Managing Labor Costs

FACTORS AFFECTING WORKPLACE PERFORMANCE

In addition to sound human resource management, other factors influence the required amount of labor. These factors include:

• Menu items
• Use of convenience foods
• Type, level, and hours of service
• Quantity of meals and number of meal periods
• Facility layout and design and production equipment
• Work environment and number of hours worked (scheduling)
• Standardization – recipes, procedures, and production planning
• Employee skill level, training, and supervision

Menu Items

The number and complexity of menu items affect the production hours needed. If you have a menu with many items requiring difficult production techniques, you will require more preparation time per item. If your menu consists of a limited number of items requiring minimal preparation, you will require less time.

Use of Convenience Foods

Foods prepared on-site require more preparation than similar menu items made with convenience foods, such as pre-portioned meats or desserts. You can reduce your labor costs by using convenience foods. However, you must consider two other factors: convenience foods can increase your food costs and may affect the quality of your product.

The second factor – affecting the quality of the product – is not always evident. Convenience foods made with high-quality ingredients and prepared exactly as recommended by the manufacturer can provide uniform portions of very good quality.

Type, Level, and Hours of Service

A restaurant featuring complex dishes with multiple components will require more labor than a cafeteria-style operation or a fast-food restaurant. Also, a restaurant that requires a higher level of skill to prepare complex dishes will require more experienced staff, which in turn means higher wages.

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The level of service provided to guests will also affect productivity. For example, a fine dining restaurant that provides a high level of attention to guests will have lower server productivity than a quick casual restaurant that doesn't provide table service, guests pick up their food at a counter and bus their own tables.

The hours open for service are yet another productivity factor. If the foodservice operation closes during slow periods between meals or is only open for breakfast and lunch the labor productivity should be higher than an operation which is open all day or even 24 hours a day.

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Quantity of Meals and Number of Meal Periods

The volume of business will affect the amount of labor required. Each restaurant will have a minimum staffing level without which it cannot operate. If it serves fewer people than this minimum staffing level can handle, the labor costs will be very high.

The number of meal periods can affect the productivity of the foodservice operation if different menus for each period require set-up and tear-down time. As well, different menus will usually mean a larger number of menu items, also affecting labor.

Facility Layout and Design and Production Equipment

Restaurant and other foodservice operation kitchens are often designed last, after all of the seating areas have been designed (or the rest of the school or dining hall, etc.) As a result, the space may be awkward and inefficiently laid out. To work efficiently, all work surfaces and storage areas required to produce an item should be located close together, as shown in Figure 13.3. This includes dry storage, refrigerated storage, freezers, storage for plates and glassware, work counters, grills, fryers, and ovens.

Long description:
A work counter is at the bottom. Opposite that is another work area which has a counter area on the left, a deep fryer on its right, another work counter, and a range oven on the right. Refrigerated storage is below the counters.
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Poor kitchen layout can limit the number of individuals who can work efficiently. It may require time-consuming trips to distant storage areas to obtain food items or dishes. If the layout of the kitchen is too spread out, the minimum staff needed to operate each station may increase. For example, if a salad preparation station is located away from the main kitchen, you may require a salad preparation person even when the restaurant is not busy.

Production equipment such as mechanical peelers, choppers, and mixers can reduce the amount of time spent doing these tasks. The key to selecting the appropriate facility design and equipment is to match these parameters to the expected volume of business. For example, if you purchase too large a mixer for the volume of business, the work involved in cleaning the machine after use will not warrant the extra expense of purchasing the equipment. On the other hand, too small a mixer will reduce efficiency as you will be unable to mix the quantities needed in a single batch. The type of dishwashing system (or higher use of disposables) will also affect employee productivity.

Similarly, if your kitchen layout is very compact, you may be able to run efficiently with only one cook. However, you may be unable to meet the demands of a high volume of sales because the kitchen is too small to accommodate more than a couple of staff.

Work Environment, Number of Hours Worked, Breaks

A hot, humid, noisy environment reduces comfort and increases stress and may negatively affect performance. Long hours and hard work without reasonable breaks can lead to reduced productivity. The same is true if you are understaffed. Not having enough staff means that everyone else has to work harder or for longer hours, resulting in tired staff and reduced productivity. Managers and supervisors also need to understand how to motivate employees and improve morale to get the highest level of productivity from their staff.

