ServiceLine White Papers
Top 5 Reasons to Centralize Resource Management
- by Randy Mysliviec, CEO, RTM Consulting, LLC.
For today's service provider the current economic environment has made efficient management of resources absolutely mission critical. This is true whether you sell billable services externally or run a shared services operation within a large enterprise. Labor intensive organizations at their core must manage their human resources in the most efficient manner possible to be competitive.
This author has written many times about Just-in-Time ResourcingSM, a solution to help companies get the right person in the right place at the right time. The methodology required to achieve this highly efficient approach to resource management is comprised of many building blocks, but none is more critical than gaining a centralized view of enterprise wide resource needs and available resource capacity and skills, and the ability to use that centralized view to determine the best plan for deployment of people.
The title of this paper might lead one to believe that the argument is based on organizational design. To the degree that an enterprise can depend on people to always act in the best interests of the enterprise, organizational construct has little to do with your gaining advantages from the centralization of resource management. Lacking effective teamwork, a centralized resource management strategy may then require changes in organizational design.
A good analogy is from the approach manufacturers have taken with respect to management of inventory. Just-in-Time Manufacturing attacked the problem of decentralized inventories by using technology to create a common view of all inventory held by the enterprise. Once a centralized view of inventory was accomplished, improvement of forecasting techniques was then added, and better planned deployment of available inventory began. The result was dramatically lower inventory carrying costs, and more responsive manufacturing capability that was no longer hobbled by parts shortages or high costs due to oversupply.
The application of how manufacturers manage inventory is analogous to the management of human resources with the centralization of process at the core of success. The top five reasons for centralization of resource management are:
- Overcome fiefdoms that tend to bottle up needed skills and capacity for the benefit of a particular department at the expense of the enterprise
- Gaining agility to achieve a level of responsiveness unmatched by competition
- Offering employees more choice for project deployment
- Equipping management with more insight and a greater range of choices for human resource deployment required to meet demand
- Producing the best economic outcome for the enterprise
THE BUSINESS IMPERATIVE FOR CENTRALIZATION OF RESOURCE MANAGEMENT
I always want the business economics of every argument to be clear and compelling. That is certainly true in this case. Similar to targeting near zero inventories for a manufacturer, human resource intensive operations should target near zero idle on-board resources. The tables below illustrate the economic value of efficient management of utilization.
Since idle resources are a sunk cost, the revenue amounts in the tables above drop straight to the bottom line as profit. Similarly, the bottom table depicts the benefits of improved productivity of internal resources.
Have you ever heard someone say "I cannot share my resources because…". Most companies have fiefdoms in their business. No one likes to admit it. Most well run companies try to eliminate fiefdoms. But they exist. While some companies are better at this than others, all companies are run by people who at times are more motivated by self interests than the common good. One of the greatest tools managers have to overcome fiefdoms is enabling transparency of information.
In a human resource intensive organization having transparency of information to know what skills we have (for the enterprise as a whole), how many we have, and where they are currently deployed is a powerful antibiotic for fiefdoms. Get yourself a good PSA (Professional Services Automation) system, establish a centralized view of human resource capability and capacity, open up the data to potential consumers of the information, and you are well on your way to a more efficient system of resource deployment. You will of course need some methodology and process to help you with making choices and deploying resources in a planned fashion. Just-in-Time ResourcingSM is the RTM Consulting proven approach to this need.
Transparency of information will benefit the organization in overcoming the fiefdoms that sometimes lock up idle but needed resources.
GAINING AGILITY TO IMPROVE RESPONSIVENESS
Key to a highly responsive services organization is having the ability to deploy the right person at the right place at the right time the first time. For medium to large enterprises, or those in rapid growth mode, identifying the right mix of skills quickly is the key to successful deployment. Getting that common view of the enterprise wide skills and capacity is essential to gaining the agility you need to make good project staffing decisions fast!
Most project managers will tell you that expert shortages are the bane of good project management. (I never have enough of people with xyz skills) is often heard by frustrated project managers. The ironic aspect of this is that in many cases the right skills are available, however they are locked up or invisible to a particular project manager due to decentralized management of resources. The PM then moves forward using the best skills they are able to identify, and managing through the inevitable issues (with higher costs) which may have been avoided if they were able to deploy the right skills the first time.
Of course a very important aspect of the project staffing process is speed. Without a centralized view into enterprise wide resources, we often resort to phone tag, email, and other highly inefficient methods for locating needed resources. Centralization of the information, aided by technology from a good PSA system will help you gain the agility you need to compete more effectively.
OFFERING EMPLOYEES MORE CHOICES
Professional services workers and consultants like anyone else are energized by the opportunity to do different things. The good ones want to learn new things, get involved in exciting new projects, and keep their jobs vibrant and interesting. The problems with a decentralized resource management system are:
- People get bottled up in one department and management exposure outside their own department is kept to a minimum by design, limiting their ability to ‘be found’ by another department with needs.
- People get bottled up in one department and their own exposure to career opportunities outside their department is more limited.
Decentralizing resource management creates blinders for both employees and management. Neither is good for morale or employee development. When an enterprise takes a centralized approach to resource management, both employee and management get broader exposure to each other, and the resulting transfer of knowledge opens up doors that may have remained closed. This natural byproduct of a centralized resource management system should not be under estimated. This approach gives the employee the ability to spend more time looking inside rather than outside the enterprise for their next opportunity creating a win/win for all parties.
