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Leading Edge

Published March 2010

HR: Work for Free

  Dr. Jac Fitz-enz

Tomorrow morning, go into your boss's office and say, henceforth, you are going to work for free. After your boss stops laughing, tell him or her that you are going to provide savings, verified by your controller, in excess of your pay and benefits. Here is a real-life example of how it can be done.

Curtis is a member of our extended family. He is a 30-something controller for a paper packaging distributor. When Curtis interviewed for the job, he told the CFO he was going to save the company at least as much as they paid him. The controller does not make or sell a product. He manages the supply chain costs of physical assets, just as you manage the supply chain of human capital assets.

Just in Time

By reducing inventory to a few days and taking deliveries from his suppliers on a schedule that matches his delivery cycle, Curtis has been able to save his company in excess of his six-figure annual cost. Additionally, by offering his salespeople shipments just when they need them, the sales force is able to provide better service and command higher prices. Customers will pay for just-in-time (JIT) delivery because they don't have high inventory costs either. Curtis' company has cut operating cost, increased sales prices and gained new customers, thus the company's controllership is now a free function.

You likely are familiar with JIT supply chain principles. If not, JIT means you don't incur the cost of physical inventory until right when you need it. This was one of the ways Japanese manufacturers took market share away from American firms 40 years ago. This applies to human resources and the work-for-free principle because companies pay the cost of carrying human skills on a daily basis. Every person on the payroll is a cost. Here is how you cut sustainable people costs and increase productivity.

Staffing

Assume a given job pays $20 per hour fully burdened. Every day that person is on payroll, the company incurs approximately a $160 cost. No job has a constant workload. There are times of the day, week or year when that job is idle, but the costs carry on. Seasonal cycles are the perfect example.

The most obvious example of JIT HR is excess permanent staff. When everyone is desperately trying to cut costs, meet with your line managers and see if you can't find a way to replace permanent employees with contingent workers or outsource a function. Set up a pool of contingents. Put someone in staffing at the same time as the morning shift of the factory. When a worker calls in sick, the supervisor calls staffing, staffing calls a contingent worker, and within two hours, the line is fully staffed with performers, not idlers. Too easy, you say? Try this one.

In many companies, employees have to wait until a training program is offered in a skill area they want to learn. With a self-directed, computer- or paper-based program, ambitious employees can build skills any time. Now they are qualified to step in when someone above them leaves. This cuts the learning curve, which typically takes six months, to a matter of weeks. Every day the person performs at a higher level is money gained by the company. Work with line managers and come up with a daily value they agree to. On a graduated ascending scale, every day the company is saving money or increasing productivity by an accepted amount.

Employee Relations

Many years ago, my company was experiencing a high level of employee complaints, filings and lawsuits from field personnel. The direct costs of this problem were well into six figures, and the indirect costs of impaired morale and lower performance were beyond calculation. The solution was to put an employee relations (ER) person in the field who would travel as needed in her region to avoid or solve these problems. It took a bit of persuasion to convince the CFO to agree to the cost. Within one year, the problems dropped more than 90 percent. Direct cost savings were five times the cost of the ER person. Morale and productivity visibly improved to the point where we didn't have to calculate it, and management saw HR as a contributor, not a central cost they had to cover.     

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