The good and the bad of overtime
Sometimes a manager can’t win. Consultants can find ways to be critical if they do something, or if they don’t do something. Using overtime is one example. Overtime is used by many organizations as a practical way to try to manage high demand periods which would otherwise require hiring additional staff. But like many good ideas in theory, it doesn’t always work in practice. Sometimes the use of overtime gets out of sync with the need for overtime.
Whenever we see overtime over 5% an analytical red flag goes up and we start to suspect that there may be too much cost built into the process. Many organizations use overtime to offset peak volume periods. The obvious danger is that the premium compensation that comes with overtime can quickly become an expectation or entitlement if it’s not managed carefully. Once it becomes an established practice, it’s difficult for a manager to claw back or remove.
When we study overtime we look carefully at what work is scheduled through the day and what work is done during the premium period. We then try to determine if overtime is really necessary or not. Some of the reasons for unnecessary overtime include:
- work is paced, intentionally or not, during the day when there is a built in expectation that overtime will be required
- work is completed using overtime hours that could be done during regular hours
- work is unevenly distributed causing overtime in one position and under-utilization in another
- work is done during the peak volume that could be off-loaded to a non-peak period
- short term support is not developed to help offset peak demand periods
The counter-balance to excessive overtime, is the lack of any overtime. This is also a red flag and a source of opportunity. In many environments work flows naturally in a cyclical fashion where you would expect that occasional overtime would be helpful. If no overtime is ever required, its sometimes an indicator that that there are more resources being used than necessary.