The 5 Myths of Overtime Management: How to Make OT Work For, Not Against, Your Business
The concept of overtime is a familiar one, especially in the United States. It’s woven into many companies and work cultures, and it’s an especially important aspect of front-line operations in always-on industries like oil and gas, manufacturing, healthcare, and public safety. In fact, in the oil and gas industry, OT is considered to be a standard part of scheduling and is accounted for in the budget.
As well-known as it may be, however, the concept of overtime remains one of the most misunderstood — and maligned — practices in workforce management. While many operations leaders see it as a necessary evil, it doesn’t have to be. In fact, with the right workforce scheduling solutions and strategies in place, you can make overtime work for, not against, your business.
Here, I debunk five major myths about OT — and how to manage overtime so it can become an effective part of your workforce operations.
Myth 1: Overtime is Driven by Labor Shortage
Not all overtime is created equal. OT can be a symptom of several different issues, which stem from various factors and can affect your workforce scheduling — and, down the line, your business as a whole — in various ways: data transparency, workflow violations, or OT assignment fairness, to name a few of the most common ones.
Labor shortage is, of course, a factor too, especially in complex industries that are challenged with hiring specific skill sets. In those instances, it can be difficult for a technology solution to assist with cost reductions when the number of resources is below the desired level to operate at an optimum level.
But for many organizations, labor shortage isn’t the only factor driving overtime. For instance, one of our clients, a government agency, discovered that a large portion of its overtime was triggered by employees volunteering to extend their shifts — and then declining at the last minute. The agency ended up having to call in mandatory OT from off-duty staff, which is more expensive. To solve that, they leveraged workforce scheduling technology to customize a workflow process that streamlined the volunteer sign-up process and de-prioritized volunteers who had declined shifts for future selection.
The bottom line: Understanding the true underlying causes of OT offers a smart starting point to reevaluating your workforce management policies and strategies around overtime.
Myth 2: Overtime Causes Too Many Grievance Headaches
Overtime doesn’t have to be the grievance nightmare that many workforce managers believe it is. Automated scheduling technology takes the hassles and headaches out of overtime management, so that overtime can work for, not against, your organization’s work environment.
When you can drastically reduce OT grievances, you can drastically improve the way you do business. Successful overtime policies improve shift coverage, reduce absenteeism, raise morale, and support healthy work-life balance. In addition, effective overtime operations ensure that OT levels aren’t excessive, but at the same time favor the employees who prefer overtime, while allowing for others to avoid it if they wish, all of which contributes to higher employee morale and productivity.
In 24/7, shift-based industries, these changes often result in big savings. After implementing workforce scheduling technology, one of our customers (a major auto manufacturer) was able to save $800 per employee per year on grievances associated with wrongful OT assignment. Employee complaints also went down by a whopping 93 percent.
Myth 3: Reports and Data Are All You Need to Reduce OT Costs
When it comes to getting a handle on overtime, beware of companies that trumpet overblown promises — then overwhelm you with a massive data dump. Instead, look for technology solutions that present data and reporting in a relevant, actionable way — tailored to the specific needs of your organization and provided when you need it.
Consider the circumstances of one major oil and gas company, which depends on data insights that go beyond sorting OT shifts worked by departments and teams. The organization goes deeper, using sorting criteria such as OT multiplier, premium shift changes, and OT refusals — all of which has helped it reduce OT costs and develop a much more efficient strategy around overtime.
Myth 4: Overtime Can Always Be Cut Back
Another challenge in complex industries like manufacturing, energy, and petrochemicals is that some skill sets can be limited, which means that overtime is a necessary aspect of your business model. And in some of these organizations, it’s mandatory — which also means that it’s predictable, and it doesn’t have to wreak havoc on workforce managers or throw off budgets.
That said, the catchphrase “work smarter, not harder” also applies with overtime management. With effective, proven workforce scheduling technologies, managers can easily automate the schedule to equalize general job experience and skill so that eventually, there is a bigger pool of workers to choose from, which lowers OT in the long run.
Myth 5: OT Management Is Only About Cost Control
Many workforce managers have a tendency to view overtime solely as creating a negative impact on operational costs and bottom-line budgets. But there’s a bigger picture: Beyond the nuts-and-bolts necessity of meeting short-term labor demand, a strategic overtime practice helps establish stronger relationships with employees and creates a positive work environment— which also builds a more cost-effective organization.
In other words, managed properly, OT is good for employees and good for business — but only if workforce managers dig a bit deeper to understand and evaluate its impact beyond the bottom line.
How Shiftboard Can Help You Manage OT
Many workforce scheduling solutions on the market have messaging that reveals an overly simplistic view of how to manage overtime and OT cost reduction. Their approach, as a result, rarely goes beyond automating schedule process and OT calculations. But managing overtime effectively requires a strategic, tailored approach that considers all the unique scheduling requirements of your facility: labor resources, production demand, internal policies, labor and union rules, safety regulations, and more. At their core, the most powerful technology solutions are designed to help you make better decisions.
Recommended Additional Resources
How to Manage the Complexity of Fair Overtime Distribution
Learn how to ensure fair scheduling by equalizing overtime distribution and improve employee retention.
How to Improve Labor Utilization During Peak Demand
Learn why operations leaders are intensifying their focus on labor productivity and utilization.