In the 1980s and 1990s, I worked extensively in check processing operations. We had volume spikes on Monday nights, Friday nights, and any day after a holiday. Proof operators had to work until all the checks were proofed and encoded. On higher volume nights, this meant overtime. With enough volume to keep most staff busy on the lighter days through most of their regular 8-hour days, we knew we needed overtime to get the work processed. Management understood this need and accepted it as part of the job.Today, many client organizations try to restrict overtime to control expenses. Certainly, expense control is a good thing to do, and overtime is an expense that can creep upwards if not appropriately managed. When working on productivity improvement projects, Ceto often hears conflicting opinions from different levels of management. Executive management tells us that they do not want overtime in their organization, indicating they are inefficient at what they do. On the other hand, middle managers often express a desire to have some level of overtime to handle volume fluctuations or emergencies. When executive management forbids overtime, middle managers usually pick up the slack and perform the needed overtime work on their own time at the office or home. And while the bottom line reflects no overtime on the books, the financial institution clearly has overtime, which can cost them in the long run.
The Pros and Cons of Working Overtime
Middle managers that work considerable overtime to support their daily workload get burned out. These managers often receive pushback from their families as their personal time gets squeezed, or they spend time with their families in the early evening hours only to work late into the night. Once they reach a certain point, burned-out managers will leave the organization. Unfortunately, executive management is often unaware of the extra work these managers perform over and above their day-to-day responsibilities until it's too late and they resign.
In the case above, it might be more beneficial to an organization to budget a certain amount of overtime each month, allowing managers the flexibility to share the load. Even budgeting for 20 hours of overtime each month might help middle managers balance their work when unscheduled volume fluctuations occur. If they don't use it, the organization saves that money for the month. When budgeting for overtime, organizations can incent managers to keep overtime below monthly budgeted amounts or provide monetary incentives to those who keep overtime below 50% for the year.
Another overtime argument Ceto often hears from middle managers is that they would not need overtime within their departments if they had more people. While this is a viable argument if there is excessive overtime within a department, the question is, how much overtime would be enough to warrant a new hire? Based on Ceto's calculations, it would require more than 31.5 hours of overtime to justify an additional FTE financially. Some managers indicate they have 10 to 15 hours of overtime within their department every week and could eliminate it if they had an extra person.
Even while paying existing staff time and a half, this number of overtime hours does not financially justify a new hire. As volumes increase, it might be less expensive for the financial institution to handle the growing volume with planned overtime instead of adding staff.
Planning Ahead for Overtime Hours
For organizations that budget and allow for employee overtime, several observations hold. First, employees regularly paid overtime often come to rely on that extra payroll for their livelihoods. If an organization reduces or eliminates overtime, it must consider the financial impact on employees and its role in possibly lowering morale and increasing turnover. One solution is to provide employees with advanced notice of the expected changes and slowly ease employees off overtime within a specified timeframe.
Second, scheduling too much overtime for employees can lead to burnout and turnover. Organizations that rely on overtime for increased volumes must be careful about how much individual overtime employees are working. In my experience managing hundreds of people in organizations, burnout occurs when individuals consistently work more than 50 hours per week. About 10 hours per week on average is about the most overtime a person can tolerate regularly. Occasionally working an extra 15 to 20 hours wouldn't necessarily cause someone to leave the organization. Still, if it started happening regularly, they would be more likely to seek employment elsewhere.
Ceto recommends that organizations and functions strike the appropriate balance when it comes to overtime. Overtime can be helpful for many organizations and functions that are growing but have not yet attained enough volume to justify a new hire. However, financial institutions should ensure middle managers are not working much overtime to adhere to the organization's desire for little to no overtime. Effectively, organizations should allow for some overtime but try to limit overtime on a per FTE basis.