Building a Better Workforce

What technology can (and can't) do to help companies optimize their most valuable asset.

Fifty years ago, a man wrote to Look magazine columnist Norman Vincent Peale, asking, “What should a person do who is unhappy and bored in his job after twenty years, but who earns a nice salary and hasn’t the nerve to leave? He’ll never go any higher in salary and position, but will always have a job.”

In the half-century since, many aspects of the employer-employee relationship have changed — noticeably the assumption of guaranteed employment. But boredom and unhappiness have not gone out of style, nor have companies managed to achieve perfect alignment between corporate strategy and the day-to-day activities of their workers. There remains only a tenuous connection between pay and performance, companies routinely lay off valuable workers and then spend large sums to recruit less-capable employees, and the incessant labeling of the workforce as a company’s most-valuable asset seems wholly at odds with the scant efforts most companies make to optimize it.

Now, however, a number of people in industry, academia, and consulting say that companies are starting to heed their own rhetoric regarding those valuable employees. With costs already cut to the bone, a renewed focus on growth, concern that demographic trends may result in a shortage of talent, and a greater appreciation of the efficiencies that can now be brought to bear, some companies are pursuing a range of “workforce-optimization” strategies.

Often described as “the right person in the right place at the right time at the right price,” workforce optimization combines managerial discipline with newer forms of information technology to produce, in theory, everything from perfectly staffed assembly lines to efficiently deployed consultants to well-crafted succession plans. At its most basic, it builds on earlier time-keeping and attendance systems in order to improve staff deployment. At its most sophisticated, it is essentially synonymous with human-capital management (HCM), a “full life cycle” approach to employees that encompasses everything from recruitment and hiring through training, career development, and compensation. While the ultimate goal — greater productivity and efficiency — is certainly in a company’s best interest, many facets of workforce optimization are explicitly designed to improve the career prospects and job satisfaction of employees.

But the man who wrote to Peale 50 years ago wasn’t simply born too soon, since many of his grievances remain valid today. What might be called the “people paradox” (employees are simultaneously essential and expendable) bedevils many companies, in part because no single executive or department truly “owns” the workforce. When asked, “Who takes primary responsibility for managing and assessing workforce performance?” the CFOs we surveyed were divided (see “Survey Says“). An almost equal number opted for either line management or senior management, and nearly as many said responsibility is shared between the two.

More tellingly, when we asked CFOs where they would focus attention if they wanted to increase the value their companies derive from their workforces, two-thirds cited employee training. Yet when we asked what drives employee effectiveness and productivity, only one in five CFOs pointed to formal on-the-job training. The most common answer to that question, given by 60 percent of respondents, was compensation and other rewards, but only 22 percent said that more-generous compensation and benefits were key to increasing the value of the workforce.

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