Why should payroll budgets be SMART?

Specific: “My store is different than the others”. Store managers always say that. And it’s true. The question is; how different and are the differences relevant to the payroll budget?

Measurable: Establishing metrics for labor performance that relate to front line operators is the best way to focus efforts on labor management.

Actionable: When the front line operator can adjust labor as sales and conditions change, the likelihood of achieving labor goals is improved. By how much should sales be adjusted and how often?

Realistic: Separating “fixed, semi-fixed and variable” labor classes helps focus and control efforts on the parts of labor that can be changed from week to week without impairing customer service.

Timely: Things change- Cost of Labor during a promotional period may be higher than at other times. To achieve the same labor costs, an operator will reduce labor hours while trying to serve more customers, tarnishing perceptions of service. The payroll budget needs to be flexible to allow for traffic driving promotions.

Budgets developed by senior management to ensure the ongoing health of the business establish a Cost of Labor target expressed as a percent of sales.  The people who achieve that Cost of Labor need more information to translate the percentage into hiring practices and actionable work schedules.