We live in a world where there is a constant push to increase profit and decrease costs. Yet there is a continual upward pressure on labor costs, through wage inflation and regulatory burden. Increasing prices to compensate for higher labor costs is either risky or not possible. Staying competitive in the market and keeping customers satisfied means giving them the best price.
“If wages keep going up every year, how do we reduce our labor costs?”
Measuring and reducing labor costs can be done the way that works, or the way that doesn’t work. One way can involve management staring at spreadsheets for hours, trying to figure out how to measure costs and success, hiring expensive consultants to measure things for you, yelling at employees to work harder, or – the opposite – motivational cheerleading. The more effective way is the Easy Metrics way. Easy Metrics’ software and tools give you granular visibility into the labor costs of every aspect of your operation.
Reveal Your True Per-Unit Costs
The first step to reveal your per-unit costs. This process starts with macro information, and then incorporates micro information. Like having the ability to order a cup of coffee 10,000 ways, today’s products and services are much more diverse, and there is an associated cost for each variance. Eventually, it becomes important to know what the cost is for each variance of product and service. We make this time consuming cost process quick and easy.
The inputs Easy Metrics uses to determine your labor costs per unit are:
1. Employee time
2. Employee hourly wage + burden
3. Employee activities (units produced, details about each unit/service)
If your company just produces one type of widget and all employees produce identically, the formula is pretty simple. Unit Cost = (#1 * #2) / (#3). The challenge comes from when you have 100 employees that produce at different levels and 1000’s of different processes and products. We take care of the thousands of calculations and determine your true labor cost.
Multiple Performance Metrics Are Crucial to Fair Performance Targets
Rather than a singe metric, multiple metrics are required to develop fair performance targets. We call this “performance accountability” and the goal is to standardize your measurements into a consistent framework that takes into account the multiple variances that can occur within each process. For example, many organizations may use units/hour as their standard of measurement. If every unit is identical and the production run always the exact same length, then this is a fair standard. However, this is usually not the case. Different batch sizes, product variances, etc., cause a fluctuation in the units/hour output. Trying to manage these variables with spreadsheets is challenging to nearly impossible, especially for the manager who wants to monitor daily or real time performance.
Accurately Measure Performance Metrics with Automated Correlation & Regression Tools
Measuring performance accurately is both an art and a science. As part of our service model, Easy Metrics will help identify for you what key metrics should be measured per process and then develop the corresponding standard for each process across all the elements or metrics. Easy Metrics enables you to analyze as many elements and metrics as your process requires. Our tools and process make it easy to determine which metrics are important and how they should be weighted for your employee performance targets.
Comprehensive Performance Reporting
The result is that each employee is given a performance score for each process they perform. This data is then rolled into comprehensive reporting that enables both employees and management to see objectively how everyone performs. Easy Metrics reports give accurate and timely feedback which makes for faster and better decision making.