Today’s blog was written by Sam Norwood, a Tatum Senior Partner and analyzer of the monthly Survey of Business Conditions.
As I was watching CNBC’s “Mad Money” interview with Roy Krause, CEO of Tatum’s parent company SFN Group, I couldn’t help but be struck by a phrase that Roy used during the conversation – “just in time employment.”
Most everyone in business is familiar with the 20-year trend of “just in time” inventory systems. This trend has had significant effects on corporate investments in inventory assets, meaning a higher return on invested capital. Economists believe this trend has reduced the amplitude of economic cycles. I remember quite clearly the role that excess inventories had in exacerbating the downturn of 1974-75.
The trend has stimulated, and benefitted from, the science of material logistics and the rationalization of supply chains. These inventory control systems have become so refined that deliveries in many manufacturing environments are timed to the hour each day, not just the date of delivery. On the economic upturn, any increase in demand will trickle through the system backward to stimulate businesses all the way back to commodities and basic materials.
As Roy noted, this “just in time” approach has also had an effect on employment. One of the fundamental trends now is there is no such thing as “permanent” employment. Gone are the days when a person can count on an adult lifetime with a single employer. Part of this trend is simply the acceleration of the pace of change. Part of it comes from the intensification of competition locally, nationally and internationally. For public companies, the pressure for performance and the fiduciary need to maximize value for the owners (stockholders) compels adjustments to costs to fit the circumstances in real time. For private companies, the drive to survive has forced an ebbing of paternalistic employee retention, shifting toward timely employee level adjustments as demanded by the circumstances.
In 2006, Wal-Mart began a system of just-in-time employment by modeling the sales volumes by the hour for each store and staffing throughout the day according to the probable volume of customer traffic. Any business with uneven daily, weekly or seasonal variations is probably doing some form of just-in-time employment.
The “just in time” employment trend is particularly relevant now following the economic downturn. As companies reorganized and redesigned processes with a new, leaner structures, there were more demands on resources and executive leaders. Companies that thrived and survived in this environment looked toward “just in time” executives and managers, as well as lower level employees, to achieve one or more specific objectives such as cost reduction, systems implementation, strategic turnaround, product development, market expansion, preparation for IPO and so forth. The trend to just-in-time employment, using outsourcing firms, is accelerating at all levels all the way up to the “C” suite to ensure flexibility, focus, and adaptation to the rapidly changing demands of business.
Learn more about how interim executives help companies achieve strategic goals with the Tatum special report – Flexible Leadership for Uncertain Times. To learn more about Tatum’s Interim Executive services, click here.
