The big data trend has found its way in Workforce Management. That is great news for large companies, where labor is the largest cost. For years, employers have been collecting an increasing amount of data on their workforce through various human capital systems, including applicant tracking, time & attendance, human resource management systems (HRMS), learning, and talent management. These employers are now finding ways to leverage the data to make better hiring decisions, inform decisions on training, manage turnover, and optimize overall labor productivity.
Baird Capital sees significant opportunity in Labor Optimization. By leveraging deep expertise and analytical tools, large employers of hourly workers can better forecast staffing demands and more efficiently deploy the right workers. For large retailers, health systems or manufacturers, this could mean significant productivity benefits. In fact, many of these large employers could generate labor cost savings of 2-5% by implementing solutions to improve planning, scheduling, talent fit and policy compliance.
We believe the market for labor optimization services is roughly $2.5 billion, with an additional $4-5 billion resident in the related (and broader) operations consulting market. Labor optimization services are provided by a variety of players, including technology vendors, lean/operations consultants, outsourcing firms and general consulting firms. The primary target market includes employers of large hourly workforces, including large health systems, retailers, manufacturers and facilities outsourcing.
Why workforce optimization, and why now?
An increasing interest in big data is driving the development of tools to capture enterprise and workforce analytics. Historically, most industry spend has been focused on data capture and creation. However, despite widespread investment in workforce management systems, software and time capture tools, most businesses have not unlocked the millions in value resident in this collected data.
Take healthcare systems, for example. These organizations hire large numbers of hourly employees, including nurses, administrative professionals and others. However, aligning staff to demand is a moving target – the number and type of employees needed for a shift varies widely depending on the characteristics of the patient population. By tying labor scheduling to electronic medical records, the health system can make efficient decisions about how to staff the correct caregiver at the correct time, without impacting its productivity goals or impacting the quality of patient care. With the correct labor optimization solution, health systems can develop best practice models and even move toward predictive analytics to drive high-quality care and improved patient outcomes.
Where are we headed?
The market trends related to human capital management are ripe for investment. Companies of all sizes are capturing invaluable workforce analytics. Because so many organizations are seeking additional expertise and solutions to deploy this knowledge, businesses with attractive workforce management solutions will be attractive partners for companies with an interest in optimization as well as investors with an interest in this space.
Baird Capital strives to build our portfolio companies into leading service providers in their respective markets. We seek opportunities to leverage our portfolio companies' client base, create operational efficiencies, support business development and enhance management teams to drive value in our portfolio for our investors.
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