Remember in the 80’s when "Supply Chain Management" revolutionized the way companies managed inventory? Applying the same principals to an organization’s most valuable asset, its staff, can help us manage human capital as efficiently and effectively as all other parts of our business. Enter the Human Capital Supply Chain.
During the recent recession a depressingly long list of companies have laid off hundreds, thousands or even tens of thousands of workers. Why? Because CEOs don't have the needed resources to allow them to quickly respond to changing market conditions in small steps rather than in painful mass layoffs (or mass rehire) campaigns where workforce quality is likely to suffer. Certainly, if CEOs had a more fluid method to relate slowing business performance to the decreased need for human capital in real-time they would have been able to gradually ramp down their staffing levels rather than decrease them so abruptly and publicly.
Supply chain management is a simple concept really, whereby companies began using technology to track the flow of raw materials and supplies, vendors, manufacturing output, shipping, customer demand and other variables to streamline the manufacturing process. The results are a decline in production costs and simultaneous increases in productivity, quality and profitability. A pretty nice win-win! It only makes sense to apply the same proven supply chain management processes to HR. Frankly, it’s a wonder it hasn’t been tackled sooner. These five steps can help an organization create their own Human Capital Supply Chain:
Find out what the real expense of your human capital is. This includes full-time, part-time, temps, 1099 contractors, consultants and outsourcers.
Consolidate staffing suppliers and identify potential strategic partners.
Implement a Vendor Management System (VMS) to help you save money by giving you the big picture on spending efficiencies.
Develop a strategic workforce plan by tightly tying business planning with staffing and recruitment. This requires having real-time data of how business performance compares to current staffing and recruitment.
Focus on a high-impact worker type. Identify the largest, unmanaged worker type in the organization (a.k.a. 1099 contractors) and focus on improving that particular segment of the workforce.
Increased communication between HR, Procurement and managers and executives decreases the amount of information and miscellaneous expenditures that can fall through the cracks which in turn increases profitability and minimizes potential problems.
Identifying a particular segment of the workforce can cut costs out of the recruitment process and improve quality and productivity of each employee.
By consolidating staffing suppliers and committing to strategic partners an organization can reduce it's human capital cost and improve workforce quality and increase productivity.
First - TAKE A DEEP BREATH.
The thought of revamping internal HR procedures and implementing HCSC management can be a daunting thing. Therefore, the first thing to do is collect your thoughts and accept that change will be good. Great, in fact. Because the reward is money for the organization. How much money? Naturally, that depends on many variables. But consider this: from 2000-2010, vendor management systems (VMS) have resulted in 5% to 20% savings on the cost of temporary labor within the first year of implementation. This has been primarily through vendor consolidation and rate management. Those are significant percentages.
Second - get the Human Capital Supply Chain (HCSC) team on board. Gather HR, procurement, line managers and exeutives and identify all costs associated with the organization's human capital. Rally everyone together and ensure that each department understands their function and is committed to working together to help realize the end goal of productive and efficient human capital management. Collectively, the HCSC team will have to develop new business capabilities like strategic workforce planning and human capital performance measurements, among other tasks. It’s imperative to have the right team in place when delving into HCSC management.
Finally, follow the steps identified in the solutions portion of this outline.
It’s really quite a simple scenario, and it functions simply if your HCSC team is operating in concert with one another; and if you’re sourcing, measuring and paying your talent efficiently by utilizing proven staffing technology.