Human Capital

Forecasting the Future with MEC

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The marketplace for the current retail industry is competitive and challenging. It also provides us with the opportunity to analyze the realities that businesses face in order to stay alive. MEC, formerly known as Mountain Equipment Co-op, is a case in point.

MEC is a Canadian outdoor equipment and clothing sales retailer with a targeted consumer base. Customers are members who can purchase a lifetime membership card to buy high-end adventuring products. If we were to apply one of the corporate strategies from our HR planning studies, MEC would most likely fit into the ‘differentiation strategy’ category. Established in 1971, MEC continued to persevere successfully until 2019, when it faced multimillion dollar losses as reported by the CBC.

As noted in the CBC article, MEC faced numerous environmental challenges. Again, if we were to apply our HR planning studies to this case, we would see that an environmental scan of the strategic business challenges facing MEC include both internal (organizational and staffing structures) and external (online and big-box store competition) impacts.

In January 2020, MEC announced the implementation of significant staffing and structural changes in response to the aforementioned financial and retail losses. As noted in this article, which summarizes their proactive strategic business initiatives, MEC appears to be implementing a ‘turnaround strategy’ in order to increase its organizational viability.

Part of this new business plan includes the need to convert a number of existing part-time or casual roles to full-time, permanent employment positions. This step provides an example of the need for HR forecasting, which must take into account the current HR supply measured against the future HR demand for human capital. With the implementation of this kind of staffing strategy, both the number of employees, and the corporate knowledge that these employees bring to their roles, should be retained, and will increase profitability and much-needed viability.

In order to survive, any business strategy that is focused on the need for change comes with the expectation of success in implementation, along with an escalated level of risk. It remains yet to be seen how these changes will all play out in this real-time application of human resources and business strategic planning for MEC.

Discussion Questions:

  1. What other types of business strategies could MEC use in order to remain viable in the current marketplace?
  2. What type of staffing strategies is MEC using to bolster employee support and confidence?
  3. What are ongoing environmental risks that MEC must consider in order to remain viable?
  4. If you were to apply a SWOT analysis to MEC’s new strategic directions, what would be the results?

Valuing Human Capital the Easy Way

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It is not that difficult. Knowing how, when, what, and why an organization should engage in the financial valuation of resources is something that all companies should understand.  It seems, however, to be something that many organizations forget about when considering their most expensive asset, human capital.

A humorous explanation about the valuation process linked to measuring human capital is shown in the following video clip.

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From this perspective, we can see how much is invested when following the progress, appreciation, and depreciation of company equipment and materials.   There are numerous actuarial tables and formulas that can be used to evaluate the contributions of hard ‘things’ to the overall financial health of an organization.  Keeping track of Barry the boardroom chair is easy!  Keeping track of what Sammy brings to the boardroom table seems much more complicated!

Why is it so difficult to provide similar value based financial assessments for employees?  When organizations tell their people that they are valued, what is the actual measure of that statement?

As Sammy finds outs in this video clip, the results can be quite shocking when we look at the return on investment that companies make on an individual employee basis.  Perhaps it is time to be as open and transparent with all employees to let them know how valuable they really are as they continue to contribute to the bottom-line financial success of any organization.

This clip ends with a pretty simple message that is, in itself, quite valuable.  Find your people.  Know your people.  Manage your people.  The return on investment will definitely pay off.

Discussion Questions:

  1. Think about your own work experience over the past five years. How much did the company you worked for, pay you?   How much value did you contribute back to the company?  What is the differential?
  2. Upon leaving your current place of employment, do you see yourself as an appreciating or depreciating asset from a pure, return-on-investment perspective?
  3. What types of measures and tools can the Human Resources practitioner put into place in order to value the true cost of employees as part of the Human Capital investment strategy?

Boom or Bust?

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It may seem that the concepts of HR Supply and HR Demand come from an almost clinical approach.  This is most evident when we look at these concepts through a human capital lens and try to apply formulas to predict the ebb and flow of human resources supply and demand.

Words Boom and Bust on opposite ends of a balance
Source: Mark Carrel/Shutterstock

Predicting the patterns of potential employee movements are not isolated exercises – They are all connected and part of bigger picture circumstances.

For example, the overall economic situation in Alberta provides us with an excellent opportunity to consider how individual employees will be impacted by the changing economy.

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As we read in this article, Alberta was once the province offering an abundance of HR demand. There were lots of jobs and lots of opportunity.  Now, Alberta is the province facing the very real impact of too much HR supply – Increasingly fewer jobs and much less opportunity.  HR’s role will be critical in determining how this oversupply will be managed and, most importantly, how the individual employee will be impacted as a result.

We cannot forget that any HR supply and demand analysis is about people.  Analysis and formulaic approaches help us with planning predictions; however, we must remember that the implementation of these plans will have an impact on our fellow humans as we all move into a challenging and unpredictable future.

Discussion Questions:

  1. What types of compensation strategies would lessen the need for layoffs in Alberta?
  2. If you had to accept a wage reduction in order to have your work colleagues keep their jobs, what would you do?
  3. Identify three critical steps that the HR professional should be taking when considering staffing reductions due to economic indicators.
  4. What would be the biggest challenge for you when preparing an HR plan that includes staffing reductions?