Warehouse Project Risk Spotlight: Hiring

Welcome! Let's talk about managing project risk.

Today we're going to review a specific warehouse start-up task that is difficult to get right: hiring.

Key hires have critical input to design, startup activities, and hiring & training.

But hiring is almost always later than planned. So this piece of work introduces often-under-appreciated risk in start-up timelines.

Getting hiring timing wrong can have major impacts:

1. Starting completion of design on schedule or with good quality
2. Increased cost in design and rework
3. Delaying the go-live and ramp plan

But the good news is that there are ways to plan ahead and avoid the risk.

Let's dive in.

Types of resource groups on projects

New site starts are often planned with three main groups of resources.

First there is the shared resource pool. This includes centrally controlled roles like project management, engineering, facilities, and various corporate IT resources. These team members are often assigned to projects to help manage and get them designed, procured, installed, and tested. Their cost should be allocated to the project startup.

Second there is the transition team support. This group of team typically includes experienced team members from other sites. This group's purpose is to help the new site organization 'learn the ropes' as they acclimate to their new company, new site with its new technology, and new processes. The transition team may start working on the project as the new site nears testing and training, and can remain with the operating team through some period of start-up and stabilization.

Last there is the operating team. The operating team is the group of people hired to run the new site in steady-state. This group is typically the most motivated and incentivized to see the site succeed, because they'll have to "eat their own dog food" on a day-to-day basis for years in a way that the other groups will not.

This team may have some members from other positions in the company, such as when the company transfers a Director of Operations or one or a few more key roles to start and run the new site, but most of it will be new hires. This makes sense because a new site is often in a new location, which requires a local team to fill most of the roles. This cost is not capitalized or allocated to the project, though for some early phases of the project the resources working on design can be capitalized.

We focus here on schedule risk in bringing on the operating team.

Sequencing Hiring

The resource dependencies into new site designs and startup tasks are below. The specific order of hiring may vary based on your company, but this is a good way to start.

1. Site Operations lead. Usually with a title like "Director of Operations" or "General Manager", this person represents Operations in design, implementation planning, and implementation execution. Because this person will often own the resulting facility, he or she is the local decision-maker. This is the first hire and the first critical role to have on very early in the project.
2. Operations Manager 1: The first Operations Manager is important as the second most senior Operations representative. Having an Operations manager hired early is needed to help the Ops lead accomplish various design and organizational tasks. This hire is also resource risk management. If the Ops Lead drops out of the picture for some reason,* the company needs someone who is up to speed on the site requirements, status, and design to keep the Operations side of things moving forward.
   • * This happened on a project I was on: The 3PL Operations Director was driving the Operations deliverables on a major site startup project. He quit with no notice as installation and hiring were started, but before any transition team resources were identified. Fortunately, there was a quick-thinking VP Ops who brought in a consultant from his network. But the startup was at risk of serious delays and design problems. It is important, especially in early design phases, to have a backup to the Ops lead identified who can carry the work forward if needed.
3. On-site HR Manager: Much of the marketing and recruiting for the first role or two is done at Corporate. But after that, the site needs to organize its hiring strategy and planning. For this, the onsite HR manager or coordinator is critical to tracking applicants, interviews, associated onboarding work, and training.
4. Maintenance (or Facilities) Manager: The Maintenance Manager is the next critical role. Especially in automated facilities, the Maintenance Manager will be responsible for equipment uptime and building functionality. This person needs to be on the ground from a very early stage to work with the general contractor trades, ensure equipment is installed correctly, learn about the new equipment and installation, and be prepared to start everything up in support of integrated testing phases.
5. Site Industrial Engineer: The Industrial Engineer will support process definition and documentation, testing preparation and execution, and manage specific sub-projects during the startup. Some elements of training documentation and delivery may be in this person's scope as well. This is critical bandwidth during a larger implementation.
6. On-site IT Support: The onsite IT team will be helping the shared resources with equipment installation, credential management and access, tickets, and many other things. Don't let IT issues be a bottleneck for your site: this is a critical enabler.
7. Safety Manager: The safety manager ensures that site training and policies are defined and delivered and that the site is compliant. This is critical to ensuring a safe and legal start-up. In some companies this may be a shared resource, but many sites have dedicated safety managers.
8. Remaining Operations managers: The remaining operations managers can be hired as needed after the first Ops Manager is brought on, up until the start of training and site setup. They will hire supervisors and the hourly team, as well as execute the training, more granular setup readiness tasks, and testing needed to get the site running.
9. Specialty operating roles such as planners and analysts should be brought on before most of the hourly team because their training is more extensive and specialized, and they may be needed for final testing phases.
10. Site Supervisors: A few site supervisors early may be helpful for setup tasks. But the main driver for supervisors is that they need to be onboarded and trained to hire their hourly teams. So supervisors are typically brought on a few weeks before, or as the hourly team is coming on.

