Managing Employees Like Widgets

May 6, 2005

David Southgate

Through a labor supply chain initiative mandated at the end of 2003 by CEO Sam Palmisano IBM saved $500 million last year. This was due, in no small part, by the three- to five-percent boost in the utilization of its service professionals.

In the process, IBM avoided hiring an additional 13,000 employees, due to labor management efficiencies, said Harold Blake, director of Labor Optimization at IBM Integrated Supply Chain in East Fishkill, New York.

"The thinking was that if we could start looking at our resources like we're looking at our parts and manage them in similar kinds of ways, it would provide us with a significant competitive advantage in the marketplace," said Blake.

While labor supply chain management (LSCM) may be impractical for all but the largest enterprises, IBM's pioneering project paves the way for future invention, according to analyst Bruce Richardson of AMR Research.

Before its pioneering project, IBM had an ad-hoc way of tracking employee skills across the enterprise. Each individual division devised its own methods. So while IBM knew where ever resistor, every capacitor, and every nickel part existed in the supply chain, the same was not true for its 360,000-person global workforce.

IBM had no way of tracking employee skills and linking them back to demand across the enterprise.

Tower of Babel

To understand the "supply" side of the labor force and begin to remedy this situation, IBM first needed a common and consistent taxonomy of employee jobs and skills to be used across all company divisions, staffing providers, and contractors.

This taxonomy allowed employees to describe their skills along the following lines:

  • within a primary job category;
  • within a secondary job category;
  • within a specific job role ; and
  • within the specific skills that support that job role, whether they be related to leadership or technical skills.
  • By virtue of it's workforce diversity, IBM had to become very domain-specific with the taxonomies, said Raghu Santanam, professor of information systems and director of Research for the Center for Advancing Business Information Technology at Arizona State University.

    "There are some standards with HR which help you define what your employees skills and capabilities are, but that's within a particular domain," said Santanam. So, IBM had to create uniform taxonomies for multiple labor domains.

    To aid with labor supply and demand planning, IBM made the taxonomies available across all business units, to all job candidates of IBM, to all contractors, and to IBM's staffing vendors in each of its key global geographies.

    Old Tool, New Uses

    Then IBM modified a workflow tool originally developed to manage the routing of travel and expense invoices, providing managers with oversight into which employees had complied with a request to fill out the employee taxonomy with job and skill information.

    As employees gain new expertise, they update their own profile on the intranet. To date, 90-to-95 percent of the Global Services and Software group employees have input their information into the taxonomies. "By end of year, the expectation is to be 90 to 95 percent all across the board," said Blake.

    The result of the taxonomy project, run through WebSphere and DB2, is that IBM can now see its labor force from a supply-and-demand point of view and can match available skills with projects across the different lines of business.

    Another benefit is that IBM can begin to manage its employee educational dollars more effectively; to proactively educate and train workers based on an analysis of the gaps in available skills compared to those in demand and those that will be in demand, said Blake.


    Supply chain management principles as applied to the labor pool aren't just a matter of plug and play, however, according to Santanam.

    "Employees aren't like widgets. You can't just plug a person into a project across the world without talking to them about their career aspirations and family situation," said Santanam.

    Information sharing between the various suppliers of talent is also critical, which requires a real openness and human trust that competitive information won't be used to nefarious ends.

    Continued pressure to manage growth and maintain billing fees, may push more companies into some form of LSCM. Early adopters are likely to be professional services firms and white collar employers, said AMR's Richardson.

    "Right now, a lot of this stuff is being developed in spreadsheets. There's no such thing as a labor ERP system," he said. "You'll probably need some enhancements to your HR systems in terms of employee management and an employee database."

    A word of caution, however, permeates these initiatives: you have to be wary of privacy concerns and there's a potential for depersonalization if employees perceive a system, not a person, is going to determine if they work in Topeka or Timbuktu.


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