Finding the Right Employee Organizational Structure – HR Case Study
One of the companies the Alpine team has worked with, came to us with a challenge – unbalanced distribution of labor. Their current organizational structure differentiated between hourly employees by department. Most of their employees were categorized as warehouse workers (75%) while the rest were material handlers (25%). The different job classifications meant there was a difference in pay and hence there was no sharing of labor between departments which led to staffing challenges throughout different times of year. In one department the employees were working overtime, yet another department was dismissing people early because they were out of work.
Additionally, they were expanding their business and anticipated this distribution of labor to be an even bigger problem in the future.
The challenge in front of us was pretty evident – how to create an organizational structure that allowed for labor flexibility between departments while at the same time reduced employee labor costs. While the problem was simple to see the real problem was in ensuring they remained the employer of choice to attract and retain qualified, experienced hires as they were in a very tough labor market. Moreover, these changes had the potential of having a negative cultural impact on current employees and so the decisions and communication of such were very important.
As we looked for the best solution, we started by gaining a good understanding of their current structure and operations:
• Skillset necessary at the function level not just department
• Current and forecasted employees across departments
• Current pay for all employees
• Similar jobs in the market and associated pay
After reviewing the data, we noticed two trends, most job functions were either relatively easy and could be learned in 30-60 days, while the others required equipment and were more complex processes. Given this, we recommended a structure that differentiated the employee based on the types of tasks they would be doing, regardless of department. The new structure would have both warehouse workers and material handlers. A warehouse worker would be on equipment and/or completing more complex tasks such as Quality Control and a material handler would be executing the less complex tasks that didn’t require equipment. This added a presence of material handlers throughout most departments which allowed for flexibility when volume increased in certain departments but not the whole warehouse. It was calculated that after the transition, the hourly makes up would be 60% warehouse workers and 40% material handlers.
The new structure allowed them to share labor across the warehouse which resulted in the following saved labor costs:
• Savings of $3.4M in labor costs realized over 18 months
• Overtime savings were also calculated at $1.2M realized over 12 months
Additionally, the new structure allowed them to add temporary employee support at a tiered rate yielding additional savings.