Note that we did not identify IT Analysts, Solution Engineers, HR Managers, Facilities Project Managers in this list. Those are in the "shared resources" group. While those are absolutely critical functions for project success, we are talking here about required hires for the new site in the Operating Team.

How the Hiring Happens

Hiring can be done by anyone in authority.

However, the "usual" way to build the organization is from the top down. That means that the highest authority person in the function hires the next highest person. This repeats until the organization is built. Sometimes there are multiple "next highest persons", so the hiring manager has to interview and hire multiple people.

The Director of Operations (DO) is often the hiring manager for the operations managers and site team like the industrial engineer, safety manager, maintenance manager, and other staff.

While the Director Ops ("DO")'s boss (typically a Vice President) can hire, they often don't do so because it would take away decision-making and shaping of the organization from the DO.

Now, that's just the responsibilities. The hiring process often looks like this:

There are a lot of steps to get through. Many of the steps also have more work than is shown, with significant organizational obstacles that need to be negotiated.

First, the org chart is drafted. Usually this is needed for budgeting purposes, so it comes with assumptions on salary requirements for each role. This in turn will require HR to do salary surveys of the area, which will come back to haunt the organization 6 months after the project is organized and hiring has started, in the form of discovery that the offered wage rate is drawing too few or too low-quality candidates.

Salary levels can create risk if they are too low. The level of confidence in salary requirements for the desired talent level should be assessed before project authorization.

Then job descriptions (JDs) have to be created and approved. Job descriptions may be 'off the shelf' and well-understood for the organization. But beware of new roles or the first time an organization is doing this, because the JDs take time and effort to create. And who is approving them? Often, the Director of Operations.

Then the actual recruiting starts. One common pitfall in marketing is getting too few or low-quality interest. This can extend the period of time in marketing and screening, or else generate requests for additional salary authorization as mentioned above.

The operations team can now interview, decide to extend offers, start, and train the new hires. There is risk here, too. Some candidates need long periods of time to quit their current jobs, or to move, or they ask to take 4 weeks of vacation between jobs. And once they've started, they're not effective in their roles immediately. There is a ramp and training period.

All this means that HR and Ops teams tend to underestimate the amount of time to successfully bring on a new role.

Planning Implications

In planning terms this implies that hiring is full of dependencies and resource constraints. Dependencies because Role A is the hiring manager for Role B, and so Role A must be onboard before Role B. Resource constraints happen when Role A is hiring Role B and Roles C, D, E, and multiple headcount into roles F and G, and there are hundreds of resumes to review and only so many interview times available. Role A becomes a resource constraint, i.e. a bottleneck.

In our model above, the Director of Operations, the HR Manager, and the first Operations manager are bottleneck resources for hiring. Therefore they should be planned well ahead of the hiring timelines for the rest of the team.

It also means there is risk in each of the steps, especially for the single-headcount critical early roles. The risk can manifest in several forms:

1. Insufficient candidate pipeline, numerically or qualifications-wise. Operation is forced to make a decision trading time vs candidate quality.
2. Candidates reject offers due to salary, leading to budget risk.
3. Candidates quit after hiring, restarting the hiring process at resume review, maybe at job posting.

