Most executives understand the important roles that recruiting and training play in the overall health of their company’s workforce. But fewer have a good grasp of the comprehensive nature of the workforce supply chain. In particular, many companies fail to take into account the cost incurred at each link of the chain. As a result, their personnel strategies fall short and they are unable to halt the steady loss of skilled workers through attrition.

An incomplete view of the workforce supply chain gives rise to innumerable challenges and dilemmas:

  • How to combat the loss of organizational knowledge through employee retirements and departures.
  • Whether to recruit green staff and train them over time, or pay a premium for more-qualified and experienced individuals.
  • How to successfully manage the relationship with a labor union while implementing a workforce strategy that significantly changes the culture of the organization.
  • How to measure the success of workforce programs.
  • How to stop thinking of the development/implementation of a workforce strategy as a cost, and begin thinking of it as an investment with a desired return.

Familiarity with all nodes on the workforce supply chain makes it possible to understand better their dynamic interplay and how each relates to overall operations. By isolating these relationships and realizing that their relative importance is constantly shifting, management puts itself in position to develop optimal workforce strategies: those that map a steady path toward heightened efficiency and profitability.

Workforce supply chain elements

The three primary elements of the workforce supply chain are recruiting, development, and retention. But within these broad categories, there are many nuances and interrelationships that are vital to understand.

Recruiting. Recruiting is all about getting people through the door. Recruiters must cast a wide net across college campuses, high schools, job fairs, headhunters, online resources, and more. But they can’t simply target one type of recruit as a panacea. Entry-level hires, for example, may be cheaper in the short term, but they cannot compensate for the loss of several valuable staffers at a critical installation. Similarly, pursuing top talent exclusively can incur a hefty financial burden.

As a result, compensation strategies must be part of any determination of the right mix of green and grizzled new hires. In most industries, there is indeed a sweet spot for relating experience to cost. One company, for example, targeted individuals a notch or two above entry level. Although it had to pay these folks a bit more than inexperienced staff, the firm gained markedly in the long run from shortened qualification periods and reduced training costs.

Development. Once new staff have been hired, they must be made capable of doing their jobs well and contributing to the achievement of corporate goals. The need to create competence isn’t limited to new hires; all employees need development to enhance their skill sets and competency levels.

Development has many facets, but training is among the more important because it effects knowledge transfer. Unfortunately, training quality is poor at many companies. Even with a first-rate recruiting organization, a company can falter badly if new hires aren’t developed correctly. They must be taught the company’s business and culture as well as the technological fundamentals of their position. Veteran staffers also require training, to hone their skills and acquire new ones. Both types of training programs have proven most effective and valuable when based on corporate metrics of organizational efficiency.

Personnel qualification is another integral part of development. Having a probation period is the time-honored way of qualifying personnel to work in an organization. Sadly, it is rarely a well-managed process, and in too many companies it is conducted in an overly casual manner. Personnel qualification should be made a formal process and used to achieve its intended purpose: improving productivity.

Retention. Just as all new hires immediately move into development, sooner or later all employees reach the retention node on the workforce supply chain. There are always going to be individuals the company does not want to lose. Their experience or know-how would be hard to replace and the consequences of their departure could be dire. Accordingly, it is important to target retention efforts at those with specific skill sets and at particular age groups.

Understand, however, that retention cannot function in isolation. Retention tactics must work hand in glove with knowledge transfer, recruitment, and other points on the workforce supply chain. For example, a small increase in the quality of new recruits can mean more rapid development of vital resources to replace veteran staff.

Capturing knowledge

Although knowledge capture is vital to development, it is not actually part of that process. As shown in the figure, it sits above the development box and feeds vital know-how into it. After all, if skills are not captured in written form and made easily available, how can they be passed on to others?

Know-it-all. Knowledge must be captured in a permanent form in order to be helpful to an organization. Source: Interliance Management Consulting

Many companies spend resources to capture knowledge purely as a means of preventing valuable information from walking out the door with a job change or retirement. That is a limited view. Attempting to pick someone’s brain during their last days on the job is a case of too little, too late. Ideally, a process should be in place for recording employee knowledge and skills on an ongoing basis.

Similarly, knowledge capture cannot be indiscriminate. Someone’s departure should not automatically set in motion anything more than an exit interview, because some of the knowledge captured may be incorrect. The need to capture knowledge should be determined by the efficiency of the exiting employee’s department. Though it is important to capture knowledge from profitable divisions, it is equally vital to quarantine practices from weaker ones. Any know-how captured from the latter should be considered suspect at best.

Optimizing business processes

Another outside-the-box aspect of workforce management is business process optimization. As the figure shows, its box sits above retention, whence it feeds knowledge capture directly, and development and retention indirectly.

Clearly, if a company’s business processes are flawed, knowledge capture and knowledge transfer will be ineffective. Recruitment resources will be squandered and attrition rates will stubbornly resist all efforts to lower them. Process optimization, then, plays a fundamental role across the workforce supply chain.

The wrong thing to do, however, is to try to optimize all processes in one mega-project. That can be prohibitively expensive and puts the organization under a heavy administrative load. What works better is to target optimization efforts at areas with the most broken processes. When optimization is prioritized according to the operational needs of the company, it really comes into its own as a powerful workforce management tool.

Strategic shortfalls

Often, one or more of the workforce supply chain elements discussed here are neglected or omitted entirely by companies suffering from personnel stress. Typically, such organizations have some sort of strategy in place to address workforce needs, but it is incomplete or flawed. The acid test of such a strategy is whether it benefits the health of the organization as a whole. If personnel, efficiency, and profitability continue to be problematic, it’s clear that the strategy needs to be retooled.

Some strategic workforce plans, for example, are overly long-term. They include grand visions, for example, partnering with colleges to promote engineering skills nationwide. Obviously, an initiative like that is inappropriate for a company in danger of going belly-up next year if it doesn’t recruit operators now. However, workforce strategies also can be too short-term—directed at filling immediate job openings, say, without addressing the aging-workforce issue.

The common problem with these strategies is that they cannot be executed within existing corporate silos of responsibility. All too often, management simply demands that Human Resources come up with a remedy for a critical personnel problem. HR responds by conducting an attrition analysis and presenting management with the findings and a suggested solution. Usually, this approach fails because HR is incapable of solving the problem alone. In reality, the personnel problem is a companywide issue that affects management, operations, quality control, and other business processes and units.

—Brad Kamph is president of Interliance Management Consulting (, a developer of strategies for optimizing workforce supply chains from recruitment through development and retention.