Fail to plan, plan to fail

Workforce planning is on the increase again; we detail how best to approach it and provide examples from Essex County Council and Medway Council about their experiences.

Learning Points Workforce planning is concerned with having the right employees, with the right skills and behaviours, in the right place at the right time. Achieving this requires careful long- and short-term planning, and looking at recruitment, retention, staff development and training - and ensuring they are all aligned to business aims and objectives. An effective workforce plan can positively influence labour turnover rates and recruitment costs. A fully effective workforce plan can mean fewer redundancies if proper measures are taken during the recruitment and development of employees.

"The skill in good recruitment is about effective workforce planning, so you have a clear, longer-term view of the skills you require, and ensure that you put together a strategy to meet those needs," says Elaine Way, president of the Association of Healthcare Human Resource Management (AHHRM)¹.

Way was involved in negotiations surrounding the Agenda for Change agreement within the NHS - which is currently on trial at 12 NHS sites before a national launch in October 2004. She believes that HR is key to ensuring the success of a programme that she believes will transform the way in which NHS staff are rewarded and developed.

However, central to the change process is the ability to develop and enforce effective workforce planning. While significant progress has been made by the NHS in recruiting more healthcare practitioners, there are still considerable staff shortages.

Workforce planning is not only gaining prominence in the public sector. Private sector organisations such as Shell Oil, Intel, NASA, Microsoft and Motorola have developed a good reputation for effective workforce planning. As early as the 1970s, Shell was using scenario planning to explore possible future options for its business strategy, and the consequent workforce implications - one of which was a possible oil crisis. During the oil crisis that ensued, Shell was far better prepared than its competitors².

Workforce planning defined

Workforce planning is the process of ensuring that a business has the right number of employees; with the right knowledge, skills and behaviours in the right place, at the right time. Achieving this equilibrium is no accident, and requires careful long- and short-term planning, considering: recruitment, retention, staff development and training - and ensuring that they are all aligned to business aims and objectives.

At the heart of workforce planning is the desire to use employees to protect, maintain and, where possible, expand the business. Workforce plans must be living, organic documents that are widely understood and observed. They must help predict shortages or surpluses in employees, monitor the external environment so as to provide protection against competitors, legislation and other outside influences and ensure the business plan is supported.

According to Dr John Sullivan³, workforce planning "is based on the premise that a company can be staffed more efficiently if it forecasts its talent needs as well as the actual supply of talent that is or will be available".

A little history

The phrase "workforce planning" itself is one that is interchangeable with terms such as "human resource planning" and "manpower planning". Workforce planning was first used during the 1960s and early 1970s when unemployment was low and organisations had to deal with supply shortages⁴. It lost impetus after the economic downturn of the 1980s, but has gathered pace again given the growing awareness of the necessity for skills development and adaptability.

Effective workforce planning will have a positive impact on all areas of the business. Not least, such a process will give a good indication of the number of employees needed in the near and longer-term future. This allows organisations to eliminate, as much as possible, the element of surprise.

Reducing costs

An effective workforce plan can positively influence labour turnover rates and recruitment costs. Labour turnover rates will decrease as employees will receive the training and development, and career progression that will help them remain motivated and loyal. Recruitment costs will also deliver more value for money as the recruitment process should be more focused on finding the right employees not only for the immediate future, but also those with potential to develop in the future.

A fully effective workforce plan might also mean fewer redundancies, if proper measures are taken during the initial recruiting and development of employees. The development of a strategy to deal with peaks and troughs in supply and demand for different skills is a key part of a workforce plan.

Other benefits

The predictive power of workforce planning means that the company will be in a better position to meet business goals, irrespective of unexpected situations. An effective strategy will also allow organisations to launch new projects and ensure the internal talent is in place to meet project needs.

Workforce planning should also be able to identify early problems with skills shortages or surpluses before they reach major proportions.

Having the right nucleus of employees in place should also allow organisations to take advantage of opportunities, such as product development, as and when they arise.

For organisations that consider diversity and equality policies as part of their workforce-planning process, the plan should allow for more effective focus and monitoring in these areas.

Finally, employer branding is certainly influenced by effective workforce planning. The potential it offers to improve the effectiveness of recruitment and enhance employee retention is likely to raise the organisation's reputation as an employer of choice.

Employers' Organisation

As a testament to the growing importance of workforce planning, the Employers' Organisation (EO) for local government has launched a guide to the process for local authorities, designed to support employers in their recruitment strategies⁵. A key part of the guide is an eight-stage model for workforce planning, which can be used for authority-wide planning or adapted to the needs of individual services.

