As
we begin the new year of economic recovery, it is critical to embrace this
question and take a stance! Heated arguments abound because the answer
correctly differs for each work group according to "LIQ" or
"Labor Intensity Quotient." Labor intensity measures the impact of
specific HR variables upon the company’s bottom line. Similar to human
DNA, LIQ is highly unique and can serve as a blueprint to widespread decision
making. Does a particular work group create profits through increased
employee testing, higher wages, lower wages, increased automation, improved
retention? This is the concept of "Human Capital."
How
do we calculate the LIQ? The LIQ calculation considers the median, margin
of error and/or standard deviation of output per unit of human capital
investment. Calculated factors include all cost accounting line items
directly affected by the behavior, performance, development and retention of
your team members. For instance, a high LIQ firm may incur higher costs in
rehiring, retraining, potential waste, quality problems, jeopardized business
or reduced output/cycle time. And while I have been labeled an
"egghead" for speaking on such complex statistical formulas, I can
assure you that the process of simply compiling the necessary data for this
equation is a highly beneficial learning by itself…and does not require
an egghead to compile the data. The fact finding mission audits quality
control measures, operational efficiencies, risks, performance management and
appropriate incentive programs as well.
1325
metro-Milwaukee jobs surveyed by HRS yielded an average wage increase of 15%
from December 1999 to December 2000. Employee retention steadily became a
"bidding war" for quality employees. Job categories surveyed include
the most universal of administrative support, customer service, production,
warehouse and data entry. These categories represent the highest volume of
positions within the typical "pyramid" of corporate job
classifications. The "tight labor market" initially caused wages to
spiral upward, probably faster than the market could tolerate. Labor intensive
corporations were forced to comply, and the cost of human capital quickly
became even more of a "bottom line" concern. Has the 2001 economic
downturn been a correction? How do you respond in 2002?
It
is clear that we are embarking upon positive swings in economic recovery, and
we are thankful for the optimism and bounce back! As each individual company
determines the appropriate hiring or recall strategies for 2002, it is
important to own some sense of the company’s LIQ. A higher LIQ calls for
a keen eye on candidate screening/selection, training needs and turnover. A
lower LIQ may excuse a more transient workforce.
In
any economy, this research needs to remain on ongoing commitment.
Understand your LIQ and set your hiring, training and compensation practices
accordingly. We’re simply stating that your LIQ calculation is necessary to
strategic planning for optimal return on investment. Employee retention,
human capital, teambuilding, internal marketing and strategic staffing are all
necessary considerations offering a vast range of corporate investment levels.
Your LIQ helps you to determine your own appropriate level of investment into
these tools and programs. There is no "cookie cutter" approach.
Written
exclusively for HRSteam.com Members and HRS clients.
Copyright
© 2001 by HRS/Human Resource Services, Inc.
