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Working Title: Where Does the Time Go, Answering THE Question ...Document Transcript
Time Trials: Uncovering the Whole Truth about
Workforce Productivity Metrics
By Jonathan Lacefield
No matter what type of product or service an organization produces and or delivers,
workforce costs have a significant impact on organizational goals and profitability. Many
businesses have tried to dissect the relationship of labor to time to profit. However, most
organizations manage workforce costs at a macro level using aggregate metrics based on
assumptions to derive the amount of time it takes to produce a good or service. The
results are, predictably, inaccurate, incomplete, and out-of-date. Businesses making
decisions without visibility into the actual amount of time it takes to produce a good or
service are at risk.
The answer lies in simplicity. Ask “Where does the time go?” at a meaningful level and
then hunt for the answers by driving down to the greatest level of detail available.
Structuring detail data into higher level, meaningful, and analytical-ready information
provides the only accurate calculation of the time required to deliver goods or services,
and is the basis for Time Performance Management (TPM).
TPM is the technique for managing workforce performance through the automated
collection and aggregation of actual time data with actual production data that drives the
“time cost to deliver” set of metrics.
Why Sweat the Details?
The driving force behind workforce performance management is cost. The goal is to
maximize the return on labor costs, thus increase profits, by ensuring that the
organization is effectively allocating labor in proportion to the amount of labor required
to produce goods or services. But, faced with thousands of employees and tens of
locations, where do you cut and where do you invest to maximize return?
These decisions require clear visibility into an organization’s actual cost of labor, derived
by combining live productivity data with live workforce time data. Building the
foundation for analysis on such detailed data allows executives to manage labor costs
toward corporate objectives through highly aggregated metrics while giving management
at various levels of the organization the ability to understand their operational effect on
the corporate objectives through disaggregated versions of the aggregated metrics used to
set the corporate objectives.
For example, a manufacturing company that produces multiple products needs to
determine which product has the greatest effect on its production costs. Determining the
total cost of production for all products is pretty straight forward, but to take action, more
information is needed. By collecting detailed workforce time data and combining it with
detailed production data, the manufacturer can start with the total cost of production for
all products and then drill into this “expensive” product to identify the shift that has the
highest cost impact on this product and determine why this shift is so expensive. Are
excess costs due to over allocation of employees? Time clock or company policy abuses?
Or, is this unrealized impact of sick or vacation time? Once the “expensive” shift and
reasons for the high costs are identified, the manufacture will be able to take the
corrective actions necessary to manage the “expensive” product’s cost to a more
In this example, understanding the reasons why the product costs so much to produce,
enables the manufacturer to utilize its organization’s knowledge and expertise to make
strategic decisions and operational adjustments at the appropriate level to lower the cost
Build Metrics from the Bottom Up
TPM uses the same fundamental techniques applied in any Corporate Performance
Management (CPM) methodology. A core set of metrics, Key Performance Indicators
(KPIs), are identified to measure progress toward a defined, focused goal. However,
unlike some CPM methodologies, this approach recommends calculating KPIs at the
lowest possible levels and aggregating these metrics up to the strategic level. This
bottom-up approach provides the critical ability to dig deeper into values to find the
operational answers that affect strategic goals.
The core set of metrics used to determine the labor investment in a product or service can
be simplified to one high-level metric, “time cost to deliver” (TCD.) TCD is defined as
the total cost of labor (time) to produce or deliver x units of goods or services
(productivity). TCD can be presented in two ways. First, as the sum of all labor costs to
produce or deliver all goods or services during a period of time, referred to as “Total
Time Cost to Deliver.” The alternate presentation is “Time Cost to Deliver per Unit,”
defined as the average actual cost of labor to produce or deliver one unit of goods or
TCD is the core metric that truly shows where time has gone. These metrics must be
aligned to the organizational structure to provide meaningful insight, and their goals or
thresholds should be organizational-centric.
Along with the TCD metrics, separate, organizational-centric, time-centric and
productivity-centric metrics should be presented to allow managers at all levels to
investigate and understand the drivers of the TCD metrics.
The process that creates TCD metrics and structures the dimensions for TPM is an
automated process that utilizes database and data transformation technologies. The
conceptual process is described in Diagram 1.
