Effective manpower utilization is critical to human resource demand and supply forecasting, labor cost management and small-business growth. The objective is to ensure employees possessing the right skills are in the right place at the right time. Evaluation techniques, such as comparing productivity in relation to labor costs, are used to determine how successfully a small business is managing its human capital resources. The critical nature and potential negative consequences of ineffective manpower utilization make fully understanding its concepts and techniques essential to every small-business owner and HR department employee.

Defining Manpower Utilization

The number of employees on the payroll doesn’t always correspond to what a small business requires to meet its long-term objectives. For example, current roles and responsibilities don’t always match with an employee’s current skill set or undeveloped potential. Manpower utilization focuses on improving staffing and talent utilization by concentrating on both work activities and the employees who perform these activities. Staffing utilization techniques attempt to realign, streamline and reduce staffing requirements. Talent utilization techniques seek to apply employee’s current skills more effectively to her current or an alternate role and develop hidden potential needed to improve utilization.

Manpower Utilization and HR Planning

Utilization is an integral part of each step in a comprehensive human resource plan. An HR plan starts by gathering current staffing and talent data, including the number of departments, the number of employees in each department and the current skill set and undeveloped potential of each employee. A determination as to whether the company's long-term goals can be met internally is typically made prior to preparing annual manpower planning forecasts. Realignment, streamlining roles and duties and employee training and development are the most common methods small businesses use for meeting long-term needs internally.

Analyzing Manpower Utilization

Improvements in manpower utilization lead first to increased productivity and ultimately to increased small-business profitability. Although a manpower utilization analysis typically includes quantitative, mathematical formulas, it’s just as important to include qualitative assessments. Observation, face-to-face interviews and employee surveys can be combined with ratio calculations to determine, for example, tasks that can be performed at lower cost by another employee, tasks that can be streamlined or simplified and work that can be restructured or reassigned to allow for more effective talent usage.

Utilization Options

Small-business growth requires constant attention to reducing costs while at the same time maintaining consistently high quality and customer service standards. A concern with strict attention to manpower utilization is that if it’s not properly conducted or managed, it can sometimes result in an understaffed or underdeveloped workforce. If this happens, performance, morale and the credibility of the business will suffer. For this reason, creating and managing manpower utilization goals should involve not only the business owner, HR and the department managers, but also every employee. Incorporating manpower utilization into the corporate culture increases the likelihood of getting a total employee buy-in which over the long-term further improves employee morale and business productivity.