Overall, this often means that steps take longer than planned, sometimes 50% or 100% longer, and especially for the 1-2 person role fills. This is nearly all of the critical early hires. This is very common in hiring & HR planning, with key-role hiring delays (defined as later than planned) occurring on 100% of the projects I've worked on.

Hourly roles are easier to fill, though much of the risk is in budget and turnover later.

Consequences

Let's say that the Director of Operations (the critical hire) is hired 3 months later than planned.

So the DO is onboarded late. Design hasn't stopped because of the delay in hiring. But the delay meant that there was inadequate Operations input, so now there are a bunch of parts that will need rework. Maybe there are changes or enhancements needed now at 10x-100x the cost vs if they were identified in design.

The DO has to get in, figure out what's going on, do his day job, and start hiring. If he's lucky, there are already pre-built job descriptions for each of the roles he needs. If not, then he needs to write them.

Now, the risk of the Ops Managers (OMs) and other critical hires (maintenance manager, Engineer, others) being late just went up.

Delays in the OMs being hired results in delays of the supervisors being hired.

This can put the whole organization in a crunch for bandwidth during a busy project of setting up a new site, building a new team, and training everyone.

Sometimes, the impact may not be "at that moment", such as when the maintenance manager is brought on during construction or equipment installation. However this increases later operability risk of missed requirements in construction, more punch items or change orders, or improper supervision of automation equipment (again leading later to maintainability problems and cost).

At the end of the day, hiring delays increase risk for a successful project go-live. Because when the Operating team is not ready to operate, the company has to fill the gaps with resources from other sites. This leaves operational gaps throughout the company, because, presumably, the company doesn't just have lots of idle people at other sites.

And in fact we've observed this happen on several projects.

The Operating team may also find itself with the transition team leaving before the Operating team is ready to operate, leading to various types of misses in production.

Fortunately, making a few key decisions can avoid much of the risk.

Mitigate your risk

Here are some strategies for mitigating the key hire resourcing risk.

Make the resource requirements transparent early

First, and most simply, identify the roles and responsibilities for the project work and scope in planning. Build a project org chart that shows who is on board and who needs to be hired to execute the project. This is separate from the operating organization.

Use Internal Transfers

A good option to reduce or transfer this risk is to fill key roles with internal transfers. This is the highest-confidence way to shift the resource risk from a "high" at the new project to a "low" or "medium" at an existing site. The existing site will be inconvenienced by the loss of a key person but has more organizational buffer and the exit can provide opportunity to up-and-coming management.

Sometimes companies don't like to do this because of relocation costs or administrative / organizational barriers. The organizational barriers (such as VPs protecting their talent pools) are the biggest challenge. But the relocation costs can be small compared with the impacts of delays to the project, problems that bad hires cause, or risk of quitting, that new hires bring.

There is still lead time associated with this option (approval, agreement of the transfer, moving costs and time, etc) but from the project's point of view it is better to have someone onboard who knows the company context.

Plan schedule and budget buffer for key roles

The next technique is to identify the key roles and plan some extra months salary for them beyond what the Hiring schedule plan says will happen. This allows recruiting and hiring to start early and provides buffer for failure or delays.

This is a business judgment based on the size of the project and operation, and the supporting resources available until the site goes live. But in critical projects, it is highly recommended to have the dedicated team available to do the work of process design, site setup, training and start. They will be the most invested in the site's success, compared with anyone else who is leaving when the site is running.

Do contingency planning

HR and recruiters are very good at filling lots of hourly roles. The difficulty of hiring this level of employee can be gauged by running "pilot" hiring fairs at the warehouse sites for a handful of employees, and seeing the turnout, salary sensitivity, and so on, of the local labor force.

But for the early critical project roles, there is no pilot. The roles are distinct in their local areas. The salary data may not be good. So these are very risky roles.

Hiring timelines should therefore be buffered and the project team should have contingencies in place if one of the critical roles does not materialize (for whatever reason) in the planned timeline.

Now go forth and have great projects with great people!

Benefit from our experience

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