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Resource Projection Best Practice 6 – The 45 Week Year
There are 52 weeks in a year. So a full-time employee works 52 weeks in a year, right? Wrong![wcm_restrict plans=”25541, 25542, 25653″]
In fact, employers typically pay employees to not work 10 percent or more per year. Consider these common benefits:
- 2 weeks or more of annual paid vacation (US average = 2.6 weeks)
Source: The Atlanta Journal-Constitution - 2 weeks (10 days) of paid holidays per year (US average = 2 weeks)
Source: Bureau of Labor Statistics - 2 weeks (10 days) of yearly sick leave (US average = 1.6 weeks)
Source: Compdata Surveys - 1 week (40 cumulative hours) of professional development training, workshops, and conferences (US average = 1 week)
Source: American Society for Training and Development
Taken together, these benefits reduce the average employee’s time dedicated to production activities from 52 to 45 weeks per year; a productivity loss of 13.5 percent. This level of effort is further reduced as an employee advances in tenure and is awarded additional weeks of vacation. It is this phenomenon that is critically important to strategic planning.
An Example:
Consider two 100 employee organizations, one with an average employee tenure of 7.5 years and the other an average tenure of 16 years. Each company provides employees with a vacation benefit that increases every five years:
- 1 – 5 years of service: 2 weeks of vacation annually
- 6 – 10 years of service: 3 weeks of vacation annually
- 11 – 15 years of service: 4 weeks of vacation annually
- Over 16 years of service: 5 weeks of vacation annually
The first company, with an average employee tenure of 7.5 years expects to pay out 300 person-weeks of vacation benefit annually. The second company, with an average employee tenure of 16 years expects to pay employees a total of 500 person-weeks vacation annually; 200 person-weeks of vacation benefit more than the first company. To compensate for this added loss in employee availability, the second company will have to hire five additional full-time employees. Assuming these employees receive a total (salary and benefits) annual compensation of $100,000, the second company realizes a workforce liability of $500,000 more than that of the first company.
Planning Implications
The impact of accrued vacation benefits is significant; reducing capacity without effecting costs. Subsequently, planners must understand the potential for and impact of upcoming changes in vacation benefits in order to adequately prepare their organizations for this impending challenge.
Strategic Resource Planning
Strategic resource planning is performed at an organizational level. These planners must understand the aggregate changes to the organization’s overall vacation benefit payout so they can:
- identify aggregate personnel resource shortfalls
- adjust the company’s projected work capacity based on those shortfalls
and develop a strategic plan that accounts for the capacity loss with one or a combination of the following:
- projects to be eliminated
- product and/or service offerings to be reduced
- staffing increase and the associated expansion in the human resources budget
- additional overtime to be paid and the accompanying human resources budget increase
Project Resource Planning
Project resource planning occurs at a tactical level where a vacation benefit change for even one team member can drastically impact the ability of the project team to achieve its timetable. Therefore, project managers must be aware of changes to the amount of vacation awarded individual team members and then work with each individual to schedule vacation at times that are both convenient to the individual and practical for the project.
Production Resource Planning
Production resource planning also occurs at the tactical level. Unlike project planning, however, some production facilities cannot be shutdown for periods of time to afford mass vacations like those that occur around holidays. Managing time off for production workers, therefore, often has associated with it rules governing the number of persons allowed to be on vacation at any one time. These policies ensure that a minimum number of critical staff is always on duty thereby ensuring continued production.
Regardless of the planning mode, it is important to properly characterize the availability of personnel resources and to recognize changes over time. When estimating the number of individuals needed to provide a service, complete a project, or work an assembly line, planners must consider the employees’ effective work weeks, not the number of weeks in a year. Not doing so will lead to under staffing, in turn resulting in overtime, cost overruns, and potentially employee dissatisfaction and attrition. While using employee and organizational data is best, absent quantified information planners should consider the 45 week year as the standard for employee availability.[/wcm_restrict][wcm_nonmember plans=”25541, 25541, 25653″]
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“LinedIn’s simple philosophy: Relationships Matter”
LinkedIn
www.LinkedIn.com
About the Resource
LinkedIn is a free online networking service connecting 24 million experienced professionals worldwide. Members create biographies viewable by the internet community that include as many of the following attributes as desired:
- background summary and photo
- current and past employment experience including company, position, and job description
- education including school, degree conferred, years attended, special activities, and recognition
- membership in professional groups and associations
- honors and awards received
- industry affiliation
- personal, professional, or business website links
LinkedIn allows members to build their networks by connecting with other members they know through current or past business, school, or personal relationships. Members can further expand their networks by joining one or more corporate, alumni, and/or professional LinkedIn groups and by getting introduced to other members through people they know. LinkedIn also offers paid subscriptions that give premium members tools for finding and reaching people outside of their network.