Step 2 Step 3
Step 1 Step 4
Data Combination Calculation and
Data Source Collection Presentation for Analysis
(Time to Productivity Distribution) Analytical Storage Configuration
Direct-Hourly Labor Source
InDirect-Hourly Labor Source
Direct-Salary Labor Source
Organizational-Centric Standards and Thresholds
Time Subject Area
InDirect-Salary Labor Source
Temporary Labor Source
Time Cost Source
Where Does the Time Go Analysis
Interactive Role-Based Dashboards
Interactive Role-Based Scorecards
Time to Productivity
Distribution Logic Time Performance Management
Where Does the Time Go Analysis
Advanced Analysis Tools
Time Cost to Deliver KPI
Multi-Dimensional Analysis Tools
Time Cost to Deliver Metrics
Time Cost to Deliver Dimensions
Where Does the Time Go Analysis
BI and Reporting Tools
Productivity Data Source 1
Productivity Data Source 2 Productivity Subject Area
Productivity Data Source 3
Four Steps for Time Performance Management
As shown in diagram 1, calculating TCD metrics requires two data subject areas, “Time”
and “Productivity.” Creating a Time Performance Management environment can be
generally represented as a four-step process.
o Step 1: Identify and collect all sources of data.
o Step 2: Combine the sources of data into the two subject areas and then distribute
the time subject area into the productivity subject area.
o Subject area-centric metrics should be calculated at this time.
o Step 3: Calculate TCD metrics, apply standards, and prepare the data into an
o Step 4: Present this information for analysis so executives, management, and
analysts can ask and answer: “Where does the time go?”
The Time Subject Area
The time subject area represents the hours and costs accrued during the production of x
number of goods and services. This data is used to calculate the numerator in the TCD
metric and is derived from two main sources of data, time and time cost.
Time subject area data is the collection of four labor-type data sources: direct hourly
labor, indirect hourly labor, direct salary labor, and indirect salary labor. These four labor
types can be grouped into two categories, hourly labor and salary labor. The following
definitions outline the requirements of each labor type.
o Direct Hourly Labor
Direct hourly labor refers to hourly labor that has a direct impact on the
production or delivery of a good or service. This is the labor type most
commonly associated with workforce cost management. Temporary labor is
usually included with this labor type, but it requires a separate data feed from
the temporary labor provider.
o Indirect Hourly Labor
Indirect hourly labor refers to the hourly labor that is required to perform tasks
to support the production or delivery of a good or service but does not have a
direct impact on the production or delivery of a good or service. For example,
maintenance is critical to healthcare providers. Hospitals employ large teams
of hourly employees to keep facilities clean and in working order. However,
these employees do not provide patient care. Maintenance employees’ time is
usually shared across patient centers; therefore, we categorize maintenance as
indirect hourly labor.
o Direct Salary Labor
Direct salary labor, like direct-hourly labor, refers to salary labor that has a
direct impact on the production or delivery of a good or service. However,
unlike hourly labor, salaried employees’ cost per hour must be derived.
o Indirect Salary Labor
Indirect salary labor, while conceptually similar to indirect hourly labor, can
be much more complex because it includes management and other corporate
support functions. Deciding what roles to include in this category and how to
derive hourly labor costs for individuals is unique to the objectives of the
organization. The level of effort required to derive indirect salary labor is
large, but the value on workforce labor cost is usually small, due to
complexity of both creating the cost per hour and distributing this cost across
goods and services.
These four labor types have predictable levels of importance when calculating the TCD
metric (Diagram 2). In general, hourly labor costs far exceed salary labor costs in their
contribution to the TCD calculation. The “direct hourly cost to deliver” metric has the
greatest impact on the TCD metric, while the indirect hourly and direct salary metrics
have somewhat less value to the TCD metric. Finally, indirect salary labor provides the
smallest contribution to the TCD metric.
Time Cost to Deliver
Hourly Time Cost to Deliver
Time Cost to Deliver
Time Cost to Deliver
Salary Time Cost to Deliver
Time Cost to Deliver
Time Cost to Deliver
This diagram shows the impact of the components of the Time Cost to Deliver metric.
Time Data Sources
Time data are data that give detail on the amount of time that was spent doing a specific
task or job. This data requires different feeds to capture the various labor type data
required to calculate the TCD metric.
The most granular and available data source is usually the time data source for hourly
labor. One of the best and most accessible sources for this data is a time clock system.
This data is employee-centric. The data inherently has an employee identifier tied to it,
which will allow for the combination of the other data sources required for TPM. This
data is calculated at a punch level and some time clock systems associate a specific task
to the punch by having employees punch-in when they arrive at a job station.
Salary labor does not normally have a granular and accessible source, unless direct salary
labor employees use time clocks to clock in and out. Salary labor typically requires
business logic to estimate and structure the data to the task or job level of detail required
to calculate the TCD metrics and allow disaggregating functionality.
Time data is one of the most challenging aspects of constructing the Time Performance
Management system due to the large amount of data and the different levels of
granularity at which labor type (direct hourly, indirect salary, etc) data is gathered or
derived. There is significant effort involved in working with this data, and taking
advantage of third-party, pre-built, time-centric data applications will reduce the level of
effort required to collect and conform the different labor type data into a single,
employee-centric subject area data source.
Time Cost Data Sources
Time cost data details either the cost per hour for an hourly labor employee or the cost
per year for a salary labor employee. This data usually comes from a human resource
management system and is inherently structured around an employee. Historical data is
very important to maintain as employees’ hourly rates or salaries change over time. Time
cost data will be combined with time data to calculate the cost associated with time.
