One Metric that Can Justify the Cost of Your Entire WFM Project

by | Aug 11, 2011

Ahoy, ye mateys!  Today, I am tellin’ secrets about the scourge of the time keepin’ industry: pirated time.  Ye say ye don’t know what pirated time is?!?  Argh!  Well, then, sit back and let me tell ye a tale of…

 

…okay, okay.  I can’t keep up the silly pirate voice for the entire post, and something tells me that you wouldn’t want me to.  However, pirated time is a serious issue that too few retailers have addressed.  Yet, as Axsium Group has seen time and time again, addressing pirated time can justify the entire cost of a workforce management implementation!

 

If you have already have a WFM system, don’t think that you’re immune or cannot benefit from eliminating pirated time.  If pirated time can justify the investment in an entirely new WFM implementation, imagine what eliminating pirated time can do for you.

 

What is Pirated Time?

 

Pirated time occurs when an associate is paid for time that he is not scheduled to work.  Sounds simple right? He clocks in before or clocks out after he is scheduled to work and is paid for that extra time (the time between his punch and his shift).  There are many ways that this occurs.  Some of it is obvious.  Others are less so.  Let’s take a look at a couple of examples:

  • An associate arrives 20 minutes before his shift starts, clocks in on the way to the break area or staff lockers, and chats with other associates before wandering to his station to begin work.
  • An associate arrives 20 minutes before his shift, clocks in and heads straight to work, and spends that 20 minutes on the sales floor.

 

In the first scenario, the associate’s pre-shift activity is clearly unproductive time, time that doesn’t contribute to the business, and should not be paid.  The second scenario is a different.  Here, the associate is being productive.  The problem is that his productive time is not budgeted nor is it needed.  He’s trying to be a good worker but he’s costing you money.  Both are examples of pirated time.

 

Pirated time adds to overtime costs.  If an associate arrives 20 minutes early for an 8 hour shift, he will likely work 8 hours and 20 minutes.  Not only does he pirate 20 minutes of pay, he does it at time and a half.

 

Pirated time doesn’t just happen at shift start and end times.  It also occurs around meals.  Just as before, if an associate clocks in 5 minutes before the end of his meal, then you need to pay him for that 5 minutes which is not budgeted for.  In some states like California, clocking in early from a meal results in a meal penalty which is paid in addition to the time worked that day which adds to your costs.

 

In all likelihood, you have a policy that specifies how early or late relative an employee can clock for a shift, but it doesn’t hold any water unless you have a means of enforcing that policy.

 

Three Steps to Eliminating Pirated Time

 

The good news is that a workforce management system can easily eliminate pirated time.  It requires that you do three things:

  1. Restrict time punches. When you restrict time punches, you prevent employees from clocking in too early or too late.  WFM systems do this by comparing a time punch to a the schedule.  Therefore, restrictions require that the schedule and time clock are integrated.   If the associate is scheduled to work at the time of the punch, the punch goes through.  If the associate is not scheduled to work, the associate is prevented from punching.  Typically, restrictions are implemented with a grace period that give employees a small buffer before or after their shift.  This allows them to clock in a few minutes early at get to their station on time or leave on time and walk to the time clock.
  2. Allow overrides at the time clock. There are legitimate reasons as to why an associate may clock in early or leave late.  Perhaps, the manager has asked the associate in early or stay late to finish a job.  Maybe the manager called the employee in to cover for an associate that didn’t show up or left because they were sick.  Regardless, you need a way to allow the manager to override the restriction and enter a reason for the override.  Capturing the reason is important and, ideally, you should provide your managers with a standard list of reasons that they can pick from.  This reduces data entry errors, speeds the process, and makes reporting easier.Some retailers allow the associate to override the time clock on his own.  This further streamlines the process since it doesn’t require additional time for the associate to track down a manager, the manager to walk back to the time clock with the associate, and then for each of them to get back to work after doing the override.
  3. Create exception reports to track overrides. Use exception reports to monitor your stores for abuse.  At minimum, I recommend two reports.  Create one report that provides a summary of overrides by store.  Create a second report that provides the details of each stores overrides.  The first report allows you to identify potential problems.  The second report allows you to see why the overrides are occurring.

