Cutting staff to control costs just might send your sales into a tailspin. But labor is by far your biggest expense. Get the formula industry expert Alan Kumpf uses.
We believe it’s important to support industry education. One industry event we have begun to support in 2018 is the Maximize Profits Through Operational Excellence seminar program hosted by Funstruction Results. Long-time industry professional and managing partner of Funstruction Results, Alan Kumpf, shared some of his thoughts about team member productivity with CenterEdge. And his secret formula for achieving the right balance between labor and sales. Here’s what he had to say:
1. What do you think is the most important factor in an entertainment facility’s success?
The answer to this question lies in the answer to the question “What is the highest expense in an entertainment facility?” The answer to both is labor. Your front-line staff controls not only the success of your park, but whether your park is able to generate a profit. When we look at labor, we take it from two different approaches: first is productivity (measured by the success of your sales numbers), and second is a percentage of sales.
2. What’s an appropriate percentage of labor against sales?
Every facility is different, however, a good rule of thumb for an appropriate labor percentage is in the range of 28 to 32, including the management team. New store openings are an exception as we need cyclical data to properly make a labor plan which can attain this goal.
3. What are common mistakes made when trying to achieve a realistic labor percentage?
The number one most repeated mistake by management teams in trying to meet labor goals is to cut the number of staff. Whether it is mid-shift or cutting staff before a shift even gets started, this is a dangerous practice which will almost certainly cost your facility sales dollars. This is where the productivity mindset needs to take over. Productivity can be achieved during any time of the day or evening, and we define productivity as boosting sales internally. If we can impact our sales in a positive manner, then our labor percentage will go down. More times than not, when we cut labor our sales follow the same downward trend, which results in labor percentages remaining high.
4. What is the productivity mindset?
This is the mindset which institutes the barometer of sales per labor hour spent. If I have 10 people on staff and they each work 1 hour, I have spent 10 labor hours. If in this same hour I garner $100 in sales, then my sales per labor hour is $10. If, as a manager, I realize that my productivity is low I would want to spend time working with my staff to increase sales with the same number of guests present.
Emotional engagement is a key factor. It is proven that if my staff engages my guests on an emotional level my guests will stay in my facility longer, and if my guests stay longer they will spend more money. Another key in increasing productivity is making sure that the staff is engaged on a skill level at their work station. For example, if my redemption team member is not busy they should be playing with some redemption prizes in or around the arcade – showing customers what kinds of prizes are in the facility - which will often cause guests to want to play arcade games or spend more on the games to win the prize they didn’t know they needed prior to an employee showing it to them. This is just one example that causes sales per labor hour to increase and labor percentage to decrease.
5. So how can a facility adopt a productivity mindset?
First, we must understand that each front-line staff member can have an impact on sales, this must be our culture. We have seen several facilities have varying cultures, for example, it is easy to make cleaning our culture. We also seem to do a very good job of making cost cutting our culture. If your staff has a priority of doing anything other than engaging your guest, then your culture is not productivity (sales per labor hour). We must make this our staff’s top goal. Culture starts at the top, both you and your management team must be sold on this mindset in order to effectively implement it. Remember that every second of every day we are training somebody to do something. What do you train consistently throughout the day?