In part 1 of this blog post, I took a look at a particular mini-case-study from a healthcare organization. Using some fairly routine math, we showed they would actually save money by constantly having a “one-up” nurse, meaning someone who sits at home collecting paychecks until an active nurse leaves, at which point they step in for the nurse that left the organization.
If you haven’t read part 1, I’d encourage you to do so before proceeding with part 2. Then again, if you’re the type to try to put together your entertainment center without reading the instructions like I am, feel free to ignore my advice.
In part 2, we’ll examine different scenarios including a real-world example where a household name, Fortune 100 Company, used this exact theory and reaped not only the financial benefits we explored, but other intangible benefits as well.
To start, let’s play devil’s advocate and immediately disqualify any scenarios where one-up or similar theory does not apply:
– In exempt environments where overtime is not paid
– In environments where the average time between leavers/exits does not catch up to the overtime cost of being short (as demonstrated in part 1)
Now that we’ve got that out of the way, let me tell you about what I found to be the most fascinating, albeit unexpected part of this exercise—that a juggernaut of a company is already practicing something like this. The following information was relayed to me by Noel Hannon of Hannon Associates, a friend who I consider an elite professional in the HR consultancy space.
The above mentioned company was practicing One-Up Theory almost to a “T”, with one ingenious modification. Rather than having the surplus resource sitting around at home, the employee was splitting time between two things. First, the employees were doing advanced career classes and continuing education. Second, the employees were being “lent out” to charitable organizations in the community to do nonprofit work! The company was enjoying the financial benefits outlined in part 1, but instead of wasting the resource during the wait period, they were improving their quality of hire with training and gaining good will and exposure for their brand all the while. Oh, and a little tax write-off too.
Redefining “Fully Staffed”
Sticking with the 80s video game theme…
Ultimately, this theory, or a modified version of it, is best applied in areas with a lot of high turnover, non-exempt employees. Retail, Manufacturing, Healthcare, Construction and Services seem to be the most viable industries for this theory. Not to say it’s limited to these, but a blog post can only take you so far. To get there, you’ll need to figure out the following:
– What kind of costs your organization incurs due to a vacancy
– What your turnover looks like by department and job (workforce analytics). Not only current rates, but trends.
– What your time to fill is for the job and/or department in question
There are also intangible factors to think about. Does your customer satisfaction (and thus retention) decrease when you are short staffed? Does being short staffed increase stress and thus employee turnover (this has a cost associated with it)? Etc.
SUM SUM: We’ve done a lot of conjecture and theorizing, but in reality, all of the synapses firing in my brain regarding this topic lead me to one point. The common definition of “optimally staffed” seems to be having the lowest amount of payroll necessary to “get the job done.” Common sense and intuition often tell you this is the least expensive way to staff. But in one theory (coupled with a real-world example), we’ve blown this right out of the water. The true definition of “optimally staffed”, at least in a financial sense, would be having the amount of people that, at the end of the fiscal year, cost you the least amount of money. It’s taking the approach beyond payroll and truly tying HR and the business together—Overtime, lost revenue, lost customer cost, etc. This is one example of an HR goal I hear on a daily basis – “I want to become strategic and tie HR to the business.”
If you’d like to speak further about this, please feel free to contact me. I’m always up for a good brainstorm.
Thanks for the time!