The guide also includes case-study examples of workforce planning undertaken by local authorities. Kelly Sandiford, assistant director, skills and development at the EO, says: "Effective workforce planning is an important tool to support authorities in maximising resources and building capacity in a structured and planned way. People are the key to improvement and capacity building, and organisations that plan well are equipped to manage both day-to-day business needs and to address changing priorities."

Workforce planning cycle

The workforce planning cycle, as outlined in the EO guide, is made up of eight stages. However, while organisations can make the process as complex and broad as required, it is a good rule of thumb to keep workforce planning as simple and systematic as possible, therefore ensuring its longevity as a process.

It is also important to ensure that all those involved in supplying information as part of the process are aware of what happens to the information and why it is being collected.

It is unlikely that an organisation will be able to implement something like a workforce plan without making some changes to the information it has to hand, or that which it collects. However, information from exit interviews or leavers' questionnaires will prove invaluable, as will all data held on file relating to current employees, including development plans, appraisals and qualifications and skills data.

Completing an organisation health check (see box 1 ) can be a good starting point for organisations prior to embarking on workforce planning.

Research conducted by the Institute for Employment Studies⁶ for the EO suggests that workforce planning should be "right sized" if it is to be effective - in that it should aim to cover areas in which it will have the most significant impact.

According to the EO, the foundations of an effective workforce plan are accurate information and having the infrastructure in place to collect and update it. Such information does not relate just to in-house issues, but may be influenced by external pressures, such as legislative changes, outsourcing decisions, change management initiatives and recruitment and retention difficulties.

All employee types - including temporary, agency and other types of workers not on standard working contracts of employment - need to be included in the data collection.

Assess where you are now

Profiling the current workforce to develop a clear idea of what staffing requirements will be required at key stages of the business plan is the first step in an effective workforce plan. Identifying the changes in the demand for and supply of employees can be achieved by considering the following:

proposed increases or decreases in company growth, output and revenue;

guestimates of the impact of such changes on the need for particular skills or employee numbers;

projections of future vacancies; and

consideration of the internal availability of skills required to meet projections, and of the external labour market to identify any problem areas or emerging trends.

As a result of these forecasts, specific action plans can be put together in the areas of recruitment, retention, redeployment, contingent workforce, leadership development and succession planning.

When all the background work has been completed, it is important to use the information that has been gathered to measure where the organisation is right now. Once the internal environment has been defined, it is then appropriate to start looking at the external and wider environment. Identifying future trends in the organisation's market and exploring how they can affect it can pinpoint priorities and underpin assumptions for the future.

And where you want to be

Planning where the organisation needs to be in the future is the most fundamental aspect of workforce planning. Unless there is a clear picture and strategy for the future needs of the organisation - with several different contingencies in place - then a workforce plan is just a paper-based exercise.

According to the EO, a useful tool in this process is using an investigative framework, which takes key documents and aligns them against key baseline data to throw up different scenarios for the future. For example, using this framework would include discussions of financial reports, control of corporate risk and budget reports.

Discussion would then centre on a few key areas relating to these documents, for example any specific issues relating to budgets that are known at this time, or the training cost per head within the organisation. When looking to the future, changes to funding levels or budget levels need to be considered.

Once the current workforce has been identified, and future needs discussed, a gap analysis is the next logical stage that brings the two sets of data together and highlights any particular areas of strategic weakness.

Gaps in supply and demand for employees can be caused by the following:

supply gaps associated with national and local labour market shortages. This may include a wide range of professions and, in particular, those in areas of skills shortages, such as teachers;

changes in demand associated with modernising the way in which services are to be delivered, including changing roles, new skills mixes, different ways of delivering services, such as outsourcing, partnerships or joint ventures;

skills shortages within the workforce. These may include basic/essential skills, customer care skills or managerial competencies;

areas of inefficiency caused by poor performance management, inappropriate job design or under-investment in training; and

voluntary labour turnover.

Forecasting the type and number of jobs that will be needed in the future identifies the skills, knowledge and behaviours required by both existing employees and potential recruits. Anticipating future changes can ensure that early action can be taken, such as implementing recruitment freezes or retraining staff to avoid redundancies.

Action plans

Strategies and action plans then need to be developed to ensure any gaps are dealt with in such a way that the organisation is not adversely affected. Ways have to be found to bridge any identified gaps between supply and demand.

Action plans have to be realistic and implemented without triggering counter-productive changes within the organisation. To be effective, action plans also need to be integrated into every aspect of workforce management and HR.

