Applying the 80/20 rule through taking an inventory approach to human capital means that organizational success probably depends disproportionately on a vital subset of employees. That’s the premise adopted by an interesting article published recently in the US. It maintains that applying the principles of inventory management can “retool” traditional HR numbers like turnover rates, hiring costs, and yield ratios to reveal opportunities to optimize the organisation and its people.
The article uses McDonald’s as an example, quoting the, by now, familiar tale of how it invited a university study of the performance of 400 of its UK restaurants and found customer satisfaction levels to be 20% higher in outlets that employed kitchen staff and managers over age 60. The result was attributed to the older workers’ additional experience, work ethic, and face-to-face customer relations skills, along with their influence on younger workers.
The interesting aspect of this article is that it goes on to demonstrate that it’s not a simple matter of “more is better” in terms of older employees. Apparently further analysis undertaken by McDonald’s revealed that the positive effect peaks at about three older workers on a crew and levels off after that.
The article goes on to make the point that in inventory terms McDonald’s should treat older workers differently from younger workers even if younger and older workers perform at the same level. It maintains that the inventory of older workers is “like the inventory of a rare and vital ingredient or product component, with the same management implications”.
It concludes: “Traditional employee turnover rates would show that vacancies can be filled more inexpensively and quickly using younger workers. That is the opposite of what inventory analysis reveals, because it misses the 80-20 principle. McDonald’s should manage its inventory of older workers with longer lead times, larger investments in recruitment, a higher tolerance for surpluses, and more urgency about shortages. Older workers in one store should be inventory for other stores, avoiding imbalances and keeping the numbers at about three per store”.
Food for thought?