The Illusion of Labor Savings
At one point or another, every owner/executive and leader in food and beverage has heard the line, “If we do or buy this, we can save labor”. Captivated by the idea of labor savings, many jump at the opportunity without any further conversation.
It is important to consider new ideas and equally as important to understand that some initiatives can have consequences that come at the expense of something else, such as:
- Increased food costs,
- Reduce value or quality to the customer,
- Place the burden on other employees or departments,
- Or all of the above.
You need to fully investigate each opportunity and ensure the savings are, in fact, realized.
The following story is intended to show the significant costs of unrealized labor savings, followed by examples of steps to help the decision-making process.
Convenience vs Labor
Shortly after starting in a new position, I was walking through a large resort’s main kitchen. In the expansive space sat hundreds of thousands of dollars in equipment and refrigeration. Many would consider it to be a dream kitchen. However, I stood in disbelief that the three departments within the area were not used and were all but shuddered except for a few outlets that used the space to do their prep work. Somewhere along the line, someone probably suggested buying already prepared food and decentralizing to save money or improve consistency. Whatever the reason, neither goal was achieved.
As with many labor-saving ideas, no labor was saved. The thought of saving a significant about of labor and improving consistency was likely applauded, and no specific results or measurements were discussed. As food costs increased due to the cost of convenience products, it is likely that the chef had a handful of excuses as to why the labor was not decreasing at the same rate. Then again, there was no real commitment. Without having an in-depth understanding of how the culinary department works, no one was able or willing to question it.
Throughout the property were convenience products that were never fully utilized, disengaged leaders and employees, and people bored with the small amount of work and/or packages to open.
It was clear in the beginning that there was no expectation for staffing levels to change and the high food cost was accepted because there was no one who could effectively challenge it. Everything that was happening was normal. The staff would talk about the good old days in hopes of regaining some dignity in their craft while others enjoyed the “easy” life.
As many have said to me, “I could have just coasted. I mean, why rock the boat when you don’t need to?” Soon they would realize the boat would not only get rocked but it would also get turned upside down and placed on the right course.
This article would be a book if I detailed the steps involved in a major change that would save the company $19+ million over the course of 10 years. Instead, this article is about a leader who one day thought they could save labor but instead could have ended their career.
The Great Potato Dilemma
After reawakening the production areas, we analyzed every product and ingredient. We reopened the centralized kitchens and began producing plenty of products in-house. Of all the initiatives, the least favorite was when we purchased two large potato peelers to help us make mashed potatoes.
The decision to peel and mash our potatoes was well-planned and checked all the boxes. We had significantly better quality, reduced cost, and provided meaningful work to cooks during downtime. It created significant food cost savings and increased labor as we went through 2000 lbs per week.
Not many people enjoyed running the potato peeler and, on this day, someone complained to the production Chef. Instead of explaining to the cook that it was jobs like this that create employment and provide meaningful work for the cooks, he decided to appease the cook and help justify why they should stop doing it.
The next day the production chef proudly stated how he had found a way to save money on labor costs. His idea was to stop peeling the potatoes and instead buy them pre-peeled.
Curious, I asked him to send me his calculations and considerations.
The next day I called him into the office and told him that, with a few adjustments, we could make his plan work.
“That’s great, I knew it,” he proudly exclaimed. “What adjustments?”
“Well, first off, the employee who peels the potatoes will only be working in production 20 hours per week, and we will immediately reduce the FTEs scheduled in that area. You will also need to tell him that he is no longer a full-time employee.”
He was perplexed.
- Although he stated there would be labor savings, he had no intention of reducing the hours. He tried to say the cook would do “other things”, but he could not state or quantify what they would be.
- He didn’t want to tell the cook that he was now part-time. That would be worse than explaining to the cook the importance of peeling potatoes!
Uncomfortable, he could not back down now because he made a bold statement that he would save money.
I continued, “Secondly, you will need to resign, effective immediately. “
He was shocked and couldn’t understand it. He just saved us money in labor!
For some reason that I will never understand, he thought that the lure of labor savings would be immediately accepted, as it was in the past. He was so determined to appease the cook and make life easier that he didn’t consider the difference in price between peeled and unpeeled potatoes. That the increased cost would be more than he made in a year, and to compensate for that expense, he would need to resign so we could use his salary to buy potatoes.
From that day on, everyone was very happy peeling potatoes.
He fell into a trap. Instead of leading, he was willing to give in for no good reason. Instead of implementing, training, and upholding standards and having productive conversations with his team, he was willing to buy the food prepared and take the easy way.
How to Assess Each Opportunity
The door must always be open to finding ways to save labor. With staffing shortages, purchasing prepared food may be something that needs to happen to properly serve the customers. The following are some considerations that can help guide you through your decision-making:
- Quality – Does the change harm quality? Keep in mind that customer expectations may be different from yours.
- Increase other labor costs – Does the change create more work for other departments? If so, they need to be involved, and the increase needs to be measured.
- Increased workload – Will the change increase the workload of other employees, and is it reasonable without placing unrealistic demands or expectations on them? Think of your busiest time.
- Other cost increases – How do labor savings impact the cost of goods? Do the labor savings exceed the increased costs of goods?
- Quantify “other things” – If the manager states that there will be no direct labor savings as the hours would be used for ‘other things’, what are the ‘other things’? Make sure they are quantified. Maybe by freeing up hours, an employee can work on other initiatives that will save in other areas. For example, starting a composting program. Just make sure it is tangible and measurable.
Whether it is a claim to reduce costs, increase customer satisfaction, or revenue, the key is to document the expected results and review them every month.