When preparing action plans, it will be useful to consider the following:

the importance of ensuring that HR strategy documents and action plans are continuously updated and continue to meet the needs of the business;

the need to cost the investment required to address any gaps in skills or competencies, and that it is best to calculate such investment at this time; and

the importance of focusing on the recruitment process to ensure it provides good value. Where skills gaps have been identified, ideally the recruitment process will be designed and structured in such a way as to minimise the amount of training required of new starters. Organisations can also consider employing those with skills that will be required in the future.

Succession planning

Succession planning is an important aspect of workforce planning. However, employers need to ensure that such activities are not contrary to equal opportunities in the workforce. According to the EO guidelines on workforce planning, succession-planning activities can be justified where:

the wider labour market will not provide the skills required;

equalities issues are considered prior to undertaking succession planning activities;

there is a genuine need to retain good employees; and

vacancies are regularly advertised externally to test the state of the wider labour market.

Key mistakes

According to Dr John Sullivan⁷, there are key mistakes that can reduce the effectiveness of any workforce planning. For workforce plans to be properly effective, he believes that they should be based on realism - both positive and negative - and have involvement and ownership from all areas and levels of the business.

Being realistic

Dr Sullivan suggests that organisations that are too ambitious in their approach to workforce planning will suffer the most serious problems. While approaching the process from a perspective that is too narrow may also cause difficulties, he believes that being over-ambitious can lead to the most serious problems.

Trying to identify and measure factors such as leadership assessment can prove problematic and take the focus and emphasis away from workforce planning. On the other hand, a narrow focus can exclude areas such as redeployment, retention, rewards and the use of contingency workforces.

Be prepared

According to Dr Sullivan, most managers are inherently positive thinkers and assume that growth will be required far more often than downsizing. While the UK labour market shows that the two trends often occur concurrently within organisations, it is important to consider both when planning workforce requirements.

Problems can occur when only periods of growth are factored into a workforce plan, as periods of downsizing or redundancy can then fall outside its scope - thus reducing its effectiveness.

Get the recruitment process right

Effective recruitment, selection, branding, development and reward can ensure effective workforce planning and deliver to organisations the "Holy Grail" of the right people in the right place and at the right time. Not focusing on these fundamentals will ensure that organisations continue to struggle with workforce planning, irrespective of how sophisticated its business-planning process may be.

Properly promote from within

Organisations need to become more proactive in the promotion and movement of the internal labour market. Generally, Dr Sullivan argues, the process of internal employees seeking other work within the organisation is left too much to chance. Instead, organisations should be looking at "intraplacement", as Dr Sullivan calls it. This, he says, requires that: "management must proactively direct top-performing workers to the areas within the firm where they will have the highest potential impact", rather than depending on employees seeking out positions.

Clear contingency plans

The use of temporary or contract workers is a fact of modern business life. Realising this and building it into a workforce plan ensures that, in periods of decline, permanent employees do not necessarily have to be the first to go. While increasing legislation in this area, for example the Employment Act 2002, means it is increasingly difficult to maintain an effective contingent workforce, it remains something that requires careful and realistic planning.

All aboard

While the HR department is best placed to devise a workforce plan, all of the organisation's managers have to be involved and contribute to it so as to ensure ownership. Without this ownership, the project will not succeed over time. Dr Sullivan suggests that "great workforce plans are 'owned' by line managers". Workforce plans should not primarily be seen as a means of cutting labour costs during a period of decline without cutting profits, because the end result could mean adversely affecting both.

In its guide to workforce planning, the EO suggests that one way of obtaining buy-in is to assign particular tasks relating to the planning process to senior managers and employees.

Appointing a project manager is an effectivemeans of ensuring ownership, as well as establishing a steering group made up of employees from all levels of the organisation. Such groups should be involved in setting timescales and planning, including monitoring, follow-through and setting priorities based on issues emerging from the workforce planning. However, the process should be the ultimate responsibility of HR, the EO argues. Organisations can also use "champions" of the process to "spread the news" and own the process.

Here's one we prepared earlier . . .

As examples of the ways in which organisations are engaging with workforce planning, we describe below the experiences and problems that Essex County Council and Medway Council have faced when going through the process.

Essex County Council decided to use both quantitative and qualitative tools to collect relevant information for its workforce planning project. While this is labour intensive, such an approach can provide a mass of detailed information based on employees' opinions and work patterns that is not easily available through other means.

Centralising workforce information

With employee numbers running beyond 40,000 and a budget of more than a billion pounds a year, Essex County Council was keen to ensure it had up-to-date and effective workforce planning in place. One of the first steps it took to achieve this was its decision to centralise its workforce information across the whole organisation using a dedicated Oracle computer system, held in departmental databases. This IT project is currently under way.

