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OPERANNG OPPORTUNINES

from Merchant Magazine - February1986

from Merchant Magazine - February1986, page 70

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WALLY LYNCH

OT ALL of the returns have been received but, according to most, 1985 was a tough but good year in general for the lumber and building material business. Even though some dealers experienced fourth quarter down tums that exceeded seasonal expectations, they sustained some profit on balance.

One practice that continued to hurt profits of many of the dealers we see is the amount of overtime paid. The majority of these operations are open ftom 55 to 70 hours weekly and are paying ftom 5 to 15 houn week-ly at time and one-half. The basic rationale behind these expenditures centers around keeping good people happy and staying open the same hours as competitors.

Recently a new client brought an overtime problem to PA.I.D. Associates. The company was open from 7:30 a.m. to 5:30 p.m. six days a week. Wage earners worked 54 hours weekly with an hour for lunch daily. In essence, 14 hours of O.T., or 26Vo of 54 houn, was costing the company almost 35% of its payroll expense.

A check of their cash rcgister tapes showed that, like most retailers who also sell contractors, they did about'li%a to 80Vo of their business n 20Vo to 25Va of their open hours. Since they were open 60 hours, this meant heavy scheduling in about 12 to 15 hours weekly.

The first part of the remedy came in staggering work hours. Half of the work force reported at 7:30 a.m.; the other half at 8:30 a.m. This eliminated 6 hours of O.T. weekly. The second move was to give everyone a mid-week day off (Tuesday-Friday). This eliminated overtime by the last 8 hours each employee was working and, for all practical purposes, eliminated the stereotyped 54 hour week.

This customer was counseled to review each employee before the work hours were adjusted and to make compensation changes where deemed advisable. In addition, it was necessary to hire some part time employees to handle specific tasks like cleaning, cashiering, stocking and stock counting because some regulars had left. Replacing O.T. hours with part time hours generally results in lower wage rates and no benefit expense because of limited hours. Our client was pleased because his savings projected in excess of 107o of payroll. This almost exceeded pre-tax profits of the previous year.

Even though they are open long hours and want good employees too, the chains and majors just do not pay overtime as a steady diet. It is very hard to work more than 4O hours in a 4O hour week, but in any business, it is very easy to work less if the time and efforts of its employees are not managed.

Charts to illustrate the points dis' cussed in this column are avoilable. Readers who are interested in more information may contact Wolly Lynch at Builders Express Inc., 11550 Plano Rd., Dallos, 7k. 75243 or call (214) 341-2886ed.