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New Book by Boudreau Links Inventory Techniques to Workforce Management

Thanks to our board member David Creelman for today’s guest post.  Readers who’d like to learn more about technology for workforce management analytics can find more information here.

USC professor John Boudreau has a new book called Re-tooling HR. In it he shares ways for HR to draw on analytical tools used in other parts of the business. Whereas most work on talent management focuses on the managerial elite, the analytical tools Boudreau discusses are often most useful in the hourly workforce where you have a large population of workers.

One set of analytical tools Boudreau thinks HR leaders can learn from is inventory management. The recruiting function tends to focus on filling vacancies with good candidates as quickly a possible. Curiously, that’s not how the inventory managers approach the problem of ‘vacancies’ in materials. Inventory managers look at the cost of holding stock, the opportunity cost of shortages, the economic order quantity and so on then optimize stock levels. For some goods it may make sense to have ‘too much’ for other it’s cheaper to put up with occasional stock outs. However, it is unusual for HR to think this way; to think for example that we might want to have 5% too many maintenance technicians on the grounds that the costs of being short-handed are greater than the cost of ‘excess’ employees.   Conversely it maybe that it’s worth putting up with too few shippers/receivers and hire a bunch at one time to minimize the cost of recruiting and training.

Boudreau is not making specific recommendations, merely pointing out that there are well-developed analytical tools that can cause us to think differently about people management.  Not only can this improve workforce management, it can be a good way for HR to connect to line management by using analytical tools they are familiar with.

August 2010 Retail Labor Index

Kronos released the newest Retail Labor Index data today.   Following is a summary analysis from Dr. Robert Yerex, Chief Economist at Kronos.

The Kronos Retail Labor Index was up slightly for the month of July, to a level of 3.63. This means that out of 10,000 applicants, 363 are being hired. Both hirings and applications were down (seasonally adjusted) from June, with application rates continuing to show significant volatility, even after being seasonally adjusted.

Much of this is likely due to great uncertainty in the job market. Those that are unemployed often seek new work diligently for several months and then become frustrated and stop looking. Good news as to economic prospects will often bring these individuals back into the search for new positions. Meanwhile, when economic news is negative, those with jobs are less likely to seek other work. This has been reflected in the retention rate which has been positive for the last 24 months. When the retention rate is positive, it means that employees are more likely to stay on the job than they were the previous year.

Consumer spending remains well off the levels seen in mid-2008, and seems unlikely to return within the next several years. There are four important drivers for increasing consumer spending: withdrawals from savings; increases in real disposable income; realization of real capital gains on assets that are sold; and use of credit, primarily revolving consumer credit in the form of credit cards and lines of credit. Currently, the trends in all four of these are moving against increased spending: the savings rate is increasing; real disposable income has not shown a measurable increase in the past few years; asset values continue to decline; and total outstanding revolving consumer credit is at its lowest level since March 2006 and will likely continue to drop, possibly to levels not seen since the 1990s.

An additional important factor is consumer confidence, which also remains low. With all these factors dampening consumer spending and consumption, retailers are unlikely to increase hiring rates anytime soon.