Part 6  ----  Why to Consider Manpower Planning?

 

The U.S. Securities and Exchange Commission might not require publicly traded companies to adopt manpower planning and disclose such information.  However, many publicly traded companies might adopt manpower planning and make disclosures.  Why so?

 

Many companies are expected to adopt manpower planning because it should reduce their staffing risks.  In essence, they should be more likely to avoid or minimize skilled labor shortages within their company.  For manpower planning information, see these websites:

 

http://akss.dau.mil/dag/Guidebook/IG_c6.2.1.3.asp

http://www.accel-team.com/human_resources/hrm_01.html

http://ptcpartners.com/Art_ManpowerPlanning.htm

 

A skilled labor shortage within a company can impact the company’s operational efficiency, profitability and stock price.  If a company has adopted manpower planning and they make some disclosures about their plans, the investors who are aware of the coming skilled labor shortage are more likely to reward the company with a higher stock price.  When skilled labor shortages and manpower planning disclosures begin to impact stock price, investment managers might request the U.S. Securities and Exchange Commission to require manpower planning and at least limited disclosure.  

 

When only a minimal level of manpower planning is conducted, the cost is likely to be very low.  Such a low level should be very cost justified.  In fact, it is likely to be viewed as reasonably prudent to conduct at least a minimum level of manpower planning.  When directors and officers fail to meet the reasonably prudent business person standard, they can have individual legal liability in the future.  This fact alone may convince companies to conduct and document at least a minimal level of manpower planning.

 

A skilled labor shortage within a company might adversely impact a company’s ability to repay a large loan.  A company’s lenders may begin pushing for the adoption of manpower planning, and disclosure of such information.  A lender might reject a loan application if a company can not show how their manpower planning supports the viability of a new or existing facility.  Also, the presence or absence of documented manpower plan could impact the interest rate charged.

 

A skilled labor shortage within a company might adversely impact the value of some company assets and the overall value of the company.  For example, a skilled labor shortage might make a specific plant facility far less valuable if not enough skilled labor is available for the plant facility.  The company’s insurance company may want the company to adopt manpower planning to reduce the risk.

 

The presence or absence of documented manpower plan could impact the insurance rate. The failure to adopt manpower planning and a subsequent skilled labor shortage might greatly increase the arson risk for a plant facility. An insurance company might require a supportive manpower plan before they insure a new or existing facility.   An insurance company could come to the realization that the lack of manpower planning starting several years before has now impaired the value of the facility so that the insurable amount is reduced or the policy is not renewed.  Also, if the insurance coverage is reduced or cancelled, the lender may have a contract clause, which makes the loan callable. The insurance companies that insure high risks at low rates are likely to lose money and be viewed as imprudent.

 

When skilled labor is abundant, there is little need to conduct manpower planning. When a skilled labor shortage begins to emerge, some companies might find that long lead times are needed to ensure an adequate skilled labor supply.  If one segment of highly skilled workers becomes scarce, the lead time needed to hire and/or train new workers easily could be six months, or even much longer.  In some instances, the need for replacements could create work bottlenecks, or even stop critical work from being completed.  Such a business risk could be one of the strongest arguments for conducting manpower planning.

 

The trade and industry associations may choose to address cost effective manpower planning for their members.  The active and early involvement by the trade and industry associations should help maximize the collaborative manpower planning efforts. These efforts should help ensure that scarce resources are efficiently organized, allocated, and deployed throughout the economy.