Scheduling employees is an art. How long should it take an employee to do a job? Unfortunately, there is no book that provides the answers. Each manager needs to determine the time required and this requires research. For instance, some managers do direct labor time analysis by putting the most efficient employee on the job and timing him or her to determine how much time it should take to do the job. When scheduling employees:

• Schedule your best employees first to open the restaurant or foodservice each day.
• Schedule other employees as they are needed.
• Schedule employees according to work to be done.
• Avoid the need for using overtime.
• Train full-time employees to do more than one job.

Standardization – recipes, procedures, and production planning

When tasks are done the same way every time, employees are more productive. Station set-ups should be designed for maximum efficiency and then written into standard procedures. A standard recipe format, clear and concise mise en place, and work simplification strategies incorporated into recipes and production schedules help employees be more efficient. For instance, if six different recipes for one day need diced onions, then it's more efficient for one person to prepare all the onions at once, than several different cooks all dicing onions. In this case, a food chopper may also be used, which makes the task even more efficient. Production schedules provide the organization (mise en place) and standardized recipes provide all the details needed to increase efficiency.

Employee skill level, training, and supervision

How well employees are trained to do their jobs, including knowing how to do multiple jobs in the foodservice operation (called cross-training) affects how productive they are and the efficiency of the operation as a whole. This is one of the reasons employee turnover is so costly. It takes time, effort and money to get an employee "up to speed" on any foodservice job, not to mention the specifics of each operation, including the menu, recipes, standard operating procedures, etc. When employees leave, new ones need to be trained, adding to decreased productivity and increased costs. Effective supervision keeps employees on task, motivated to do their jobs, and provides intrinsic rewards for a job well done.

Improving Productivity

In many situations there has been a lack of emphasis and training devoted to increasing productivity by foodservice managers. Labor costs are an issue today and foodservice operators who are placing emphasis on increasing productivity will be better able to remain competitive.

Management, being aware of productivity, can easily spot ways to improve. For example, it is not uncommon to see employees talking to each other because business is slow- this is poor use of paid time, and it is due to overstaffing or poor scheduling. "Standing time" should never be idle time.

Tasks should be set up that will "store up labor". "Store up labor" means tasks that can be done when business is slow for use at peak times. For example, a cook can prepare nonperishable food items such as croutons, or grate cheese for later use; the waitstaff can wrap silver.

Today less and less "from scratch" cooking, particularly baking, is being done in the individual foodservices. Fine restaurants are even going outside to purchase dinner rolls, croissants, and gourmet desserts (also "signature" items- those items the foodservice operation is known for).

It is wise for management to compare the costs of convenience foods with preparing "from scratch". A substantial number of preparation and cooking hours can be eliminated through the use of convenience foods. Convenience foods available can be sampled, and then the same items made from raw ingredients can be precosted and postcosted to determine how much time they take. Could one produce the items for less and will they be better than purchased? Is the frozen, prepared product more expensive? Can labor costs be reduced?

Ways of Increasing Productivity

To improve the productivity of employees, management must know what the existing productivity rate is, and what it should be, what affects productivity, and must set realistic goals for increasing productivity. Cutting the number of labor hours would seemingly increase productivity; however, that could mean that the job doesn't get done. Increases in productivity don't just happen and don't come overnight. Setting standards, monitoring and adjusting any or all of the above workplace performance factors can all be ways of increasing productivity.

Productivity Standards

A first step in determining staffing needs is to establish productivity standards. These standards must take into account the amount of time necessary to produce food of the required quality. The standards are based on procedures dictated by standard recipes.

Productivity standards are measured in labor dollars or labor hours. Labor dollars measure productivity in terms of the number of dollars that must be paid out in labor to generate a certain revenue. The advantage of this approach is that budgets and financial statements are also expressed in dollars so comparisons can be easily made. However, it can be very time-consuming to calculate the labor dollars given different wage and salary scales. Labor hours must still be calculated because the number of hours determines wages.

Labor hours indicate the number of hours of labor needed to produce a given number of meals or generate a certain amount of sales income. When you use labor hours as a standard, it is less time-consuming to calculate. As well, some simple tasks may take the same amount of time to complete, whether they are performed by a chef or a dishwasher. Using labor hours as the input for a productivity measure is a "true measure" of productivity because it is not affected by sales dollars or wage rates.