Demystified

By Cihan Cobanoglu | May 07, 2009

While attending this years MURTEC (Multi-Unit Restaurant Technology Conference) in Las Vegas in March, I had the opportunity to participate in a roundtable discussion on labor management. The roundtable had a mix of restaurant chains, from large brands to mom-and-pop operations; yet the challenges they faced were similar, and the solutions were complex and difficult to implement. Labor is the second highest cost in restaurant operations, after food and beverage costs, so managing it properly is a must. This is no easy task, however, due to high turnover rates, varying levels of skill requirements, and relatively unpredictable demand.
There are, however, several solutions that can help manage labor effectively. One of the most effective tools is a labor prediction model, created using the multiple-regression method. In this method, a restaurant enters key variables (i.e. day of the week, average check amount, weather, etc.) into the equation, and the tool creates an optimal model that predicts guest traffic, and consequently required labor. If you have a Ph.D. in statistics, this is easy. For most everyone else, however, the multiple-regression model is complicated and fraught with possible points of failure. One global restaurant company spent large sums of money to create a sophisticated, proprietary regression tool. Very few franchisees ended up using the tool because of its complexity.
 
The lesson: a labor management system (LMS) must be simple to use and must not require expertise in statistics or other related fields.
 
Successfully managing labor will not only positively affect the restaurants bottom line, but also increase guest and employee satisfaction. Guests will not be underserved, and employees are less susceptible to burn-out. According to 2009 Restaurant Technology Study, 30% of restaurants do not use an LMS, despite the availability of many solutions that can be tailored to meet the particular needs of the restaurant industry.

Must-have LMS features
The following features are important to evaluate when selecting a Labor Management System:

  • Integration: The most important feature of an LMS should be its ability to interface with other systems. This is critical for collecting the right data to produce an accurate predictability model. Without comprehensive integration, users will have to manually enter key metrics, a cumbersome process that can lead to errors and a reduction in use.
  • Performance-based scheduling: The LMS should take the performance of the staff members into consideration when suggesting an action. This can be done manually; however, if automated, it will offer convenience and objectivity. The system should let you enter dynamic variables such as such as sales, customers, table count, entrees sold, etc., to determine the performance level of staff members.
  • Easy-to-use interface: A good LMS should have a simple, easy to use interface, just like with any other software. However, with an LMS this becomes critical, as it is a key determinant of the software being used or wasted. The LMS should not involve the user in the mechanics of the algorithm.
  • Flexibility & customization: Although it's important that the system be easy-to-use, it mustn't be too restrictive. The LMS should offer customization and allow users to enter target measurements, such as guest-per-labor-hour and labor percent as part of total sales, for example.

The good news is that there are many good stand-alone LMS products on the market that can offer all of these features. In addition, some POS vendors integrate LMS modules into their POS products. The right LMS is available for your needs. You just need to be willing to search for it.

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