Not just marking time

New labor management solutions turn the time clock into a strategic weapon

Manufacturing Business Technology - February 2006

Frank O. Smith

Punching a time clock at the beginning and end of a shift is such a common occurrence that few workers give it a second thought. But advances in technology for tracking employee time and attendance are allowing corporate executives to turn ordinary time clocks into strategic business tools.

For instance, Cangene Corp., an Ontario-based biopharmaceutical manufacturer, secured a large contract with the U.S. Centers for Disease Control and Prevention (CDC) because of the company's ability to precisely document labor costs using a software package purchased from Kronos.

"Our major challenge was to ensure what we tracked and what we billed from a labor perspective was accurate," recalls Gisele Marks, Cangene's HR manager. "We had to have a process that the CDC would accept."

That process was effectively embedded in the Activities module of the Kronos labor management suite. This module allows Cangene to track tasks at a granular level, starting with a work order and descending four levels to specific subtasks.

Tracking activities in this manner allowed Cangene to bid for the CDC contract on a cost-plus basis. Under a cost-plus arrangement, a customer agrees to first reimburse a contractor for all expenses that can be validated through documentation before paying a set fee that is, in essence, the contractor's profit.

After winning the CDC bid on that basis, Cangene management decided that cost-plus bidding offered such a distinct competitive advantage that it elected to start tracking the activities of all employees—from the CEO and all salaried staff on down—on the Kronos system.

Multiple benefits

This is just one example of the value manufacturers can mine from this new generation of labor management solutions. "One of the key benefits of the software is getting consistent and accurate information related to absenteeism," says Brad Ward, IT director at Tower Automotive, a body structure supplier based in Novi, Mich. Tower also deployed the Kronos labor management suite.

Industry analysts estimate 2 percent to 10 percent of employees at any large company are absent on a given day. And while most of those absences are legitimate, companies have been able to discern some distinct patterns using analytic capabilities that exist in labor management solutions.

"The Friday before the opening day of hunting season and the Monday after the Super Bowl always have an increased number of no-shows," says Tony Hocevar, manufacturing vertical manager for Workbrain, a workforce management software vendor.

Hocevar also points out that company executives probably shouldn't try to uncover these trends if their only goal is to catch a few employees playing hooky. There are more practical reasons for wanting this information, he says, such as making sure all plants are adequately staffed to keep production lines running.

"You can't manage what you can't see" is how Deb Torchia, director of product marketing for workforce management vendor SmartTime, states the case for analyzing employee attendance trends.

Tower Automotive's Ward says the analytic capabilities in the Kronos suite did, in fact, "open management's eyes to information that wasn't visible before." The new data, he adds, enabled the enactment of policies that reduced Tower's reliance on temporary workers.

Simplify the complex

Companies also are finding labor management software helpful in implementing complex rules for how employees are paid, especially those governed by union contracts.

"With some companies, you're talking about 50 to 100 years of union contracts that have been negotiated and renegotiated," says Hocevar. "It puts a big strain on in-house legacy systems, as well as the payroll department. Workbrain can automate 100 percent of those rules, and provide hooks that allow you to bring those rules forward when you upgrade to a new system."

Chemcentral, a Chicago-based distributor of industrial chemical products, has seen firsthand how easy it can be to apply complex pay rules, thanks to the system it recently purchased from SmartTime.

"We have roughly 16 locations that are union, and each has a different set of rules tied to union agreements for how payment is calculated," says Ken Krausz, Chemcentral's director of employee benefits.

"We only have three people in payroll," Krausz continues. "With SmartTime, we customize payments to meet the requirements of all the locations."

Workforce management solutions also can eliminate potential labor-management conflicts. Says Tower's Ward, "It's difficult for someone to argue that they were on time when the system says they were late. The system also ensures consistency in applying policies. Having accurate data to support all aspects of labor management is a key benefit of having this software."

Demand-driven scheduling

Judy Sweeney, a director with Boston-based AMR Research, says innovative manufacturers are using labor management software to create optimal work schedules—adding or subtracting workers in response to the ebb and flow of customer demand. Retailers pioneered this concept in the quest to ensure adequate staffing for special store promotions and holidays, but Sweeney says manufacturers—particularly large multinational companies—clearly are interested in these capabilities.

"Workforce scheduling and optimization is moving to the top of manufacturers' priority lists," Sweeney says. "It starts with time and attendance, but at the high end of orchestration, it is bringing together optimized scheduling to meet demand, with the workforce being more aligned to meet the strategic goals of the company."

This is borne out in AMR's ongoing research on human capital management in manufacturing. In the most recent surveys, Sweeney says, manufacturing managers cited creating optimal workforce schedules as their third-highest priority. It was priority No. 5 in previous surveys, she says.

More notably, adds Sweeney, IT managers cited optimizing workforce schedules as their No. 2 priority, while HR managers ranked it fourth. Surveys also show this capability ranking higher in importance as companies get larger. Higher-ranking executives also tend to see this as a higher priority than middle managers or front-line supervisors.

"Senior executives look at this more strategically than line managers," Sweeney says. "And IT appears to be taking on the job of working with senior management to map strategies for investing in these capabilities. Meanwhile, HR managers are looking to make their own function more effective with better tools for recruiting, performance management, and leadership and succession planning."

Sweeney cautions HR executives to consider taking more of an interest in the strategic aspects of corporate staffing, "or they could find themselves being outsourced."