Right Sizing

Depending on the industry, the cost of salary and benefits absorb between 40 and 80 percent of total expenditures and holds the distinction of being the single largest annual expenditure.  As human resource professionals, we recognize that our greatest cost is also our greatest asset.  However, conventional as well as professional wisdom spends a considerable amount of time examining and pontificating on how this “cost” might be reduced, minimized, or even eliminated.  Beginning with Frederick W. Taylor, business started its successive progression through the next big thing for reducing costs while attempting to improve quality.  This progression led to continuous improvement, TQM, six sigma, and lean management becoming parts of the business lexicon. This desire to “right size” staff captures a more than 100-year concern with determining the right number of employees by balancing desired outcomes to desired costs.

Almost daily, the mainstream media reports on organizations reducing cost by adopting streamlined staffing models.  Although the desire to improve operations including reduce costs when feasible clearly relates to organizational success, method matters.  One of the great temptations of any leader is to forget that “right sizing” includes both desired costs and outcomes.  As customers, we typically judge an organization by outcomes and respond accordingly.  A recent example of cost outweighing outcomes occurred at your local Apple store (http://news.cnet.com/8301-13579_3-57494841-37/apple-admits-to-screwing-up-retail-staffing-levels-report-says/?part=rss&subj=news&tag=title)

As you look at your organization and attempt to determine how to “right size” your staffing model, what should you consider?

Capabilities – Although an average candidate may look like a good idea when considering cost alone, a less capable person may actually cost an organization more in the end.  The quality of the staff directly relates to how many people an organization needs to be successful.  A more productive, adaptive, and capable workforce negates the need for additional support and actually “do more with less.”

Best Practices – The other half of the equation pertains to the process, resource, and operations of the organization.   In essence, the quality of the resources and how aligned they are with the desired outcomes partially determines the level of staffing needed.  Efficient processes mean fewer people.

Adaptability – Ideally, human resources would possess some interchangeability.  As needs in the workplace change, employees could be reallocated instead of new people being hired.  In less adaptable organizations, improving processes and technology can even increase staffing instead of diminish it as the organization seeks to find new activities for long-term staff.

Planning – The level and quality of the workforce should be assessed and a plan developed to meet current and future needs.  If an organization leaves capabilities to chance, the lack of a planning reduces the chance of organizational success.  Moreover, rarely does an organization that fails to plan for its future workforce needs know the status of its workforce.

Training – A stagnate workforce fails as a resource.  A learning organization ensures that its human resources build on their strengths as well as gain new skills responsive to changes in the marketplace.  Training might be the first cut in a downturn, but the opportunity cost of the savings lasts for years.

Metrics – Effective management depends on being able to measure what goes in as well as what comes out.  The best way to assess the relationship between capabilities and results begins with measuring.

Making the Mix Work

Most of us have felt the economic downturn in one fashion or another.  The impact on employees has varied from low morale coupled with heightened stress and anxiety to outright loss of employment.  For most of us, this is the worst economic crisis we have experienced.  As the recession continues, employees who felt that the downturn will only a last a year or two are starting to realize that we find ourselves in a multi-year correction to the economy.  The combination of the severity and duration has led to higher levels of anxiety, stress, depression, and uncertainty.  Consequently, stress related physical and mental illnesses are manifesting more readily in the workplace.

It is hard to pick up a newspaper or other periodical without finding at least a small article on the impact of the downturn on the workforce.  What appear to be less covered are the changes that are occurring organizations outside of the financial realm.  Organizations like individuals under stress respond by attempting to minimize uncertainty, increase flexibility, and create alternatives.  If you ask an employee that is fearful of keeping his or her job what would diminish his or her anxiety, options are key.  If the person knows that he or she can leave their current employer and find complementary work, then the employee can better deal with the change.  Similarly, an organization as a living organism needs to know it has the potential to survive and better align itself with its environment.

What have we seen the last few years as organizations have evolved?

  • More acceptance of future change
  • More concentration in contractors
  • More hybrid staffing models

More Acceptance of Change

The idea of an unofficial contract between the employee and employer has been deteriorating for several decades.  This change has manifested in the increase in the average number of jobs that an employee holds as well as the diminishing loyalty shown by employees and organization alike.  The Bureau of Labor Statistics (BLS) has found that the typical worker has tenure of approximately four years.  As we move from possessing a fairly consistent workforce that remains with an organization for an extended period of time to one that constantly brings in new talent and loses others, we need structures, processes, and expectations that match that level of change.

More Concentration in Contractors

Even in the downturn, organizations still compete for specialized skills in the marketplace.  Moreover, as the economy recovers the best resources will be taken first.  Fluctuations in availability and quality make the difference between success and failure.  The need for more flexibility in times of greater scarcity, diminished capacity in human resources due to cost cutting, and higher levels of uncertainty all have increased the value of contract labor.  A higher level of acceptance of contractors enables the third change: hybrid staffing.

Figure 1: Example Hybrid Staffing Model

More Hybrid Staffing Models

Numerous futurists predict that the way we work is changing and will be dramatically different as little as 20 years in the future.  As we move toward more flexible and cost effective means of staffing, hybrid staffing models will become the norm.  Over time, organizations will employee less traditional employees and supplement with contractors, fixers, and project specialists.  Contractors will provide longer term resources, but will provide a more flexible solution than a traditional employee.  Fixers as a more cost effective solution than consultants will go from organization to organization working to address specific, yet critical needs preventing an organization from realizing its full potential.  Project specialists will make up project teams needed to implement new systems, processes, or products when an organization only needs those expertise for a finite period of time and recognizes of having the best and brightest available during implementation, but not retaining the resources after completion.

The move from the traditional approach to flexible and creative staffing arrangements will free organizations and employees alike.  However, we all will need to change the way we look at our value, position, and future.