Commentary: This is the second in a series of posts on operation management. The series takes an operational view of environmental conditions into account and focuses on sustainability through adaptability. Right now, we are looking at the basics; methods, manpower, materials/machinery, and money.
Core Operations Management: ManPower
Manpower is a expansive topic involving leadership and management, governmental regulations, proficiencies, extracting instutitional knowledge, leveraging intellectual capital for profit, and so much more. Manpower can be either expensed or capitialized. The tendency is to expense manpower leading to a generalized thought that manpower or labor is 'expendable' and readily replacable with another abled body. However, many companies realize that manpower is not so readily replacable as experience, training, and tradecraft knowledge are not easily resourced without inherent risk. Some organizations have attempted to develop Key Performance Indicators (KPI) in an attempt to quantify success or what it would take for success. The bottom line is that leveraging manpower is risky business. We will focus on training and skill for this post since that seems to be, in part, at the heart of the issue of developing or resourcing quality staff.
Strategy
Duties in the work place have become increasingly more skilled as technology permeates all aspects of business operations. The unskilled manpower used to dig a ditch has now become a licensed and skilled backhoe operator for example. Another example is one of the most advanced manufacturing plants in the world. Ford's Auto Manufacturing plant in Brazil requires highly skilled manpower not to build the vehicles but instead maintain the automation equipment. Thus, a persistent issue that many companies struggle with is that manpower is expensive to recruit and retain quality skilled members. Manpower is so expensive that companies use strategies that involve a combination of layoffs and other reductions in labor expenditures to free capital for other operations and projects. Thus, labor becomes a low cost source of capital as compared to bank loans, corporate bonds, and other capital resources. Usually, there is a financial analysis that compares risk in terms of the return on investment, ROI, and interest rates in order to select the lowest cost source of capital. The apparent paradox is that operations and projects require labor. Hence, the need for a strategy rather than just layoffs.
Companies may reduce the cost of manpower by seeking less expensive candidates. This also frees capital and maintains a ready workforce. One approach is to seek people with certifications and to promote from within, training their staff in lieu of seeking fully degreed professionals external to the organization. In operations management, this training/acquisition push tends to focus on certifications such as Six Sigma, TQM, CPIM, CSCP, SCRUM, PMP, and other like certifications that incorporate OM methods and processes. The benefit to certifications are that they are focused, require currency, and can be easily expensed off the books than more comprehensive long term training programs that career industry professionals would typically possess. Certifications tend towards a journeymen's approach to the tradecraft and are often cross-functionally proficient influencing multiple areas of a business. The degree of cross-functional focus varies based on the level of skill required in certain functional areas. People acquiring the certifications often enjoy increases in pay and the companies generally saved money in the short term over hiring fully degreed professional as well as have employees with heightened levels of loyalty and dedication.
Another strategy is to offload some task burdens to a new career field. Cetain career fields created technician career paths such as medical assistants or public safety officers. Other fields simply certified people in the ranks as in the case of information technology with mostly vendor certifications. The justification is usually at a cost savings, at least, in the beginning with an increase in a focused workforce. Hence, another strategy of creating alternate lower cost career paths.
Recruiting certified people in lieu of certifying internal employees can be veiwed the same as recruiting a fully degreed professional by the employer. Typically, the employer determines what he is willing to pay and places the mark on the wall. Candidates are reviewed above and below that mark. The employer then seeks the best candidate in relation to the mark on the wall. Candidates above the mark can be percieved as overqualified and candidates under the mark are typically percieved as not drawing top dollar. In short, there are a lot of perceptions and challenges to overcome when recruiting externally for both the employer and the candidate.
Degree Versus Certification
This brings to light the age old dilemma of degree versus certification. The general logic is that companies do not always require a fully degreed professional to perform some tasks and want to give opportunities to other people in their organizations. Therefore, they promote and train from within. However, this is not without risk. Organizations that promote almost wholly from within risk becoming stagnant and stovepiped. They often are inflexible and unresponsive to changing marketplace conditions. The thought in the organization often becomes polarized and resistant to change as is the stereotype for government work. One example is that several years ago a pharmaceutical company attempted to encourage senior citizens to take thier medication on schedule. This was a business issue as well as a human issue. Taking pills on time meant increases in sales for the company. The solutions the staff developed were emails, text messages, and timers on the bottles. However, seniors did not use email or texting that much and timers were ineffective if the senior was not checking the bottle. The problem was not resolved until fresh thinking was recruited. The solution that worked was to install electronic gambling caps on the bottles. The bottle would release a new number or letter as part of a lottery when the medication was to be taken. The senior would obtain this release, place it in a website, then see if they won prizes, money, or refills. The idea was generated by recruiting externally for a cross-functional professional in social behavior and marketing. Thus, the conundrum is to determine the best mix centering on a balance between a high degree of risk versus a high degree of stagnation. This is a uniquely organizational decision with some organizations using the 80-20 rule; 80% internal promotions and 20% external recruits. Many of the new recruits in larger organizations fail to recognize that they are actually being hired based on a succession plan in which they must show potential for a position that may be two or three promotions away. In the current economy, as of November 2011, most employers seem to focus on the immediate than succession plans.
Compounding Issues
A more recent complication is the consolidation of job duties. In the last several years, layoffs released scores of people; yet the duties remained in place often being consolidated into one or more other positions. Later these other positions became vacant for various reasons. Companies found themselves searching for candidates to fill these newly condensed positions only to discover that in the market place people had not developed the cross-functional skills in the manner which they consolidated duties. There was a gap between the talent pool and positions available with little to no discernible standard. This was often seen as employers interviewing people for positions they could not fully define in a way that the market could fill. This created a problem of high unemployment and unable to find skilled people to fill the cross-functional positions. Operations managers had to make choices between risk of hiring and training candidates versus not filling the position that further exasperates the issue when those duties are consolidated into other positions. There are alternatives to looking for cross-functional professionals. One apporach is to seek someone who is a generalist and accustomed to a variety of duties. Generalist usually do not have tremendous depth in any one field but they do have a breadth of experience across most aspects of the organization making them good candidates to be applied in many ways. Another approach is to define a common position, recruit for it, then slowly add the cross-functional duties based on assessed abilitiy to handle them.
Conclusion
All these issues discussed point to a growing need for stronger manpower strategies that involve cross-functional skill sets, upward mobility, and creativity. Organizational design should include expanding and contracting labor requirements based on common marketplace skillsets. Varitability should be handled by internal staff who possess the corporate knowledge and loyalty to execute properly. Hiring external professionals either degreed or certified or someone who has both should be considered not as overhead but an investment. In doing so, the position should be dollarized in terms of cost savings, increases in profitability or revenue, and/or in terms of organizational value. Sometimes these metrics are difficult to determine but if possible are excellent indicators of a contributing member. KPIs were one attempt at defining metrics.
If measuring the performance of a position by dollarizing or in other organizational value terms, the member must be given control of the factors influencing those metrics. This is often difficult for closely held business owners to permit as they generally like to retain control of the details. Nonetheless, this is determined by the kind of leadership in the organization. Inspirational and charismatic leaders coach their staff to success often aspiring to principles and goals.
Comment: I have brushed the surface on this topic as there is much more to manpower. The next post will deal with materials and machinery as we move through some of the basics. I will return to manpower later to discuss intellectual capital and organizational knowledge.
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