Apply Supply-Chain Tactics to Talent Management

The reason: As corporate leaders and business owners strive to better manage workforce planning for future competitiveness, the talent-on-demand idea is forming the basis of many more companies’ people analytics today.

At its core, of course, talent management is all about getting the right people with the right skills into the right jobs at the right time. It’s a lot to get right, and few organizations hit the precise target consistently, finds a recent white paper by The U.S. Chamber of Commerce Foundation’s Center for Education and Workforce.

The supply chain approach is gaining a lot of traction in workforce planning practices, the Washington-based business federation reports, with good results. And that’s led the chamber to call for its widespread adoption—acknowledging that “when it comes to sourcing and developing talent, too few companies have brought supply chain management logic to bear.”

So, what’s the connection? Specifically, failing to manage your company’s talent needs can be likened to the equivalent of failing to manage your company’s supply chain, suggests Peter Cappelli, the George W. Taylor professor of management at the University of Pennsylvania’s Wharton School and director of Wharton’s Center for Human Resources.

Supply-chain managers ask questions like “Do we have the right parts in stock? And do we know where to get these parts when we need them?” Such questions, Cappelli says, are just as relevant to companies trying to manage their talent needs. In other words,  the principles of supply-chain management, with its emphasis on just-in-time manufacturing, can be successfully applied to staffing, too.

Gauging the ‘Short’ and ‘Long’

When you boil it down, the term “talent management” simply means “trying to forecast what we are going to need, and then planning to meet that need,” Cappelli notes. And the definition of supply-chain management is essentially the same: “We think that demand for our products next year is going to be ‘X’. How do we organize internally to meet that demand?” he says.

To best manage the uncertainty about talent needs, companies should constantly calculate the “short and long,” advises Cappelli, who is also author of Talent on Demand: Managing Talent in an Age of Uncertainty (Harvard Business School Press).

“Suppose a company forecasts that it will need 100 new engineers this year,” Cappelli says. “Not many people ask the question: ‘How accurate is that forecast?’ As it turns out, that forecast is almost always wrong because business needs are so hard to predict. So the way to proceed is to ask: ‘What happens if we are wrong?’”

Management can be wrong in one of two ways: Either you end up needing fewer engineers than you thought you would, Cappelli says, and you have to either carry them or lay them off, or you need more engineers than you thought, and you have to scramble to find extras. The next question, he says, should be, “What does that cost us in each case? Does it cost us more if we have too many, or if we have too few? It’s almost always the case that it is much worse in one context than in the other.”

So the strength of the supply-chain approach is that it naturally forces more of these “what if” scenarios into workforce planning and coordinates the variations, which positively impacts the ability to predict true needs without wild fluctuations of under- or over-shooting your staffing.

Fine-tuning the Analysis

Case in point: At McLean, Virginia-based Capital One Financial Corporation, the HR team aims to be prepared to deal with all possible outcomes. Peering into the crystal ball takes the form of an information-based strategy to link business trends with workforce planning.

The financial services giant asks managers directly to assess current workloads and what will drive staffing needs going forward. Using that information, HR then projects changes. On the basis of workload projections and anticipated productivity growth, the company quantifies its required future workforce size, allowing for adjustments along the way.

These database simulations allow the company to forecast its labor needs with greater precision and flexibility—especially helpful during times of economic uncertainty.

It’s a real-time scenario plan that allows the 45,000-employee company to ebb and flow with the times and bring a lot more flexibility to many of its business units.

In tomorrow’s Advisor, we’ll outline four benefits that supply-chain principles bring to staffing management.