HR Supply Chains? Really?

Businesses often build safety stocks into their supply chain to handle all manner of disruptions or changing customer buying habits. Yet businesses rarely do so regarding their workforce. That could be a mistake.
Written by Brian Sommer, Contributor

John Boudreau - USC professor - re: HR Transformation

Looking at Talent Management as a Supply Chain -

At the recent Human Resources Executive's HR Technology Conference in Las Vegas, I heard John Boudreau speak about HR Supply Chains. John is a professor at USC and author of several books on HR.

His talk was a five-part piece re: principles that should bring ‘evidence-based' change to HR and the firms that employ bright HR execs. At the core of his principles was one that challenged attendees to apply supply chain thinking to the HR realm. I've got books in my office on just this topic - It's spot on and too infrequently utilized in many firms.

John drew a comparison for the audience that was particularly solid. He asked attendees three questions:

-  How many open requisitions should HR have? (audience answer was "ZERO")

-  How much of an employee surplus should the firm have? (audience answer was "ZERO")

-  How many positions should have an employee shortage? (audience answer was "ZERO")

He then said that if an operations or business unit executive were asked the same questions regarding the firm's inventory, would they have the same answer? He posed three parallel questions to the ones above:

-  What would be the right amount of time needed to fill open orders for products or services?

-  What would be the right level of surplus stock in work-in-process inventory, finished goods inventory or raw materials inventory?

-  What would be an appropriate shortage level for work-in-process inventory, finished goods inventory or raw materials inventory?

His point is that companies frequently maintain all manner of safety stocks to account for potential disruptions in their supply chain. They also maintain excess inventory to account for the sometimes volatile, changing whims of customer demand. Surplus inventory permits rapid order fulfillment, prevents losses of orders due to material shortages and also smoothes out production schedules.

Rarely is there a corollary for this supply chain analysis for human capital.

Finding the right answers to these questions for HR is akin to an operations research problem. How can HR simultaneously solve a complex multivariate equation like this?

In dealing with numerous professional services firms the last several decades, I can state that the best firms:

-  Are constantly building their bench size and depth, often in the face of unclear demand. Their reward for doing so is often increased market share as their firms always have key talent when competitors are scrambling to find someone, anyone, at the last minute.

-  View talent as a multi-level inventory challenge. They need people who can:

  • deliver projects and programs
  • be change agents
  • act as subject matter experts
  • manage complex or difficult client relationships
  • build the practice
  • etc.

The best service firms also are great at managing the bottom ranks of their talent pool, too. They continue to cull the worst performers while training and mentoring others so that they can achieve better careers and deliver a more valuable client experience.

Top performers definitely warrant investments in time, mentoring, training, etc. But a big differentiator in many service firms is that some hire people for the skills and abilities they have today while others take a longer term approach. For the latter, they look at their team and see the talent and value they can make of them over time. It's a very different perspective. Body shops and staff augmentation firms fall into the former camp and a smaller number of firms into the latter. That could be a mistake for the person or the firm depending on the business strategies and goals of each.

I liked John's talk. I'd also like to stress that the supply chain metaphor in HR be extended to include not just how many people are in the chain (quantity) but also the quality of the workforce, too. Maybe there's a BI/Analytic app for that......

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