Deloitte is branching out to become a product company for the first time. The company has been examining why companies are overspending an estimated $30 million on labor costs each year. This level of expenditure can take up 50-60 percent of a company’s operational budget.
With the new platform, LaborWise, Deloitte has produced a means to empower executives with new data and provide them with full visibility into the causes of overspend. The software also provides solutions as to how to reduce labor expenditure and to gain long-term business savings.
To discover more, Digital Journal spoke with Pat Russo, Principal and LaborWise Leader, Deloitte Consulting LLP.
Digital Journal: Thanks for agreeing to be interviewed Pat, what are the major challenges facing firms in relation to labor costs?
Pat Russo:Deloitte analysis finds that a typical Fortune 500 company spends $1 billion to $2 billion per year on labor, which accounts for approximately 50 to 60 percent of companies’ operating expenses. At that volume, labor overspend amounts to an average of $30 million per year, or 0.5 to 2 percent of hourly payroll.
DJ: Is the labor cost issue a global one? Does it cut across different sectors of the economy?
Russo: Deloitte research confirms that the need to increase productivity and manage costs is a global challenge. The industry sectors that we have observed the highest impacts are those with a higher percentage of their employee population classified as hourly or non-exempt with most opportunities noted in the healthcare provider, retail, manufacturing, life sciences, oil and gas and related industries.
DJ: Please explain what the aim of LaborWise is?
Russo: LaborWise is a workforce analytics product that unveils hidden sources of labor overspend, and is designed to help reduce labor costs by analyzing workforce data for nine causes of overspend including overtime, missed punches and canceled meals. With this analysis, the solution empowers organizations to not only determine where labor overspend is occurring, but also provides suggestions on what operational changes should be made to improve worker efficiency and productivity.
DJ: How does the new version of LaborWise differ to previous versions?
Russo: The latest version builds upon the capability of identifying overspend by drawing connections between overspend and sales performance and other operational metrics such as worker productivity, efficiency, safety, and engagement. Empowered with this new data, companies have identified, quantified and sustained long-term savings.
DJ: What steps have been taken to safeguard the security of information?
Russo: LaborWise uses role-based authentication for its users, encryption during data transfers, and certified data centers for storage.
DJ: What types of companies have adopted LaborWise?
Russo: The industries we’ve seen the highest uptake are the industries’ where there’s a significant percentage of their payroll are hourly workers. Healthcare provider, retail, manufacturing, life sciences, oil & gas, etc. Any organization where there are hourly workers, a need for maximizing demands, and a need to plan for as-they-occur changes in real-time to save money for the enterprise that need to be invested back in the business and be more competitive in the marketplace.
DJ: What have the main applications been?
Russo: Leveraging people analytics and defining correlations to business and revenue cycle data to drive optimal performance and productivity.
DJ: Why was the decision taken to expand Deloitte beyond consultancy and into creating a product for the first time?
Russo: Deloitte’s reputation is in services, and we remain true to this core business practice, but adding products and solutions onto current service offerings allows us to bring a wider breadth and depth of knowledge and resources to clients. We consistently assess the challenges our clients are facing, and the vendors they work with to see how we can partner to innovate and develop products in what we would call the “white space”, the space that no vendors were tackling today but we knew represented pain points that our clients were dealing with.
DJ: Will there be any similar product developments?
Russo: Deloitte will continue to expand our platform of human capital products to address the challenges our clients are facing as the expectations of the current workforce evolve.
LaborWise is a computer-based solution to the current budget issue plaguing Fortune 500 enterprises globally – that of labor costs. The software features an advanced analytics engine and an intuitive interface with interactive visualizations. Furthermore, the software integrates with a wide range of data sources and provides what-if analysis and scenario modeling.
