Innovation often comes from taking practices & frameworks from one walk of life and applying it to another. Clients are often interested in how insight from one industry can apply to another. For instance, a great deal of the innovation in Procurement in the 90’s came from the automotive sector; Marketing from FMCG; R&D process from pharma; Large scale capital management from Oil & Gas.
But what about cross functional learning? The CEO of the CIPD, Peter Cheese, is on a mission to take learnings from the Finance Function and apply it to HR. For example, rigour in processes and standards, the level of professionalization and being more comfortable with the language of business. This comparison with Finance is constantly referred to at conferences and when talking to aspiring HR practitioners. But what about other functions? What can we learn from them? Well there is communication from Marketing/Brand management, managing innovation from R&D, and I now submit to you, Supply Chain Management for workforce planning & management.
What is a supply chain?
Supply Chain management is about matching the supply of goods with demand. It involves having a forecast and understanding how the forecast will change; thinking about what needs to be built or bought, and getting the getting the right stuff at the right place at the right time at a minimal cost with maximum flexibility;… it is an end-to-end process. It requires managing a large numbers of things: suppliers, SKUs (Stock Keeping Unit – the thing that is being moved around, transformed, bought and sold), employees, inventory, customers and information.
It is extremely data driven with a variety of data sources; customer data with demand signals, service levels and demand forecast accuracy; lead time and lead variability; cost and build of materials. Plans are made, frozen and adapted with an industry focused on good Sales & Operational Planning alone. Within supply chain management there are a range of trade-offs between flexibility, agility and cost. Many companies use their supply chain and supply chain expertise as a source of significant competitive advantage. For example Dell have a fully integrated value chain with consumer customisation, while Amazon manage to sell & deliver millions of products around the world. When you think about it, what they do is truly amazing.
I love supply chain thinking and when a supply chain is truly world class it is a thing of beauty. But how do you manage all that complexity effectively? The best practices seem so simple but are seemingly impossible for most organisations to get close to. It is where I cut my teeth as a management consultant while at A.T. Kearney and where I think Concentra (the parent company of OrgVue) is doing some of our best work. As an example, we are helping one truly global Fortune 100 FMCG firm reduce 40% of their finished goods inventory across all 180 of their markets (a market being a country). Just like with OrgVue, we are using data to drive out flaws in the system, and using visualisations to help the client really understand their Supply Chain.
So, how does this supply chain thinking apply to workforce planning & management?
In many respects, workforce planning a supply/value chain issue. Substitute goods with people and there is a great deal of overlap. It is about ensuring that the supply of people matches demand. In fact it isn’t the supply of just people, it is the supply of competencies to transform a set of inputs into outputs/outcomes. In supply chain speak, that is a Build of Materials.
Both functions require strong information management, planning at different horizons, process and tools to pool the whole thing together. At the daily tactical level, there is constant change. A customer has a rush order OR a crucial employee leaves? At the IT level, the quality of the data and how information is processed, shared and visualised has a huge impact on how efficient the process are AND crucially, how good the decisions are. They both need long term planning. For instance, how to enter a new market or add a different product range? How to scale for growth or decline?
There is a huge amount more to say, but what are the takeaways? What are 3 things that workforce planning professionals should take away from their cousins in supply chain? This is
1. Learn from sales and operations planning (S&OP)
Learn to integrate your various organisational functions, aligning and synchronising them to create a people forecast. Then plan accordingly, as is done in S&OP. A plan can always be changed if the situation dictates it. But it is so good to have the starting point of a plan that is broadly agreed. The process of planning is as important as the actual plan. Good supply chain teams have a pretty robust calendar routine. Multiple functions are pooled together at fixed points during the year, month or week. Forecasts are frozen x-days out. The decisions that need to be made are clear, as is the information to make those decisions. It is about being efficient with everyone’s time and that means pre-work, clear agendas and expected outcomes.
2. Sort your information management
The customers for the work force manager are inside the business, not outside. So the demand signals are requests to hire OR plans to hire over a period of time. They are related/driven by the business strategy. This information needs be captured, scenario modelled and alignment harnessed. The demand plans need to be compared with the supply (see my blog on workforce planning as a case of supply and demand). Most organisations don’t think supply and demand. At best they have a list of employees with job titles that are all over the place; time to retire analysis isn’t done; the impact of attrition, or even the attrition levels by area, role type etc are not calculated. The maths is simple. What is difficult is getting the right meta data tags and understand the basics and in dealing with temporal data. Knowing the basics, for example, in terms of what are the roles? What is the attrition by role/area/group/grade/tenure/high performers? Which roles are hardest to recruit for and how long do they take to fill? What are the internal supply options for each role vs the outside pros & cons? In this context, thinking about succession planning becomes a subset of workforce planning.
3. It takes effort and investment to become world class
Companies invest heavily in their supply chain capabilities. They know it is about people, process and systems so they invest in all three areas. They know it can be a great source of sustainable competitive advantage and they know there is no quick fix. It takes years to build a truly work class capability and it may require targeted outside help. It certainly requires continued senior leadership support, budget and a focused team. Mostly, however, it requires a long term commitment to excellence. In this space, perseverance, resilience and dedication will win over flashy but unreliable genius every time. It isn’t a quick win type of area. But then again, things of real value rarely are.