Applying supply chain thinking to the supply chain talent problem

In a recent white paper published in October 2010, Jim Rice from MIT argues that there is a potential crisis for supply chain talent brewing.  A speaker from a large global manufacturing company spoke in my MBA Supply Chain Relationships class today, and shared his views on if this talent shortage really exists, and if so, what its impact is.  His initial reaction to the MIT study was – “Hey if he says there is a crisis, maybe he’s just trying to sell me his students!”

The executive also noted that the talent issue has been nagging him for the last year.  Being a quant jock and a supply chain logistics manager, he described the journey that his company took to drive thinking around this problem.  He was assigned to a new role as a Logistics Fellow with a title of “Supply Chain Professional Development Manager”.  This task involved  leading mid-career recruiting and professional development, managing university and association relationships, and preparing a strategic workforce plan.

But what he learned in his new role led him to understand how difficult this was going to be.  Historically his company has recruited out of colleges, but developing an entire talent management system required a different type of approach.   Sadly, the system at this company today (like many other large companies) cannot provide a succinct view of how many people they have on payroll, due to the number of different HR systems that track people and performance across the system.  Further, they didn’t know exactly what the workforce growth requirements will be.  Upon being assigned, this gentleman realized he needed to drive new thinking in this area.  And being a supply chain guy, he started to think about using supply chain tools to drive supply chain talent management!

In the beginning, there was a need to drive the relationship objectives of his company with universities teaching supply chain in general.  The scope of the relationship encompasses recruiting and talent development, but also executive education, and thought leadership (access to new ideas and thinking).  The second part was to market the company’s brand awareness on campus – and this starts directly by speaking to students in the classroom (as he was doing today)!  And the third piece is around driving research and thought leadership from the university side, and how the company can absorb that information and drive thinking in the company.  This started to look like supplier segmentation!  There may be some universities that drive just recruiting requirements – such as smaller universities such as Western Illinois or Ball State, which provides talent directly into local facilities.  On the other hand, Stanford has Hau Lee and great thought leadership – but MBA’s at Stanford are hardly going to want to start a new job as a second shift supervisor in a facility Waco Texas!  So there is a need to have relationships for different reasons with different universities.

But here is where the big secret came out: HR groups in companies are really defensive functions, and spend most of their time ensuring that they aren’t violating government policies and breaking rules that could result in a lawsuit!  But on the recruiting side, HR groups have often lost sight of how to be effective in recruiting!   The model that this company came up involved marrying three different variables.  First, understand what the company is – and what they do, when they do it, and the culture around it.  Second, there is also the job description – it is what it is!  And then there is the candidate – as an individual with their family, finance, geographically, where they can work legally, etc. All of these three variables have to be matched to have a good fit at the end with a candidate and a job.  And the one that is most difficult is timing.   Usually, companies don’t know in October that there is a need for a June starting position – it is usually on May 15!  So often the timing for university graduates typically doesn’t align with the time when companies need people to start!

After establishing university relationship segments and anlyzing the recruiting parameters, the third step in the process was to develop forecasts for talent.  There is a need to understand at each facility how many people do you have, how many do you need, and how many in the next five years.  And for your part of the world – here is your basic attrition rate – and all of a sudden, the growth number less attrition number is how many people you need to hire at your facility!  So between now and the end of the year – you have to hire, say, 15 people.  And where do you want to bring them from – an internal person from another division, a recent college graduate, a mid-career professional, or bring in an intern, or a contractor / flexible workforce? This company discovered that across all the positions that people wanted to fill, about 15% of them were with recent college graduates.  And college graduates was taking up 100% of their effort!  But a third of the positions were experienced professionals – and there was no process for this!  A small number were interns (5%).  About 25% were internal transfers – but there was also 10% that fell into the “I don’t know” category.   And it also became clear that the company wasn’t hiring people fast enough.  As the team went through this exercise last summer and returned in the fall after  recruiting – the Senior VP came back and said – if we are looking to hire that many grads – we aren’t hiring enough interns.  This is changing the way we look at the talent pipeline –and simply applying supply chain principles to the people problem!

The final element was looking at cost drivers.  For talent costs – there are recruiting costs (travel, etc.).  The only two levers that can be driven include the need for external talent and recruiting efficiency is the only element that can drive and control recruiting costs.  Labor markets are the cost driver for compensation, geographic gaps are the driver for relocation costs, competency gaps are the driver for education and development, and the opportunity cost was the cost of work not getting done properly!

Those interested in this topic should check out a book called “Talent on Demand” by Peter Capelli, where he talks about the history of HR and why it works the way it does.  He also talks about applying SCM principals to human resources.  The old approaches worked when you had stable demand, you could build a talent pipeline with the expectation that for 3 candidates for CEO in 30 years, I need 9 people doing these things, and 27 doing other things, and working through the pipeline.  But with mergers, acquisitions, etc. makes it difficult. 

Companies are also looking forward towards collaboration technologies, by applying S&OP approaches for recruiting.  The use of social media and communicating with the right candidates is important but unknown, and there are things that could help there.  Improving performance metrics to drive talent management is another key part of this, as well as measuring the forecast variance for talent requirements – and holding people accountable to their projections.  Why is there are shortfall/surplus in positions versus people?  There are also areas to drive simulation models and take that on – and how to drive the cost of flexibility?  Perhaps there is an option to recruit 30-40 MBA students on a particular trip – and I may not exercise that option.  And there is also a need to drive scenario planning – what if there is a double dip?  What if there is a huge growth in China?

Talent will continue to be a topic of interest in this post, as well as in future research developed by the SCRC.