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Get ready for just-in-time staffing.

Faced with labor shortages and cyclical demand for their products, some companies are turning to flexible staffing--which cuts costs and ensures just the right number of highly skilled workers to get the job done.

For any executive who can look past the near-term troubles currently afflicting the world's major economies, the 1990s are heady times. Few periods have offered such unbridled potential. As nations from Eastern Europe to Latin America abandon central planning for free-market economies, they create vast opportunities for business to supply goods and services to their heretofore closed markets. What's more, the impending union of the European Economic Community will spawn a huge, far less restricted market for a broad range of goods and services.

North American business--particularly with the successful negotiation of the North American Free Trade Agreement--is poised to ride the crest of rising economic opportunities throughout the world.

However, success won't come easily. The global battle for market share will be won by companies that can deliver quality products and services at the best prices.

For several years, corporate managers have been repositioning their companies to accomplish such a task. Fixed costs have been pruned, and the largest one of all--human resources--is no exception. After downsizing, "right-sizing," and eliminating superfluous functions, North American companies have found the optimal staffing levels at which to operate: the "least common denominator."

This core staffing element is augmented, as changing or cyclical business needs dictate, by a trained and highly skilled supplementary work force that is employed on a flexible basis. Ideally, at any one time, a company should have enough workers on hand to operate the business, with no idle employees or frequent shrinking and swelling of staff.

This approach, often called "flexible staffing" or "just-in-time labor," not only enables companies to cope efficiently with today's evolving business needs, but also helps them prepare for what promises to be tomorrow's labor shortage.

Labor shortage? With national unemployment near an eight-year high, such a thought may seem like heresy. But shortages already exist in some parts of the nation and in certain disciplines. According to a recent survey, two in five North American companies claim to be affected by understaffing; in many instances, worker shortages were termed "severe."


A dearth of employees with suitable workplace literacy skills compounds these labor shortages and erodes productivity. Today, employers interview six applicants to find one qualified employee, according to a report by the National Association of Manufacturers. One-quarter of these companies said they cannot improve product quality because employees were not capable of learning appropriate skills.

Once confined to highly technical professions, the skills shortage is now manifesting itself in an ever-broadening spectrum of industries and services. And the problem will be exacerbated by a changing work force and a resurgent economy.

At the peak of the eight-year economic expansion, U.S. non-farm employment totaled 111.3 million, and worker shortages were rampant. As of October 1992, non-farm employment was 108.4 million. Even modest job creation--coupled over the next 15 years with a 30 percent drop in the number of new entrants to the work force--could easily trigger the kind of labor shortages that plagued so many industries in the late 1980s.

But flexible staffing can defuse this potential time bomb, enabling companies to efficiently deploy a shrinking skilled work force and to cope with fluctuations in their businesses.

For example, due to the cyclical demand for its goods, a leading manufacturer of audio systems faced a challenge when the growing volume of orders prompted an expansion from two production lines to six. While more workers could have been hired to keep pace with rising demand, the need to shrink the work force during "valleys" in production would create substantial recruitment and re-training costs, not to mention morale problems prompted by the specter of layoffs.

The company responded by hiring flexible workers to supplement permanent staff. Each new employee is recruited, trained in specific job requirements, and made available to begin a job immediately.

This supplemental work force has contributed to improved productivity and reduced administrative and human resources burdens for the manufacturing plant. A full-time, on-site facilitator supervises and administers the flexible staffing program, freeing up the plant's management to focus on core business issues. The facilitator ensures that precisely enough assignment employees report to the site each day and that each possesses the requisite skills.


A growing number of companies throughout the U.S. and Canada has adopted flexible staffing. The practice conforms to common management philosophies that focus on a company's core business issues, while "outsourcing" secondary functions to suppliers who can deliver services efficiently.

To illustrate: A major West Coast aerospace assembly plant recently turned to a flexible work force on a regular weekly schedule after annual layoffs took a toll on workers and had a negative impact on productivity. The assignment employees work at varied skill levels, ranging from secretaries who may be utilized for a day or two to engineers who are on the job for many months. This approach is especially effective since plant activity can swing sharply from full production to idle spells in a matter of days.

Other companies know precisely when their down times occur so they can plan for them. Seasonality is the primary issue for a manufacturer of outdoor furniture based in the South. The company's business volume soars from late December to July. In the past, the company added substantially to headcount during this peak production period and then furloughed excess workers during off-peak periods. Today, it accesses a special pool of flexible workers to perform assembly and light industrial functions during the seven-month production season.

The company's distribution manager says, "We have noticed a significant increase in productivity since our decision to utilize a temporary work force for this project. We have benefited in large part because the assignment employees are free to go once the product is completed; we don't have to worry about diverting people from within or making new hires who will be laid off eight months later."


Indeed, flexible staffing is a "win-win" proposition. Research reveals that lifestyle considerations motivate most employees to accept temporary assignments: students who want to supplement their coursework with on-the-job training; homemakers who seek flexible hours to accommodate child-care or elder-care arrangements; mature adults who look to augment retirement income; and people who wish to gain experience in a variety of industries before settling on a career.

For employers, the benefits are even more tangible: a highly motivated, efficient work force; reduced turnover and training/recruitment costs; and lower unemployment and worker's compensation premiums and other payroll costs.

Group medical benefits plans usually are offered to temporary workers on a contributory basis. However, because temporary employment often represents the second--and sometimes third--paycheck in many families, only a fraction of assignment employees have a need for such benefits, surveys show.

A study of North American business recently revealed that nearly one in three companies has adopted flexible staffing in some form, up substantially from just three years earlier. Flexible staffing is finding application in an increasingly broad spectrum of North American industry: telemarketing, accounting, word processing, credit and collections, customer services, data processing, bookkeeping, light manufacturing, and assembly.

The trend toward flexible staffing is analogous to just-in-time inventory management practices adopted over the past decade. Just as companies plan to produce only the amount of goods they need to deliver at any one time, flexible staffing enables them to deploy the right number of workers to perform a task at any one time.

A new order is emerging on the world economic scene. Companies that harness their human resources to optimal advantage will clearly prosper as global economies once again resume growth. Innovative labor management practices can go a long way to both contain costs and restore efficiency.

Frank N. Liguori is chairman and chief executive of The Olsten Corp., a $1.2 billion staffing services company based in Westbury, New York.
COPYRIGHT 1993 Chief Executive Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Human Resources
Author:Liguori, Frank N.
Publication:Chief Executive (U.S.)
Date:Apr 1, 1993
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