An Introduction

Corporate leaders who are able to react to market improvements with agility are best positioned to hire the best human capital faster than their competition. Human Capital Supply Chains explains how companies can link their strategic workforce planning and staffing functions more tightly to their business planning functions to optimize workforce productivity and decrease the total cost of human capital, while maintaining or increasing the overall quality of their workforce.

This book was written in the midst of the 2009 world recession. According to the Bureau of Labor Statistics, since the start of the recession in December 2007, the number of

unemployed persons has risen by 7.0 million to 14.5 million, and the unemployment rate has grown by 4.5 percent-age points to 9.5 percent (Bureau of Labor Statistics, 2009). Websites like Forbes’ Layoff Tracker display a running list of companies that have laid-off tens, hundreds or thousands of workers since the recession began. Certainly, if CEOs had a more fluid method to relate slowing business performance to a decreased need for human capital in real-time they would have gradually ramped down their staffing levels rather than decreased them so abruptly and publically.  Human Capital Supply Chains provides a method for companies to calibrate and fine tune their workforce, quickly responding to changing market conditions in small steps rather than in painful mass layoffs or mass rehire campaigns where workforce quality is likely to suffer.

This book is written for several groups of readers: for executives of larger corporations who are looking for new ways to drive cost out of their business while gaining competitive advantage; for heads of procurement who want to apply their expertise to better manage their company’s total cost of human capital; for heads of human resources (HR) and recruiting who want to hone their staffing practices to improve workforce quality and productivity. Staffing firms, recruiting agencies, consultancies, outsourcers, software vendors and third-party service providers who are looking to develop strategic relationships with hiring companies will be interested to understand how they become more integrated with the emerging human capital supply chain.

We define the human capital supply chain as the business processes, technology and organizations that are responsible for planning, hiring, on-boarding and off-boarding a company’s human capital. Human capital supply chains link business strategy, business performance, strategic workforce planning, staffing, on-boarding and off-boarding for improved corporate financial management and greater business success.

Human capital is an umbrella term that refers to all of the people that provide services and work product to an organization and include: part and full time employees, independent contractors, consultants, business services providers and outsourcers. In the language of procurement, we include all labor-based costs.

While we decided on the term human capital, we struggled with the word choice. We considered several synonyms – person, laborer, worker, employee, human resource and talent. Talent is the most commonly used term, but generally refers to an individual employee and this focus is too narrow for our purposes.

In Human Capital Supply Chains we ask corporations to consider all of the types of human capital they use and apply supply chain concepts to their entire workforce. Workforce analysis and management almost always defaults to a focus on permanent, full-time workers, but this traditional worker type represents a shrinking portion of a company’s human capital. The use of flexible workers and workforces, especially temps and outsourcers, is on the rise. Most firms lack visibility into the total cost of human capital because compensation for permanent employees is managed one way and the management of flexible workers, like temps, consulting firms and outsourcers follows a separate process. In order to ensure that a firm has the right talent at the right time in the right place at the right price across the organization, staffing must be managed holistically. 

Human resources experts have been encouraging corporate leaders to pay more personal attention to engaging and retaining their workforce for decades. In Human Capital Supply Chains, we encourage leaders to apply more personal attention to optimizing their workforce for an additional reason. Once the total cost of human capital is fully visible, we find in our knowledge-based economy that the cost of the workforce is more often a firm’s greatest expense, so reducing the total cost of human capital is arguably the best way to decrease overall operating costs.

Applying supply chain management concepts to manufacturing and other industries has resulted in a reduction in the cost of goods and services produced while increasing quality.  Applying supply chain management concepts and skills to optimize human capital is an obvious idea, yet little has been written on the topic, making it difficult to understand how companies might actually apply these concepts to improve business performance. Our hope is that after reading this book, you will not only have a deeper and more detailed understanding of  key human capital supply chain concepts, but you will be so motivated to achieve the potential benefits, you will launch your own program of work that defines and manages your own human capital supply chain.

Human capital supply chain leaders, such as Hewlett-Packard and IBM, are continuously improving specific human capital supply chain areas. Optimizing each area of the supply chain yields massive benefits, but we suggest looking at the supply chain as a whole for two reasons – one, so problems and costs are not inadvertently pushed to another part of the chain and two, so additional gains can be achieved by addressing the whole system as a sum of its parts.
Each chapter provides an overview of a core topic, covers advancements in that subject area and provides ideas on how to utilize the concept within your organization. Each chapter begins with chapter objectives and ends in a summary of key messages which can be quickly skimmed.

Chapter 1 defines what we mean by the term human capital supply chain and serves as an introduction and executive summary of the book.

Chapter 2, 30 Years of Manufacturing Lessons Learned, acts as a primer for readers who have had limited exposure to supply chain management concepts. We’ve done our best to select key themes that can be readily applied to the human capital supply chain.

Corporate leaders must understand the relative benefits of new initiatives so that they can prioritize the effort. Chapter 3 helps leaders build the business justification for defining and managing the human capital supply chain.

Understanding your company’s total spend on human capital is a key input to the business justification and the first step of any human capital supply chain management program.  Chapter 4 explains how to get your arms around both your internal (wages, benefits and taxes) and external (accounts payable) human capital costs. Once companies understand how much they are truly spending on labor their C-level management becomes much more engaged in human capital management.

Establishing a human capital supply chain management program requires a major change management effort for HR, procurement and senior leadership. Chapter 5 describes the changing role of each stakeholder group as they learn to speak a shared language, utilize each other’s strengths and unify their human capital goals.

Chapter 6 describes the end-to-end human capital supply chain management business process. We have tried to design a holistic process that builds on existing, somewhat disjointed business functions. We encourage you to start with this example and tailor it to your own organization.
Automating the end-to-end business process is a common way to reduce costs and speed turnaround time, both of which are important to the human capital supply chain. Chapter 7 describes the various technologies that are inherent to the human capital supply chain and explains how they might be connected to enable real-time measurement and management of human capital.

Strategic workforce planning links the business strategy and the workforce, so this quickly developing corporate function is critical to a successful human capital supply chain. Chapter 8 provides an overview and recent advancements in this area.

Chapter 9 describes the changing role and increasing value of staffing suppliers and how to transform these relationships into strategic partnerships in order to best enable human capital supply chain goals.

To help you get started on your human capital supply chain management program, we discuss a handful of proven approaches to getting started in Chapter 10.

We have been intrigued with the idea of human capital supply chains for several years. This book is based on our decades of experience working with and consulting to very large staffing and recruiting organizations. Our book discusses a very broad range of concepts that we have relied heavily on our background as industry generalists. We are grateful to the practitioners and academics that are experts in their area and have offered their input and insights.
We are sure that many of you have experiences and knowledge that would improve this book. In subsequent editions, we would like to include more examples and case studies from our readers. We encourage you to share your feedback and human capital supply chain experiences on our website www.humancapitalsupplychain.com.