I'm not psychic, but chances are you're not going to meet your revenue budget this year. Though you can chalk some of this up to the economy and tougher competition, you should take a closer look at your employees. If your operation is a spa, your employees are not where they're supposed to be a full 20 percent of the time.
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Right now, you're probably thinking that I'm not talking about your spa. That's because yours is a highly professional operation with procedures and protocols and attendance policies—your employees are not running wild. Most of them even show up for work on time and in uniform. But let's go back in time to the last quarter of 2007 when you were finalizing your budget for 2008. You probably had some lively conversations with your team, or maybe just yourself, about all the factors that could impact sales in 2008.
Maybe your planned expansion was just finishing up, and you projected that sales would increase by 30 percent, thanks to pent-up demand from guests who you'd now be able to serve. Perhaps a new spa was opening, and you were hearing the loud sucking sound of clients and employees being siphoned off as you gritted your teeth and cranked your sales numbers down in anticipation of rough waters ahead. Or maybe your nearby competitor was closing its doors, and you were adding a conservative 7 percent a month to your 2007 sales. Whatever you were doing to your revenue budget—pushing it up, pulling it down, or leaving it flat for 2008—you were giving it some serious thought.
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The only way you were going to make those sales, you knew, was if your staffing levels could support them. So you took that top line number and you poured it into your operating schedule. And yes, when you divided those dollars into staffed massage, esthetic, and nail shifts, there were enough bodies to ensure that you'd reach that number. Your spa did indeed have the capacity to drive those sales. I would like to congratulate everyone who sees the essential flaw in this simple calculation, because it took us more than a few years to understand why we kept missing our mark with remarkable precision and consistency.
One reason we did not hit our revenue budget was staff turnover. When a shift is vacated by a departing team member, it's rare that someone is waiting in the wings and can leap into the vacancy without missing a beat. In reality, many beats are missed, even when we have notice of the employee's departure. When turnover occurs, our so-called on-call staff is frequently subsumed by the regular schedule, leaving us with no on-call staff to cover our "sick outs." Even if we have a great candidate in hand, he or she may not be able to work the exact vacated shift.
While turnover is certainly a key reason for missing revenue numbers, there is a more insidious one. How much time off can your employees take each year? Perhaps your company offers paid vacation, and you also allow for additional unpaid time off. Even spas that don't offer paid time off (PTO) enable staff members to take unpaid time off. Most spa operators are well aware that one of the key benefits for employees in this industry is flexibility. This is part of the tradeoff we make because our workforce is not highly compensated, and it has real value for folks who make their careers in the spa industry.
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Many of us have created policies that enable our workers to take additional time away if they are able to cover a shift. In plenty of instances, we feel that we should not limit their time away if they've been able to get coverage. Then there's sick time. Or maybe you've lumped all your PTO into something known as flex time, which can be used for vacation, illness, or the odd personal day, as the employee chooses.
Are you starting to get the picture? Your revenue budget divided by scheduled shifts may fall short due to the various planned and unplanned time away that your workers inevitably take each year. Perhaps you are awash in talent and make sure that shifts vacated by vacationing staff members are stocked with substitutes. I suspect, however, like many spas, your staffing levels are not so abundant that you have extra employees you can pop into that one-week or two-week hole. I would not be surprised to learn that you have some empty, lonesome shifts on your appointment book, for which no one is available. There's also an unfortunate relationship between seniority, popularity, and length of vacation. Your most-requested therapists are the ones who have been with you the longest. And the ones who have been with you the longest are usually entitled to the longest periods of time away. (Even if you do as we do and pay a service award bonus to revenue producers on their anniversary rather than provide paid vacation time, your team members will still need time away.)
Let's return to the concept of coverage. There's a reason that this word is not a synonym for sales. When Fabuloso, your popular senior therapist, decides that he needs time off, he will, per your policy, dutifully solicit coverage from another staff member. Who is likely to have the most time available? Newton, the lean and hungry junior therapist who is picking up shifts. Will Fabuloso's clients schedule their appointments with Newton? Probably not. Newton will have to settle for catch-as-he-can, while Fabuloso's clients faithfully wait for his return.
When we looked at actual time worked in 2007 versus our budgeted time on the schedule, we were shocked at the shortfall. Between paid and unpaid time away, the ravages of the flu season, sick-outs, minor injuries, and the inevitable unscheduled emergencies that befall employees, we realized that employees were really on the job about 20 percent less than we planned. Even if some of those shifts were covered, whether by our on-call program or through advance planning, the disruption almost always resulted in fewer appointments and lower revenue.
What does this mean to your revenue budget and the goals you set for your spa and your staff? To reach your revenue target, you'll need to set goals higher. The formula is not created by taking your revenue goals by department and neatly divvying them between the number of shifts worked. There are two ways to correct for the Missing Worker Phenomenon. Your currently scheduled team members can make higher contributions during the time they are there, or, if you have the capacity, you can add shifts and staff to make up that 20 percent you're going to lose. But something tells me you wouldn't have a treatment room sitting idle if you thought you could fill it, anyway.
The good news is that something management may have been interpreting as a sales and marketing problem—"we missed our revenue budget, so demand must be off"—may actually be a logistics problem.
How can you solve the problem?
1. Build a schedule that's capable of delivering the sales you're promising. For example, if you're committed to producing $1 million in sales for the year, your per-shift production goals must add up to $1,250,000 to offset the impact of losing that precious 20 percent to time away from the job.
2. Firm up and consistently enforce your unpaid time-away policies. Don't feel guilty about denying an unpaid time off request. If you've always been lax about this, it amounts to a significant cultural change. At Preston Wynne, it took our team about six months to start monitoring and respecting the unpaid time off bank once it was consistently enforced. Be sure to emphasize the fact that the only fair way to administer the program is to do it by the book.
3. Create an on-call system for your busiest shifts to mitigate the impact of sick-outs and emergencies. We rotate on-call responsibility throughout the entire team. Enable employees to bank additional unpaid time off for covering shifts. Check labor regulations in your state to ensure that you are compensating workers properly for on-call duty. One otherwise-missed appointment that is saved is more than enough to cover the cost of paying an hourly rate to on-call workers if they are not needed. We release them within two hours of opening the spa, even though California law dictates that we must pay them for four hours. Getting paid to do nothing can be a nice upside to an on-call program. On-call programs also shift the responsibility for fulfilling the schedule back to the employees. Everyone wants to enjoy their time off, but workers are less likely to call out sick if they know it's going to impact a co-worker's weekend.
4. Never stop recruiting. Banish the phrase "fully staffed" from your vocabulary. Staff turnover is one of the biggest causes of revenue shortfall. Continuously run recruiting ads, and keep a fairly generic blind ad going at all times. It will give you a head-start when one of your employees starts looking for a new job.
Implement these processes successfully, and you may have the distinct pleasure of sticking to your revenue budget rather than missing the target. As Woody Allen said, "Eighty percent of success in life is showing up." While I'm pretty certain he never operated a spa, he had the math exactly right. —Peggy Wynne Borgman
Peggy Wynne Borgman is the CEO of Wynne Business and the director of two Preston Wynne spas. Borgman is a principal consultant and seminar leader for Wynne Business and author of Four Seasons of Inner and Outer Beauty: Spa Rituals for Well-Being Throughout the Year (Broadway Books, 2003). She is also a member of the Day Spa Advisory Board. You can reach her a [email protected].