Workplace disruption is the new normal. As organizations plan for 2023 and beyond, they must grapple with talent shortages, rising costs, supply scarcity and a host of other issues that require a new type of strategic plan – one that is agile and resilient.
None of these challenges is more disruptive than the current workforce shortage. And no task is more urgent than devising a solid plan to determine how you will get work done in the coming year. Effectively organizing your labor force today is the key to short- and long-term success.
To prepare for the challenges to come, organizations must:
Today, we will explore the “people supply chain.” What is it? And how can it help your organization survive our new reality’s many disruptions?
Future blogs in our Preparing to Thrive series will cover the remaining imperatives, so you can thoroughly plan a workforce strategy for 2023 and beyond.
What is a People Supply Chain?
The need to develop more efficient labor sourcing strategies is not new — the industry has been talking about it for a decade. The difference lies in the urgency. In the past, organizations with scale could survive disruptions and even overcome poor decision-making.
Now, even large organizations don’t have enough or the right talent to meet demand. Organizations of any size can no longer assume they can recruit an adequate workforce when needed. Smarter talent sourcing decisions are necessary for survival.
But how? Possible solutions lie in supply chain management theory.
People are not goods. We know that. Yet, in these post-COVID times of the Great Resignation, labor shortages and changing employee perceptions, supply chain management can teach us much about talent management. As supply and demand becomes even more unpredictable, employers must structure their talent planning similarly to their physical goods supply chains.
Basic supply chain theory calls for organizations to balance the probability and cost of scarcity with the probability and cost of surplus. The centering principle is the “Goldilocks” ratio: the “just right” amount of each, not too much and not too little. In days past, organizations could roughly achieve this balance. They could hire more people when they needed them and lay them off when they didn’t – the primary variable was how much it cost.
However, experienced managers know that you will eventually be caught scarce if you manage inventory by making purchasing decisions at a moment’s notice. They also know that if you are not good at predicting demand, you will have a surplus. The same is true for people.
In today’s world of constant disruptions, organizations must have a better plan, shifting from the basics to the more effective modern supply chain tenets, including:
These tenets play out in supply chains everywhere, but very few companies recognize their value in the workforce. Today, according to U.S. Bureau of Labor Statistics, full-time employees comprise 83% of the average corporate workforce. In other words, companies primarily rely on one source of labor.
A better strategy is to procure labor from a combination of sources — just as companies obtain materials from a mix of onshore, nearshore and offshore.
These sources could include internal employees, contractors, consultants, crowdsourcing, outsourcing, partners and suppliers. Developing a variety of sources is key.
Optimizing the People Supply Chain to Get Work Done
Ultimately, rather than asking, “Do we have enough employees to do the work?” organizations should ask, “How can we get work done?”
Supply chain leaders determine how to get goods to market. When HR leaders shift the perspective to identifying “the best way to get work done,” they open up strategic and creative opportunities and clear a path to a plan with metrics, outcomes and assessments.
Just like with a materials supply chain, organizations should:
Step 1: Gather insight into your capabilities and needs. What labor supply do you already have? What are your current labor gaps? Future needs? What predictive capabilities do you have to match your labor supply with existing and future labor demand?
Step 2: Decide what is most important to you in your supply chain. Whether seeking the fastest, the cheapest or the most reliable method of sourcing labor, think about which metric you want to optimize. Is it cost? Availability? Speed? Skill? Select the types of labor supply that best fulfill your goal. Determine the metrics you want to optimize, and track them diligently.
Organizations spend money to gather insight into their goods supply chains. They dedicate resources to understanding risks and timing associated with the availability of materials. They can assess the results of the strategy at any stage. The same thinking should apply to people supply chains.
Step 3: Determine the labor strategy that optimizes your metrics. Labor sourcing and management strategies should originate in what needs to be done and what metrics must be optimized. If flexibility is essential, contingent labor will be critical. If cutting-edge capabilities are primary, consultants or even crowdsourcing pools may be more prominent.
