Authored by: Juanita Coley
Guest Interview: Todd Hixson
In the hustle and bustle of the business world, one term that often pops up, especially in the BPO sector (Business Process Outsourcing), is “Shrinkage.”
It might sound like something from a sci-fi movie, but it’s a crucial aspect of workforce management that businesses need to grasp. So, let’s dive in, shall we?
What is Shrinkage?
So, let’s get right into it! To keep it simple, Shrinkage is the percentage of staff or hours your workforce is reduced by. For instance, let’s say you planned to have
40 hours of work but instead, only ended up with 36 hours of work performed. This equates to a 10% shrinkage.
Now, one of the common mistakes businesses make when it comes to forecasting shrinkage in their planning is they only account for the time they are paying
when in fact, true shrinkage should account for ALL the time that was reduced. After all, it is what your workforce “shrunk” by isn’t it?
Let’s explore the difference between the two really briefly:
Example 1: Predicting all lost time
- Breaks
- Lunches
- Team meetings
- Coaching
- System Issues
- Planned Absenteeism (Paid or Unpaid)
- Unplanned Absenteeism (Paid or Unpaid)
Example 2: Predicting only paid lost time
- Working States
As you can see from the lists above, the categories are drastically reduced when factoring only the paid lost time.
If I’m not paying for it, Why should I care then?
As I mentioned earlier, one of the common mistakes when working with shrinkage is only predicting paid time that you will lose, such as breaks, coaching,
team meetings etc. However, you also want to predict the time that will be unpaid as well.
The reason this is important is that, regardless of whether it’s paid or not, it’s still a resource you planned to have available and now you don’t. Just because they
told you to prepare the others, (LOL! used PTO) and then decided to take it unpaid doesn’t help you at the moment when serving the customer.
It may matter to payroll, but from a workforce perspective, all types of shrinkage – paid, unpaid, productive, and unproductive – should be accounted for.
Only when you truly understand where you are losing hours of labor/workforce can you effectively manage and maximize your efforts.
So, How Should You Leverage Shrinkage in your WFM Strategy?
Ok, let’s face it – you are going to pay for more than you use!
Now I know, I know. As an executive/business owner, you are like “Wait a minute, so I have to pay someone for 40 hours and only really get 36 hours
of work out of them???”
Short Answer: Yes, Pretty Much! That’s how it works.
Unless your entire workforce consists of robots (and don’t you even think about it… LOL!). People need breaks, training, coaching, and oh yeah, TIME OFF!
So, what should we be doing to effectively leverage shrinkage within your WFM strategy?
- Partition – First, you should be categorizing your shrinkage. Nothing makes me twitch more than asking how much time you spend on “X” and the team looks back at me saying, “Ummm, I’m not sure but a lot!” Well, WHAT IS A LOT?!!?
Listen, the better insights you have into where time is being spent and how much, the better you can direct its flow of it. This isn’t about control for control’s sake; this is about being an effective and efficient leader who creates equity for your employees who need time to develop skills, coaching, etc. - Predict – Secondly, once you know the types of shrinkage you have in your organization, you can actually better predict it and what (if anything) to do about it. Many times, organizations have knee jerk reactions instead of strategic responses to spikes in call outs or extra coaching time being requested. If they were doing a better job at predicting, their responses would be different, promoting a more cohesive environment.
- Plan – Lastly, but certainly not the least, as I mentioned above, have a PLAN!
For example: If you just hired a class of new employees, why are you not accounting for higher AHT and/or more coaching time to be requested from your trainers and agents who may be helping your new hires? Yes, this is shrinkage! And you need to (1) partition (categorize) it under training or SME, or whatever helps you sleep at night, so you can (2) use the data with other new hire classes to predict it. Why? So that you can (3) plan for it and how it will impact your customers, employees, and business bottom line.
There’s SOOO much more we could discuss on the matter of Shrinkage, but I hope that you’ve gained just a little more insight than when you started.
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