Keys to Understanding Human Capital Management Within Supply Chains
Corporate leaders who can react quickly to market changes are strategically positioned to hire the best and most qualified people more readily than their competition. There is a way for companies of any size to decrease their total cost of human capital management while maintaining or increasing their overall workforce quality.
We define the "human capital supply chain" as the business processes, technology and organizations responsible for planning, hiring and terminating a company's human capital. Human capital supply chains link business strategy, business performance, strategic workforce planning and staffing for improved corporate financial management and greater business success.
Here are the eight steps needed to implement a successful human capital management supply chain.
1. 30 Years of Manufacturing Supply Chain Experience
Before learning how you can implement a Human Capital Supply Chain (HCSC) management system, it is important to understand basics of HCSC.
Money usually flows one way in the HCSC. Corporations need to step up their efforts and optimize their human capital management supply chains. Money can be saved by corporations who apply manufacturing Supply Chain Management (SCM) practices to the HCSC.
Match workers with tasks that keep them optimally utilized. Resist making excuses and proactively invest in business process documentation and KPIs, in order to truly track, measure and manage the HCSC.
Orient the organization around key metrics and continuously improve the supply chain by acting on performance data that is monitored weekly and eventually daily.
2. Craft the Business Case for Human Capital Supply Chain Management (HCSCM)
Start by crafting a conceptual business case, which will demonstrate the feasibility of the HCSCM program. The most important financial number needed to estimate the business case is the total spend on human capital management.
Design the HCSCM program to fund the expensive, but necessary, automation efforts with the savings achieved through process and policy changes. Even though the ROI for implementing a HCSCM is quick and substantial, it is often difficult to get it approved because the costs and benefits are spread across the organization. Most often companies need the CEO to request and approve a conceptual business case for HCSCM in order to mobilize this strategic, cross-functional initiative.
KPIs and benchmarking data can be used to develop additional qualitative details about the ROI. Once KPIs are selected, and after baseline, current performance and benchmarking data is gathered, it is then possible to set achievable and measurable goals for the human capital management program. Establishing performance management processes help focus the whole HCSC on achieving goals.
3. Wrap Your Arms Around the Total Cost of Human Capital
It is the CFO's responsibility to have a team determine the company's total human capital spend. "Back of the envelope" calculations show that the company's spend on labor-based categories is a meaningful proportion of the organization's total purchases and that the potential for savings is staggering.
Capturing human capital spend is not easy and requires tedious data collection across the organizations and advanced payroll systems. Once the total human capital spend at a single point in time is known, put business practices, processes, and technology in place to track and manage the human capital management spend on an ongoing basis.
4. Engage the Stakeholders
The HR/procurement culture clash must be overcome in order to successfully implement the HCSC. Implementing a HCSC requires all of the key stakeholder's roles to change, and fear of change can prevent an organization from saving millions.
C-level sponsorship is required in order to get a HCSC program off the ground. High-level stakeholder roles must be strategically defined and may vary depending on corporate strategy and by worker type, geography, business unit, etc.
5. The Process of Human Capital Supply Chain Management
Designing a human capital management process is fundamental to business, and it's important to get your existing HCSC under control. Once an HCSCM process is in place, routinely analyze the performance and find ways to continually improve efficiency and cut costs.
Hiring companies must look at total cost across the end-to-end supply chain and not push costs from one process to another. Focus on developing deep relationships with a handful of suppliers, especially those that are relentless about driving cost out of the supply chain while increasing the quality of talent.
6. Tie the Technology Together
Companies that automate and integrate their end-to-end human capital management will be best positioned to accelerate their growth, especially as the economy recovers from a recession. Key technology such as applicant tracking software is critical and central to the HCSC because it is the link between the firm and the staffing suppliers.
Integrating the technology across the human capital management supply chain will reduce the time and cost of filling positions by eliminating duplicate data entry and its associated errors, substantially reducing manual reconciliation of data between systems and time wasted manually bridging workflows and hand-offs between systems.
7. Create a Strategic Workforce Plan
A strategic workforce plan drives the HCSC, so every company needs one. Getting started probably means hiring skill sets from outside of human resources.
A strategic workforce plan provides an overview of the current workforce, describes how the workforce is changing and what the plan is to solve skill shortages and surpluses. The human capital management plan needs to be tuned routinely to accommodate changes in demand, supply and feedback from the plan's implementers.
8. Partner with Strategic Human Capital Suppliers
Get to know all of your staffing software vendors and be clear about the value each supplier provides the organization.
Margin squeezing is a short-sighted approach and a good way to put suppliers out of business. Work with strategic suppliers to eliminate wasteful activities, streamline processes, and reduce the cost of the entire staffing and recruitment process.
Strategic supplier relationships decrease the total cost of human capital, decrease time to fill, and improve the quality of the workforce, which results in higher profits.
Contact eEmpACT today to learn how our staffing software solutions can increase efficiency and enhance your human capital management plan.
