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Peter Howes

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Workforce planning: Helping to deliver on promises

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Peter Howes identifies the five areas that must be considered to successfully cope with an increasingly unpredictable business environment.

 
Workforce planning means taking the steps today to ensure you have the right people with the right skills in place at the right time. It’s a way of translating future business strategy into workforce demand forecasts and it is used to reduce business risk associated with workforce capacity, capability and flexibility. It can be used to compare demand to the anticipated workforce supply; to identify approaches to mitigate risks of gap and strategies to close gaps; identify financial and intangible costs to the business; and it helps to create the appetite and energy to act today. Importantly, it also quantifies the workforce in a way that CEOs and CFOs understand.
 
Generally, organisations are well-aware of the potential for workforce planning. Infohrm’s 2008 global survey of HR professionals identified that 49% of respondents already conduct workforce planning, while another 45% intend to implement such processes within three years. Only six% had no plans for workforce planning processes.
 
I suspect that if we ran this survey now the figures would be markedly different. HR professionals who delay their engagement in workforce planning are going to find the fluctuating business environment an increasingly unmanageable challenge.
 
An economic downturn brings a new dynamic to HR. Money becomes tighter. Management looks for a return on every investment yet at the same time, competition for good labour remains an agenda item. New technologies keep demanding new skills and matter how much you may consider cutting back, developing and replacing skills is paramount, and this is where the value of workforce planning comes in.
 

Making the difference – tools for perfect planning

  1. Measure the health of your current workforce
    This requires going further than the initial snapshot of organisational health. Consider the risk of vacancies of certain positions and how they may impact the organisation. What would be the ramp-up time to bring a new hire up to speed? Look at the age distribution of critical job families and the effects of current reductions on typical succession paths. Analyse the voluntary turnover in critical job families by segment, and the career path and experience profiles of your workforce. 
     
  2. Evaluate the current workforce to identify potential risks
    Focus on roles – not people – and identify the pivotal roles; those that conduct the core business; the positions that may become part of the core business under future scenarios; roles that have been difficult to fill or require a long training time; and those that have the largest number of staff. This is your list of critical job roles for workforce planning regardless of the economic conditions. Use it to institutionalise a framework for categorising, analysing and reporting trends, and develop segment analyses and strategies for each segment. The end result of this framework is a map of your organisation’s human capital.
     
  3. Use scenarios to work with uncertainty
    Scenarios are the articulation of what we predict will significantly impact the business during the forecast period. They typically take into account projected economic conditions in three, five and ten years time, although given the speed of change right now, some industries need to work on shorter time-scales.

    The scenario builds a picture of how the external environment (and economy) will affect the business, and how the business will operate to most effectively respond to these impacts. The key characteristics of scenarios include focus on a range of plausible outcomes for GDP growth, market share, commodity prices, exchange rates, technology and innovation. To be of any use scenarios should concentrate on the most relevant issues to the business, bridging the gap between intuition, educated guess and fact. The importance of scenarios is that they ensure a workforce plan is a true planning document and not just a budgeting process.
     

  4. Identify potential shortfalls in external labour supply
    While you can’t control the external environment, it is essential to account for it during planning. This is where HR looks outside the organisation to consider societal and demographic trends that might impact the supply of talent for critical jobs. If the right number of qualified trainees is not coming through the education or trade system, it could be time to develop alternative strategies. In the past this has included partnerships with universities and trade schools; pre-active retraining of existing staff and the development of new career paths; and redefining job roles and responsibilities. Resources may need to be reallocated to attract key talent.
     
  5. Estimate the financial impact of workforce strategies
    This last step is potentially of most interest to other senior management. This is where questions such as the estimated savings of targeted reductions in voluntary turnover for critical job role and/or tenure groups are quantified. Other figures that should be derived include the extra costs incurred by filling gaps in critical job roles by using contractors and temporary staff; the impact of exporting labour to cheaper labour markets now and into the future; the savings of recruiting at lower levels and developing employees internally; and the estimated cost of filling critical job roles when the economy recovers.

When integrated with other planning processes, these tools provide real value to the organisation. Planning will help to reduce labour costs by ensuring the correct skill mix and by not having surplus staff with inappropriate skills. It will support the creation of more cost-effective learning and development opportunities that come from productive, on-the-job experience. It will minimise the impact of skills shortages and is instrumental in being able to offer better career management that benefits both the employee and the company.

Making the difference – delivering real business benefits

 
No matter how thorough or far-sighted the workforce plan, it will only ever be as good as the resulting action. Plans that are not carried through or kept up to date with evolving scenarios quickly become worthless and demean the value of the overall HR effort.
 
More than ever, HR needs to be relevant and responsive by understanding what the critical job roles and job families are that need to be retained and invested in. Whatever decisions you take and however you decide to make them, the essential thing is for HR to have insight into where strategies should be directed and that requires looking deep into your own organisation. Good forecasting and planning will ensure that these decisions are made in a robust manner and that they don’t just rely on gut feelings.
 
 

With over 30 years’ experience in human resource management, founder and chief executive officer Peter Howes has a distinguished global reputation as a consultant in HR metrics, analytics and workforce planning. Peter’s major area of consulting over the past 25 years had been in workforce planning and HR/HCM analytics, reporting and measurement. For more information visit www.infohrm.com

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