Coming of age for workforce planning

AN AGEING workforce and an emerging baby boomer retirement wave are driving more companies toward strategic workforce planning, according to a recent US report

AN AGEING workforce and an emerging baby boomer retirement wave are driving more companies toward strategic workforce planning, according to a recent US report.

Strategic workforce planning involves analysing and forecasting the talent that companies need to execute their business strategy.

This relatively new management process is being used increasingly to help control labour costs, assess talent needs, make informed business decisions such as where to open new facilities or whether it’s more cost effective to add full-time employees or contractors, and to assess human-capital needs and risks as part of overall enterprise risk management.

Strategic workforce planning is aimed at helping companies make sure they have “the right people in the right place at the right time and at the right price”, The Conference Board report found.

Other forces driving strategic workforce planning include: current movement and projected labour shortages; globalisation; the growing use of contingent, flexible workers; the need to leverage human capital to enhance return; mergers and acquisitions; and the evolution of workplace technology and tools.

“In many companies, traditional workforce planning was an onerous process that HR imposed on management,” said Mary Young, senior research associate for The Conference Board.

“Too often, the net result was a humongous report, blinding spreadsheets, and a dizzying amount of data that provided very little value to the business.”

Methodology is rapidly advancing in response to changing business needs and new tools and technology.

Some organisations have enhanced the simple gap analysis (workforce demand versus supply) that constitutes traditional workforce planning by adopting the logic and analytical tools of other corporate functions, such as finance, strategic planning, risk management, and marketing, the study found.

But the crux of strategic workforce planning is conversation and a process of enquiry, rather than reliance on spreadsheets crammed with tiny numbers.

To engage senior executives in workforce planning, the process must focus on understanding the strategic business plan and its broad implications for the company’s workforce.

Establishing consistent, organisation-wide data is a prerequisite to winning executives’ confidence in the results of strategic workforce planning, the Strategic Workforce Planning: Forecasting Human Capital Needs to Execute Business Strategyreport found.

Other challenges include making the process and tools simple and efficient, developing HR’s capabilities and comfort level, establishing a common language to describe jobs and required competencies, integrating workforce planning with business and budget planning, and driving the plan deep into the organisation.

Most companies are still in the process of fully implementing strategic workforce planning or realising its ultimate potential.

Organisations still in the process of implementing workforce planning already report benefits such as generating insights and knowledge executives can use to make business decisions, providing a deeper and more nuanced understanding of workforce dynamics than was previously available.

It also enables HR to realise its long-held desire to become a player and a valued contributor to high-level business strategy decisions among other executives.

“Strategic workforce planning enables the organisation to slice and dice its workforce data to discover critical issues, compare different groups, understand patterns and trends, home in on critical segments of the workforce such as mature workers and top performers, and customise its approach to managing different segments of its workforce,”said Young.

“By enabling leaders to see across lines of business, workforce planning can leverage talent within a company. Ultimately, the same workforce planning database tools will enable employees to shop for new jobs, assess their own developmental needs, and prepare for career moves inside the organisation.”

The report recommended that organisations build on previous successes, such as succession planning or embryonic workforce planning efforts, as a first step in company-wide implementation.

It also stressed that HR look for partners in departments such as finance and IT to move the process forward.

“While no organisation claims to have achieved it yet, many believe that the ultimate payoff from strategic workforce planning will be a vibrant, internal job market that transcends the boundaries between business units and geographies,” said Young.

“The company will be able to mine employee data to locate talent anywhere in the organisation, woo passive job candidates, and find the best use for each employee.”

Workforce planning at five major firms

The traditional approach to workforce planning analyses the gap between supply and demand, and creates a plan to address future staffing needs. This method is used by Providence Health System, as described in The Conference Board report.

The workforce analytics approach mines current and historical employee data to identify key relationships among variables and between workforce and business data. Dow Chemical has favoured this approach throughout the ten-year evolution of its workforce planning process.

The forecasting and scenario modelling approach uses data to create forecasts incorporating multiple 'what if' scenarios, which enable executives to evaluate strategic options. A major bank described in the study can decide where to locate a new call centre based, in part, on this kind of analysis and forecasting.

Human capital planning, as used by Corning and others, segments jobs based on their "mission criticality" and makes different levels of workforce investment in each segment. It focuses on broad trends over a three to four year period, rather than on a precise headcount and short term plans.

Hewlett-Packard and IBM are two of the companies described in The Conference Board report as committed to relying on strategic workforce planning, which must be customised to the specific conditions and needs of each company.

In IBM's case, HR and finance departments help senior business leaders plan realistically to execute their business strategy and manage drivers of labour costs. For HP, high-level discussions and a two-way educational process between business leaders and HR emphasises the qualitative over the quantitative.

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