Benefits of Using this Resource
Networks are an increasingly important part of every professional’s career. LinkedIn helps members build and maintain their network as well as affording them the opportunity to:
- find potential clients, service providers, subject matter experts, and partners
- post and distribute job listings
- find high-quality passive candidates
- be found for business opportunities
- search for employment opportunities
- leverage inside connections that can help you land jobs and close deals
The quality of these opportunities is further validated by the recommendations members provide for others with whom they have a relationship.
Final Thought…
Relationships, not business card networks, are a cornerstone of every successful professional career. LinkedIn is a premier tool for helping experienced professionals stay connected with those in their network, however, it cannot create or maintain relationships. Professionals must personally develop and nurture the relationships within their network. It is through active relationships and quality interactions with others that the full measure of LinkedIn’s benefits can be realized.
Leadership Inspirations – The Pioneer’s Creed
“The cowards never started, the weak died on the way, and only the strong survived.”
The Pioneer’s Creed
Resource Projection Best Practice 5 – The 40 Hour Work Week
For the purposes of personnel resource estimation, what is an individual worth? The answer may seem obvious. A full-time equivalent (FTE) or full-time employee is typically considered to be ‘worth’ 2000 hours of labor per year; calculated as the product of fifty, 40 hour work weeks.[wcm_restrict plans=”40910, 25542, 25653″]
But does any full-time employee really work just 40 hours per week? According to the Bureau of Labor Statistics report, American Time Use Survey, published June 28, 2007, persons employed full-time work an average of 9.3 hours per day or 46.5 hours per week. Should 46.5 hours per week be used as the standard assumption for making personnel resource projections?
While receiving 2325 hours of labor per year per employee instead of 2000 would be nice, a 16.25 percent increase in labor received at no additional cost, it is perilous to base any plan, be it the organization’s strategic plan or an initiative’s project plan, on such a labor rate. First, unless explicitly included in the terms of their employment agreement, professionals generally feel they are paid to work 40 hours a week; making demands by employers for long-term working hours in excess of 40 hours per week appear to be uncompensated and therefore unreasonable. Continued without adequate employee valued compensation, long working hours often result in rising attrition and lower work efficiency. Second, employees working over 40 hours per week do so because they harbor goodwill for the organization, feel a sense of commitment to the team, take exceptional pride in their work, and/or desire above normal recognition. Goodwill, commitment, and pride develop over time; being earned by the organization. Since at any given moment a sizable portion of an organization will have less than a year of service and not all employees will ever harbor these feelings, extended hours based on employee goodwill, commitment, and pride are undependable. Lastly, workers are increasingly seeking to balance their work and personal lives. Thus, employees are becoming less likely to voluntarily work extended hours.
Adverse employee reaction to extended working hours is not the only reason for avoiding excessive work hour estimates during planning. An individual’s efficiency tends to decline as the number of hours worked increases. Subsequently, the extended working hours associated with long work weeks result in less and less output; invalidating the value assumptions associated with an hour of labor.
So what is the labor worth of an individual? All things considered, a person should typically be considered to produce 40 hours of work per week.
Final Thoughts…
There are exceptions to every rule, including the use of 40 hours per week to estimate the labor productivity of individual employees. Exceptions to the 40 hour work week include:
- professionals, such as doctors, who are on-call beyond their normal working hours
- professional services employees with a defined number of billable hours per week over 40
- represented employees who, by contract, are required to work over 40 hours per week as demanded by their employer (usually with an upper limit)
Common to these exceptions is the upfront communication to workers that they will be expected to work beyond what is considered the 40 hours per week norm. For all employees, this communication should take place as a part of the hiring process and on a case-by-case basis for special events and business needs. Additionally, employees must feel their added effort is recognized and valued by the organization. This may take the form of increased compensation, public and private praise, and/or expanded responsibility; consistent with that which the employee values.
The thumb rule of the 40 hour work week is based on the socially accepted full-time work hours for Americans. The same rule is applicable in other countries adjusted to that region’s socially or legally acceptably work week hours.[/wcm_restrict][wcm_nonmember plans=”40910, 25542, 25653″]
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