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Maybe There Is No Labor Shortage

Updated: Nov 7, 2023

Since the beginning of the pandemic, it’s been difficult to engage with any service business on any problem without the labor shortage being a key topic of conversation. Doing my best impersonation of Morpheus from the Matrix, I’d like to ask, “What if I told you there is no labor shortage?”

First, I believe that there is real pain across our industry, and I acknowledge that we’ve lost a significant portion of our pre-pandemic workforce. I also believe that this is our fault, but that’s a blog post for another day.

Labor has always been a problem for the service industry. Here’s a noteworthy gap in perspectives: everybody in frontline operations thinks we don’t have enough labor, and every owner or senior leader thinks we have too much (until they can visibly see sales decline – which is way too late). Here’s the even bigger gap: both parties are right! The real problem is that the jobs have too much waste built into them, and gross misapplication of labor across days and day-parts is rampant.

For more than a decade, I’ve been collecting data to understand two similar – but very different – questions. 1) What is the work to be done? And 2) How is that work done? For example, if a customer orders a beer, the work to be done is:

  1. Receive order

  2. Pick up glass and hold under tap at a 45-degree angle

  3. Dispense beer from tap

  4. Return glass to 90-degrees as the beer approaches the top

  5. Place beer in the correct spot for delivery/pick-up

How that work gets done could look different depending on the design of the operation. For example, how far away from the taps is the glass? Is it below waist level, requiring bending? Is it above shoulder level, requiring reaching? A 3 second reach, a 5 second bend, or a 10 second walk (5 seconds in each direction) might seem small.

Extending this scenario, let’s pretend that our restaurant serves 1,000 items/day and that each one requires 7 seconds of unnecessary motion. 7,000 seconds is almost 2 hours of labor that has evaporated from the bottom line, AND 2 hours of customer wait-time that was built into the operation. Motion is only 1 of the 7 wastes. When we add in overproduction, conveyance, over-processing, rework, waiting, and inventory replenishment that interrupts line work, it becomes easy to see the HEAVY losses across our industry.

Don’t trust me; trust the data. Service Physics and our partners have been collecting labor utilization data since day one of our company’s inception. Labor utilization is a common practice in industrial engineering, but it is a less common approach in the service industry. It leverages work sampling to determine the percentage of time people are actively engaged in service activity, vs. walking, vs. idle.

When we start working with a new partner, the baseline level of labor utilization at peak (in all but one example) is below 50%. There is a lot of range across the various parts of the operation, wherein some parts of the operation are higher and some lower, but at a systemic level, waste is overtaking and interrupting the great experience that could be provided to customers and the return on labor investment that could be provided to owners.

This misapplication of humanity is depressing. Employees bring their full selves to work every day, and the systems we provide them with can’t apply it. I believe that there is a brighter future for those who take the time to understand what’s happening and design the waste out. It makes for happier, more productive work environments, better experiences for customers, and healthier margins for owners.

Steve Crowley

Service Physics

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