IMPROVING MANAGEMENT INSIGHT
In the end we know what we know. Information is power. I will reassert that I am not a 'centralist' advocate, or a 'de-centrist' advocate. I will assert that having the power to know what is the best path to take is information based and must transcend any particular desire to centralize or decentralize an organizational structure. Therefore gaining a centralized view of resources and having the flexibility to deploy those resources with the better interests of the enterprise at heart is fundamental to my argument.
Imagine if a pilot and co-pilot of an airliner had decentralized views and controls over the fuel that was held in the wing on their side of the plane. Each wants to protect their fuel usage for the engine on their side of the plane. After all if 'my' engine quits I am in big trouble. This may be an extreme example since in reality we all know self-preservation will drive both pilot and co-pilot to share fuel in the end. The process is made easier in this case as the pilot (not co-pilot) has sole discretion to deploy fuel as they see fit with a centralized view into that fuel supply.
Centralization of resource management related data provides the opportunity for you to gain broader insights on the range of choices available for staffing. It also promotes better strategic resource planning.
PRODUCING THE BEST ECONOMIC OUTCOME FOR THE ENTERPRISE
The last and certainly a very important reason is that centralization of resource management can and will produce the best economic outcome for the enterprise. There are numerous reasons for this including:
- Normal peaks and valleys of departmental utilization get smoothed out since the centralization process opens up idle resources to other departments where needs might otherwise be filled by new hires or contract resources.
- Lower hiring costs are a nice byproduct of the centralization process since unneeded hires or contractors are potentially avoided.
- Higher overall enterprise utilization occurs since the centralization process helps weed out expert shortages, and permits better enterprise level forecasting and project staffing decisions.
- The common view enables the ability to do better long range skills planning including retraining of existing resources to better meet anticipated future needs.
- Attrition can and should be lower in a centralized environment since employee choices for in-company opportunity begin to replace the outward opportunity seekers.
THE RESOURCE MANAGEMENT OFFICE (RMO)
One additional concept fundamental to the centralization of resource management is the RMO. For medium to large enterprises, development and management of the processes necessary to effectively manage the resource pool is a necessary and beneficial investment. Particularly where the resource pool is shared across organizational boundaries, the RMO can play a neutral role and help break down the fiefdoms that sometimes exist in the enterprise. Typical functions of the RMO are:
- Establish overall resource management policies, processes and metrics for the enterprise this can be a difficult role early on as this is where the breaking down of the fiefdoms often begins.
- Provide governance for the process. It is important that the neutral nature of the RMO be exercised with clarity and sensitivity.
- Manage or provide direction to IT function providing application support. The RMO should collaborate with corporate IT and the PS function on application needs.
- Provide resource planning support for supported organizations e.g. planning assistance, reporting, alerts, query handling, etc.
- Providing resource recommendations for projects a very important aspect of this area is focus on the matching of needs with available skills. There will be continuous pressure to "put my favorite person" on every project. Effective resource management focuses on the need, not the person.
- Continuous analysis of labor markets and labor pool distribution, and providing recommendations for expansions, reductions, rebalancing of the labor pool.
- Management of the peak-load contractor pool and internal coordination with corporate partner/alliance functions. The peak-load pool would typically range from 5 20% of current needs but will vary depending on the type and nature of the business need.
In summary the RMO manages the overall resource management process for the enterprise required to achieve Just-in-Time ResourcingSM as depicted below:
Just-in-Time ResourcingSM Process Wheel
Centralizing resource management is mission critical for the services provider offering billable services or operating a shared services organization in a larger enterprise. For each of the five reasons we reviewed, none are more important than the compelling economics of efficient resource management. But all are enabled by the simple process of centralizing this important function for the services (or shared services) provider.
As manufacturers realized 30 years ago, centralization of inventories was an essential building block to realizing true Just-in-Time Manufacturing. That movement was followed quickly by supply-chain applications. The author firmly believes Just-in-Time ResourcingSM will be a minimum requirement to compete in human resource intensive industries in the future. The RMO concept will grow in popularity as an effective organizational construct to take advantage of centralization. Technology in the form of PSA systems or future technology innovations will enable real information transparency needed for a centralized resource management capability to work.
About the Author
Randy Mysliviec leads RTM Consulting, providing high impact advisory and execution services for a wide range of companies with human resource intensive operations. RTM Consulting provides strategic and operational advice helping companies both increase revenues and drive improvements in operational efficiency, and manage their human capital more effectively. Acknowledged by industry sources as an expert in Global Resource Management (GRM) and author of the Just-in-Time ResourcingSM Solution, Randy helps multi-national companies with the complex challenge of operating services teams serving the global market.
Prior to establishing RTM Consulting, Randy was SVP, Consulting and Professional Services for Convergys, successfully managing and growing a multi-hundred million dollar business with 1600 employees in 31 countries across six continents. Randy began his career with 18 years at IBM, serving in a variety of sales, marketing, and general management roles. Randy was also President and CEO of a successful start up services firm in the Carolinas. He is a founding member of the Technology Professional Services Association (TPSA) and served as a member of the TPSA Advisory Board. Randy is also an active and contributing member of PSVillage and the International Association of Outsourcing Providers