 

For many retailers punch restrictions and overrides are new concepts and may not be well-received by the associates.  Communicating the change, why it is occurring and the benefit to the organization is important.

 

Carefully consider how long your grace periods should be.  For many retailers, these grace periods can be 5 minutes before or after shift start time.  Other retailers – particularly those that have not previously restricted when associates can clock in or out – will set longer grace periods.  Those that use longer grace periods can shortened them later if associates are abusing the grace periods or if further cost control is necessary.

 

How to Calculate the Impact of Pirated Time on Your Stores

 

Understanding the impact of pirated time take some number crunching.  You absolutely need to access to time clock data to perform this analysis.  It helps to have access to schedule data, too.  With both pieces of data, you can compare the time punches to the schedules to identify actual pirated time, and using an average hourly pay rate, you can quickly determine how much pirated time is costing your business.

 

When you don’t have schedule data, you need to make some assumptions about what constitutes pirated time.  For example, if it is standard practice for associates to be scheduled on the hour or half hour, you’ll need to make an assumption that anybody clocking in 15 minutes before the hour or half hour is arriving early for a shift while anybody clocking in or at 15 minutes after the hour or half hour is arriving late for a shift.

 

Your time clock data may not differentiate between in and out punches. If this is the case, you’ll need to make further assumptions about when an in punch can occur versus an out punch.

 

You’ll need to make some assumptions about your grace periods.  The smaller the grace period, the larger the possible gain by stopping pirated time.  However, as we discussed earlier, you don’t want to be too heavy handed.  If you’re unsure what to use, start with 5 minutes.

 

Finally, if you plan to use this analysis for the basis of your business case, make sure you document all your assumptions.  This not only makes life easier for the person reading the business case, but it makes your life easier if you have to recreate the calculation in the future.

 

A pirated time analysis without schedule data looks something like this.  For this analysis, let’s assume 5 minute grace periods, shifts that start at the top and the bottom of the hour, and that our clock data identifies in and out punches:

  1. Pull clock data for a sample of stores for a reasonable period of time.  Ideally, this would be a year’s worth of data but you could get by with as little as a quarter.  Choose stores that represent a cross section of your formats and customer demographics.
  2. From that clock data, you’ll want to extract two sets of records.  The first set identifies pirated time before the start of shifts.  Extract all punches that occur between 5 and 15 minutes before the hour or half hour.  The second set identifies pirated time after the end of shifts.  Extract all punches that occur between 5 and 15 minutes after the hour or half hour.  This assumes that shifts will start on the hour or half hour and that you’re going to use 5-minute grace periods.  You will need to adjust those queries if these assumptions are not true for you.
  3. Calculate the amount of time between the punch and the hour or half hour and subtract 5 minutes.  Again, the 5 minutes represents your grace period.  Since you’ll have grace periods even after implementing the three-step solution to described above, you don’t want to include them in your calculation.
  4. Sum the results and divide the total by the number of weeks of data that you pulled.
  5. Divide the results, again.  This time divide by the number of stores you used in the sample.  At this point, the result is the average number of minutes per week per store that are lost to pirated time.
  6. Divide the value by 60.  This converts the minutes into into hours.
  7. Now, multiply the results by your average hourly wage.  The result is the dollar amount that pirated time costs your company per week per store.
  8. Multiply the results of Step 7 by the total number of stores you have.  This tells you how much money is lost per week across your enterprise to pirated time.
  9. Finally, multiply the results of Step 8 by 52.  The result is the annual cost of pirated time across your enterprise.

 

Don’t be surprised if the output of this exercise is large.  I’ve worked with several mid-sized retailers who didn’t think that they had a pirated time problem, and found that pirated time was actually costing them more than $10 million dollars per year!  As I said at the outset, this one metric can justify the entire cost of a WFM project.

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