To combine these sources all employees’ should have an hourly cost associated with each
unique employee record. Combining the sources into one employee entity will require
the employee entity to contain and maintain audit attributes associated with wage
The time cost data source should not constitute any significant level of effort to collect
and structure as long as history is correctly maintained in the source system.
Productivity Subject Area
Productivity data represents where the time has gone. In other words, the productivity
subject area represents the output from the time investment. This subject area displays
how much of the deliverable was produced during a particular period of time, and is
industry-specific because it represents the goods or services produced. This subject area
should be sourced from a system or collection of systems that provides the number of
units of goods or services produced or delivered during a time period with as much
context detail as available. For example, productivity data for manufacturing should at
minimum be collected at a line, shift, and location detailed level. Productivity data for a
Hospital System should be collected at a facility, room number, admitted date, and
discharge date detailed level.
Distributing Time to Productivity
To distribute time data into productivity data you will need to create business rules that
tie the lowest levels of the time subject area labor types to the productivity detailed
levels. This is normally a manual process that requires a significant time investment to
create but a nominal ongoing effort to maintain. The productivity subject area drives this
process. All time records will join to a productivity record with no time records left
unassociated. The distribution process also includes weighting indirect labor time
records so that indirect laborers’ time is spread out among all the different goods or
services produced during the time worked. The goal of this process is to distribute time
data into productivity data at any dimensional level (organization, products, time,
locations, etc.) necessary to show worker productivity at all possible levels.
Calculating Time Cost to Deliver
Conceptually, calculating the TCD metric is done after distributing the time subject area
into the productivity subject area.
From a high-level, the algorithm for the Time Cost to Deliver metric is:
From a high-level, the algorithm for the Time Cost to Deliver per Unit is:
SUM(Time Costt)/SUM(Production Countt)
Where Time Costt represents the labor cost accrued during the time period to produce or
deliver the number of goods or services represented in the Product Countt metric. In
other words, the subscripted variable t in this algorithm represents the amount of time it
takes to produce or deliver x number of goods or services. The subscripted variable t
represents a very important aspect of this process because it infers that the TCD metric(s)
can be calculated at the most granular level, one unit of goods or services produced, and
can be aggregated up to any desired level. This allows an organization to analyze labor
costs from a top down perspective while having the ability to drill into lower levels of the
organization to dig deeper for answers.
Presenting for Analysis
Once data has been collected, combined, and calculated it is time to effectively present
the TPM information to the organization to promote analysis and action. This is the part
of the TPM process which allows people to ask: “where does the time go?”
At this point in the TPM process data has been transformed into information which will
be presented at a meaningful-level throughout your organization. A meaningful-level of
presentation means that the information should be tailored to the individual, role, or
organization level that has been designated as the consumer of this information. For
example, a CFO will be presented with enterprise level and enterprise wide strategic and
relevant TCD metrics measured in dollars, while a line manager will be presented with
variations of the TCD metrics restricted to information about their line(s) and shift(s)
workforce time and production.
TPM presentation should start with a one-page role-based dashboard which acts as a
jumping-off point where users will analyze their meaningful-level aggregated TPM
metrics and KPIs and then dive into a metric or KPI for deeper analysis. Pre-built, TPM
metric-centric or KPI-centric parameterized reports, ad hoc analytical areas, or
multidimensional (pivot table) reports will provide access to the deeper analysis.
A library of pre-built reports categorized by your organization’s TPM subject areas, for
example TCD by product, or absenteeism affect on TCD, should also be utilized as an
easy–access environment of common and repetitive information. The contents of this
environment can be restricted by role to ensure people in your organization only see what
is relevant and needed for their job.
Presentation is a very important and somewhat difficult part of the TPM process because
none of the other steps matter if your organization does have clear, meaningful, and
secure access to the information. Your organization will gain more value from TPM by
keeping the presentation area as simple and easy to understand as possible. If you
organization has not been successful with providing restricted and role-based access to
information, consider getting outside help to ensure this step is done correctly.
Can your organization answer the question: “where does the time go?” Most
organization can’t. But, if they can, the answer takes so long to find or is not at a
meaningful organizational level that it is not useful to manage production costs. Utilizing
the Time Performance Management process of automated collection and aggregation of
actual time data with actual production data to derive the “time cost to deliver” set of
metrics, provides organizations with a powerful tool that provides vision into the
organization’s production costs. And, because you can’t manage what you can’t see,
companies will finally be able to say:
“I know where my time goes and I can do something about it!”
About the Author
Jonathan Lacefield is an Analytical Consultant Level V with Kronos Inc, Experts at
Improving the Performance of Business and PeopleTM. Jonathan has more than seven
years experience leading, designing, and delivering analytical initiatives for healthcare,
telecommunications, retail and manufacturing industries. Kronos is the industry leader
for workforce management. He can be reached at Jlacefield@Kronos.com.