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Human Resources: We need your help to optimize the labor supply chain.

December 12, 2011

As the topic of finding skilled workers to work at manufacturers continues around the world, leave it to China to push a solution forward. China’s Ministry of Education has announced the cancellation of majors at its colleges that have not found employment for more that 60% of its graduates for 2 consecutive years. I read this announcement recently in a Wall Street Journal Blog.

This will probably have the desired effect of pushing those on the edge of a decision between majors to the one with more job opportunities. I wonder though, how motivated will a student with a desire to study history be as they move through a civil engineering curriculum.

What the Ministry of Education has done is to put a “push” system in place. They are trying to forecast the demand for new hires and supply the correct student mix.

China is not alone in struggling with this problem. The U.S. is dealing with slack demand for investment bankers and consultants while skilled trade openings go unfilled. All the while students are taking on too much debt to obtain a degree that can’t produce enough value to pay the loan back once the degree or certificate is earned.

If I were to apply a couple of supply chain concepts to the education system, I would think about the following.

How can we change the system from a push to a pull? We are constantly making the wrong mix of students, ensuring too little employment for some and shortages (petroleum engineers and welders for example) of others.

Is it possible to shorten the lead time of education to improve the ability to respond to changes in demand for a specific degree? Four year degrees have been around for a long time. Is it really necessary to have that much time invested before a student can start delivering value to a company?

Are the risks and rewards in the labor supply chain in the right place?

Students must invest heavily with high uncertainty about their ability to earn a return on their investment. But their risk is mitigated heavily as they are able to take loans that do not look at career choice as an indicator of their ability to pay in the future.

Educational institution risk comes in sourcing students rather than ensuring employment. They also have the shortest ROI as they are paid before they even deliver their services.

Hiring companies have little control over the labor supply chain until a degree or certification is earned. So they are at the mercy of supply and demand for a resource that is critical to their success. But they contribute to this problem as well by releasing unneeded employees back into the market when production demand slackens.

I wish I had an answer in a neat package, but I don’t. What I do believe is this is a prime opportunity for HR departments to become supply chain experts just as their counterparts in Operations did as they improved inventory management over the last two decades.

The company needs HR expertise. If I were in an HR department today, I would immediately take the following actions:

  1. What are the specific skills required to do the job? Is a certification or degree needed or can a person begin work today as they finish their coursework?
  2. Reach out to local schools and invite them to talk to the hiring managers to collaborate on curriculums can be redefined to put students to work sooner.
  3. Begin holding open houses to the parents of high school children. Bring them into the company and show them that manufacturing has changed and jobs are available.
  4. Think about a more flexible work strategy that will allow your company to flex up and down with changing demand while limiting the swings of hiring and layoffs that disrupt the entire labor supply chain.

Accomplishing these tasks would resolve student debt issues, improve flexibility of the workforce and allow companies to hire the employees they need today without impacting the revenues of the educational system.

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