Managing Employees Like Widgets

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The dot.com era may be over but the hangover from hiring and firing so many employees, so quickly still lingers. By applying some SCM principles to your labor pool you can avoid this boom/bust cycle in the future.

Through a labor supply chain initiative mandated at the end of 2003 by CEO Sam Palmisano IBM saved $500 million last year. This was due, in no small part, by the three to five percent boost in the utilization of its service professionals.

In the process, IBM avoided hiring an additional 13,000 employees, due to labor management efficiencies, said Harold Blake, director of Labor Optimization at IBM Integrated Supply Chain in East Fishkill, New York.

”The thinking was that if we could start looking at our resources like we’re looking at our parts and manage them in similar kinds of ways, it would provide us with a significant competitive advantage in the marketplace,” said Blake.

While labor supply chain management (LSCM) may be impractical for all but the largest enterprises, IBM’s pioneering project paves the way for future invention, according to analyst Bruce Richardson of AMR Research.

Before its pioneering project, IBM had an ad-hoc way of tracking employee skills across the enterprise. Each individual division devised its own methods. So while IBM knew where every resistor, every capacitor, and every nickel part existed in the supply chain, the same was not true for its 360,000-person global workforce.

IBM had no way of tracking employee skills and linking them back to demand across the enterprise.

Tower of Babel

To understand the ”supply” side of the labor force and begin to remedy this situation, IBM first needed a common and consistent taxonomy of employee jobs and skills to be used across all company divisions, staffing providers, and contractors.

This taxonomy allowed employees to describe their skills along the following lines:

within a primary job category;
within a secondary job category;
within a specific job role, and
within the specific skills that support that job role, whether they be related to leadership or technical skills.
By virtue of it’s workforce diversity, IBM had to become very domain-specific with the taxonomies, said Raghu Santanam, professor of information systems and director of Research for the Center for Advancing Business Information Technology at Arizona State University.

”There are some standards with HR which help you define what your employees’ skills and capabilities are, but that’s within a particular domain,” said Santanam. So, IBM had to create uniform taxonomies for multiple labor domains.

To aid with labor supply and demand planning, IBM made the taxonomies available across all business units, to all job candidates of IBM, to all contractors, and to IBM’s staffing vendors in each of its key global geographies.

Old Tool, New Uses

Then IBM modified a workflow tool originally developed to manage the routing of travel and expense invoices, providing managers with oversight into which employees had complied with a request to fill out the employee taxonomy with job and skill information.

As employees gain new expertise, they update their own profile on the intranet. To date, 90 to 95 percent of the Global Services and Software group employees have input their information into the taxonomies. ”By end of year, the expectation is to be 90 to 95 percent all across the board,” said Blake.

This article was first published on CIOupdate.com. To read the full article, click here.