Non-core functions may be heavily outsourced. Some organizations have contingent labor completing nearly 50% of work.
Step 4: Enact policies to execute your labor strategy. Put in place a human resources infrastructure, policies and processes that enable your organization to carry out your new people supply chain strategy efficiently. This is not as easy as you may think. Managing teams of full-time employees is complex.
Managing teams of mixed labor sources, from contractors to outsourced talent, is even more challenging and requires different management competencies. Most corporate managers do not have this experience. Seek expert assistance to set a structure for management.
Overcoming People Supply Chain Challenges
Remember, People are Different
While supply chain strategy can inform labor strategy, we must remember that people are neither goods nor interchangeable numbers. They are less predictable, have feelings and place value on relationships.
Here, employers can apply supplier relationship management concepts to talent relationship management.
If a customer has a good relationship with a supplier, that supplier will be less likely to abandon the customer when supply becomes scarce. The same holds for talent. Developing good relationships with employees helps to ensure they won’t go elsewhere.
Additionally, nurturing different sources of talent — contractors, outsourcing, temporary services — can help to foster a more reliable, long-term supply of people to fulfill labor requirements when and where they are needed.
And, just as organizations may constantly be scanning the landscape for new sources of supply, organizations should stay on top of labor market trends to look for opportunities and challenges on the horizon.
But how do organizations know which mix of labor-sourcing relationships they need to develop? And when to utilize each? Fortunately, we now have access to powerful data analytics to manage the unpredictability of talent supply.
Use Scenario Planning
Organizations can use “scenario planning” to build and manage their people supply chains. This involves two phases:
1. List and match business and labor scenarios. First, predict various business scenarios, as well as the different possible workforce scenarios. Match your people scenarios with each business scenario.
2. Record metrics and guideposts. Gather data for each scenario to understand which labor force composition works best with each business scenario to achieve your desired outcomes. This data will inform your decision-making about the best workforce strategy to use in a given situation.
This process is not easy. Modeling the business scenarios is complex, and matching the right people scenarios adds another layer of complexity. It’s also dynamic. Most organizations conduct workforce planning yearly or in anticipation of a hiring freeze or rapid growth.
We recommend a near-constant assessment of talent plans, just as an organization would constantly monitor and optimize its supply chain performance.
Rethinking workforce planning gives organizations the flexibility, agility and resilience to pull through disruptions – and flourish.
Get It Right with Holistic Systems
Supply chain management is no simple task. Neither is managing a people supply chain. Organizations will meet similar challenges with workforce planning and management as with advanced materials supply chains — delays, lead times, exposure to risk, accountability, quality control and more. And an engineering department head that can manage supply chain problems won’t necessarily be an expert workforce planner.
Getting the right talent is more than figuring out how many people to hire.
This is especially challenging for midsized companies that don’t often have the right specialization or experience in-house. But they likely have sufficient change, growth and attrition to warrant treating their people supply chains with the same urgency as they do their material goods supply chains.
To stay competitive, organizations need a holistic approach that includes building the right leadership capabilities, human resource policies, incentive systems and other processes aligned with supply chain principles. Holistic systems that optimize workforce strategy allow organizations to be more nimble and resilient, now and into the future.
Improve Your People Supply Chain with hrQ
The one caveat to modeling workforce planning on supply chain systems: they can fail. Everyone knows the last two years have been riddled with worldwide inventory and sourcing problems. That’s why it’s important to act now. By building an agile and resilient strategic workforce plan today, your organization can withstand economic and employment challenges as they arise – or avoid them altogether.
Building an effective people supply chain strategy requires specialists who understand your business and your objectives and honestly care about your success. hrQ can help. Organizations worldwide trust our expert assistance to analyze and devise optimal, realistic solutions to their labor force needs.
Contact us today to begin building your ideal people supply chain.
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