One department of the council, Essex Children's Services, identified that it had severe skills shortages among social workers. The council has double the national social services vacancy rate - 25% compared with 11.3% - and was facing stiff competition from other authorities to attract and recruit the relatively small number of qualified practitioners available in the area.

Focus on internal talent

Faced with limited opportunities to increase the recruitment of qualified social workers, the council decided instead to focus on the capacity of the current workforce. Essex County Council felt thatsocial workers were spending too much of their time on administrative tasks that could be done by increasing the number of administrative support staff.

To explore this further, the council conducted a survey exploring three "job families" within the department: Care Management, Specialist Health and Community Support, and the state of current workforce activity. Conducting such a survey would also allow HR to identify staff performance and capacity issues and opportunities.

Staff survey

Once the survey had been developed, a workshop was held to discuss the aims of the project and the expected outcome of a new workforce model.

The survey - distributed to more than 500 staff - appeared in three sections. The first sought basic information, such as name (if the respondent wanted to supply it), their role and their type of employment contract.

The survey next explored how staff spend their time during the week and the volume of service activity during that time. Respondents were also given the opportunity to provide feedback on the ways in which they considered that the service and their job role could improve or change.

Specifically, respondents were asked to think about tasks they perform and consider if there were any that:

should cease;

should be done in less time;

should be done by someone else;

should be allocated more time;

are not done now but could be in the future; and

those they felt they should do that are currently done by someone else.

Workshop

Following completion of the survey and analysis of the results, a further workshop was held to discuss the findings among social workers. The workshop also considered the changes to the job role that the findings had identified were necessary.

As a result of the survey and workshops, the Council developed a number of proposals, including the development of multi-agency healthcare and a proposal for professional input to develop the skills levels of staff in residential/private homes.

Lessons learned

While this approach produced high-quality data, HR and the project managers encountered some difficulties, essentially relating to staff support and participation. An internal evaluation exercise carried out by the team identified the following lessons:

communication with staff and liaison with the union at every stage of the project were important to ensure clear understanding of the project aims and gain staff support and participation;

careful planning - including a pilot - of the staff survey to ensure a high survey return rate;

at least one member of the project team should have strong analytical skills to enable careful survey design and analysis of the data captured; and

proactive engagement of managers is required to ensure their ownership of the issues raised through the survey process.

Medway Council employs more than 7,000 people and was set up in April 1998 as a result of a re-organisation of Kent County Council, Rochester-upon-Medway City Council and Gillingham Borough Council.

Legal requirements

Workforce planning within the council is being driven by the need to bring current workforce practices in line with the Care Standards Act and the resultant changes in the way in which services were being delivered.

Given statutory minimum qualification levels in the social care sector and the council itself, partnership working with health authorities and contracts with the private sector, effective workforce planning is key to ensuring the Health and Community Service Directorate meets its aims and objectives.

Senior management at the directorate has taken responsibility for the workforce planning project so as to deliver a top-down approach and encourage participation and ownership by all employees.

The first step in the process involved the council trying to compile detailed workforce information. At this stage, it became apparent that the current systems were not satisfactory and required an overhaul.

Engaging external consultants

As a result, an external consultancy has been contracted to produce the workforce data required. Workforce planning and development teams have also been set up to feed into the process, and consider such factors as recruitment, retention, impacts on future staffing, new roles/working practices, new skills/competencies, and training and development implications.

Alongside these internal factors, the teams are also exploring labour market data on a continual basis, including local labour market characteristics and comparative data on pay.

The council has decided to concentrate on defining issues that are the most important in terms of service delivery, and those that will have the greatest impact on recruitment and retention. The next stage in its planning process will now be to ensure that current initiatives are in line with emerging priorities from the workforce plan and to address any gaps.

Lessons learned

The council has identified the following as the key factors to ensuring success in beginning a workforce-planning exercise:

involving a senior manager to champion the project at a corporate level raises the importance of effective workforce-planning activity;

while it is vital that the HR department is involved in the process, the process also needs contributions from other departments in order to be sustainable;

the creation of workforce planning and development teams ensures better understanding and ownership of the project, and means that all issues raised are relevant to all employees; and

involving external advisers can have a positive effect on the project, specifically in overcoming the problem it experienced of inadequate data generated by the in-house management information system.

1. "HR must drive change in health service", Personnel Today, 8 September 2003, www.personneltoday.com.

2. "Why workforce planning is hot", Dr John Sullivan, Industry Trends, 29 July 2002, www.erexchange.com/articles.

3. "Why you need workforce planning," Dr John Sullivan, Workforce Management, November 2002, www.workforce.com.

4. Human resource planning: an introduction, Peter Reilly, Institute for Employment Studies, 1996.

5. Guide to workforce planning in local authorities: getting the right people with the right skills in the right place at the right time, Employers' Organisation, available from www.lg-employers.gov.uk/publications.

6. Workforce planning: the wider context, Employers' Organisation for local government and Institute for Employment Studies, July 2003, www.lg-employers.gov.uk.

7. "Why workforce planning fails", Dr John Sullivan, Electronic Recruitment Exchange, 19 August 2003, www.erexchange.com.

This article was written by Noelle Murphy , research officer, IRS Employment Review, noelle.murphy@irseclipse.co.uk.

Document extract

1. A health check for workforce planning

Introducing a workforce-planning system to complement performance management requirements	Score 1-5
Do you have a business/service planning process, which integrates corporate and departmental objectives?
Are your business/service plans with their resource implications communicated between departments and the HR function?
Does your authority work to a holistic one-organisation approach to people resourcing?
Does your authority develop longer-term business/service plans, providing a framework for shorter-term decision-making?
Does the planning process link finances, human and other resource-related issues for both short-term and longer-term budget and business/service strategies?
Do your planning cycles complement and feed into each other, eg business planning, project planning, team performance and individual performance assessment and training and development requirements?
Do you evaluate the cost of turnover within your organisation (ie hidden costs such as expertise but also direct recruitment and training costs)?
Does your authority have the capacity (skills, knowledge) to prioritise and undertake workforce planning?
Is the authority clear about what it wants to achieve through workforce planning and has it communicated this to stakeholders?

Assessing current capacity and planning for the future	Score 1-5
Do you have a clear assessment of the numbers of employees and the skills needed to carry out today's tasks efficiently?
Do you have comprehensive, up-to-date and accessible personnel records?
Do you have information on employee skills and training records for the whole workforce?
Do you capture the reasons why people leave your authority by department, grade and occupation?
Do you know how long employees stay with the authority?
Do you have a clear assessment of any areas of instability caused by turnover/absence, etc?
Do you know how employees progress within the organisation, eg career pathways?
Do you have a "map of change" (or organisational development activities) and how it will affect the numbers and types of employees required, eg e-government, Best Value recommendations, etc?
Do you know where you will have an excess or deficit of employees in particular functions, locations, grades, depending on available business/service strategies?
Have you considered only one view of the future or a number of different scenarios?
Do you have a training needs analysis that considers the range of skills employees will need in the future in order to deliver improved services?
Do you have a training plan that addresses the future skills needs of employees?
Do you have recruitment and retention strategies that support the business objectives and link to your workforce requirements for the future?

Monitoring and evaluating your systems	Score 1-5
Do you have a workforce plan that supports and delivers business/service improvement?
Do you review and, if necessary, revise the workforce plan, particularly in response to unexpected changes?
Is workforce-planning information valued by managers and used to feed back into the business/service planning cycle?
Have you developed a clear cost/benefit analysis of workforce-planning activity that can demonstrate added value?
Do you have a defined set of indicators against which to measure the performance of strategies arising out of the workforce-planning activity?
Does your authority have an information/knowledge management strategy that will improve the capture, storage and access to data for management information purposes?

Source: "Guide to workforce planning in local authorities", Employers' Organisation, August 2003.

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2. Information required by organisations for effective workforce planning

Planning	Input	Outcome
Supply analysis: use of data-collection tools	Workforce demographic and personal data, including turnover	Workforce profiles, such as age, gender, job type, length of service, tenure, ethnicity, disability
	Workforce skills/experience/job data	Trends such as turnover, retirements, redundancies, skills changes, ill health, accident rates
	Staff survey data, organisational health check information and exit interview data	Workforce skills information, current skills, training and learning data
	Workload measurements	Staff perception and involvement
	Performance management information	Local labour market supply information
	Establishment information
	Outsourced contractual information and partnership information
	Financial data, agency costs and on-costs
	Labour market data, for example unemployment rates, local skills base
Needs analysis	Strategic objectives for the organisation	Future workplace trends
	Management assessment of business plans and HR implications	Implications of e-government
	Review of Best Value reports	Workforce profiles, skills, numbers, occupations
	Review of internal informal inspection reports and audit reports	Turnover, retirement projections
	Budget plans	New responsibilities, changed roles creating different jobs and potential skills gaps
	Performance management information	Proposals for filling skills gaps cost-effectively

Source: "Guide to workforce planning in local authorities", Employers' Organisation, August 2003.