Plan of action
In a fast-changing global economy, world-class workforce planning is the key to success. By John Sullivan.
It's an unforgiving world for those who don't plan. Many workforce strategies in place today fail to consider the effects of industry consolidations, shifts in retirement patterns, trends in talent migration, or new developments in technology. In a fast-changing world, the message is clear: fail to anticipate major problems, and a problem may become so severe that it becomes unsolvable.
The only viable answer? Put more resources into anticipating and preparing for the upcoming wide range of workforce issues your organisation could experience. The time for world-class workforce planning is now - and companies that ignore this are destined to find out that the talent shortages of the late 1990s will, for them, become permanent.
Being strategic means planning ahead
While most HR people assert that they are 'strategic', many are repeatedly surprised by events that occur around them. Being strategic, by definition, equates to looking and planning ahead so that you can be prepared to act quickly when either a positive or negative business or economic event occurs.
Most HR departments are reactive, at best. They are so busy fighting those metaphorical fires that they forget to spend the necessary time preventing them. Or when they do forecast, they fail to take the action needed to take advantage of the advanced information. For example, a large retail chain accurately forecasts growth patterns and the resultant need for additional employees. Then, however, it fails to take any proactive recruiting actions until the day that the recruiting department actually sees a hiring requisition.
Fortunately for HR managers, the golden age of strategic workforce planning is dawning, thanks to new tools, strategies and a wealth of data. The last decade was aptly labelled 'the war for talent'; the cycle now underway might be best labelled 'anticipate and prepare, or perish'.
Strategic workforce planning defined
The goal of workforce planning is to manage the people inventory in order to provide managers with the right number of people, with the right skills, in the right place and at the right time. Strategic workforce planning is the systematic process of trying to avoid talent surpluses or shortages by identifying and addressing the gaps between a company's workforce of today and its human capital needs of tomorrow. It is based on the premise that by forecasting both talent needs and the supply of talent, a company can be more efficiently staffed, and thus avoid the need for layoffs or panic hiring.
Workforce planning might be more accurately called 'talent planning' or 'talent supply chain' because it integrates the forecasting and planning elements of each of the HR functions that relate to talent, including recruiting, retention, redeployment as well as leadership and employee development. Effective workforce planning's ultimate goal is to remove recruiting, retention and leadership bench strength from the agendas of senior managers (because effective planning has made them non-issues).
What kind of events should be forecasted or anticipated?
It doesn't take a rocket scientist to realise that the world of business is changing and that anticipating what types of events may occur and affect the talent pool is essential. They include:
- Terrorism and other physical disasters
- Stock market downturns
- Accounting irregularities
- A significant decrease or increase in product demand
- Mergers and acquisitions
- The bankruptcy of a major competitor
- Wars and civil disruptions
- Labour shortages and surpluses
- Failed government approvals (namely pharmaceuticals)
- Class-action lawsuits
- Shifting demographics and their related work-life issues
Although individual events are, by themselves, difficult to forecast, few would argue about the inevitability of such events increasing in frequency. HR strategies must be flexible and able to deal with economic events.
When companies do have workforce plans, most plans merely project a steady 2 to 5 per cent straight-line growth rate, based either on historical growth patterns or on wishful thinking. Unfortunately, the business world all too often fails to follow simple historical patterns. A 2002 study on strategic alignment, by CIO Insight Magazine, found that only 20 per cent of the executives polled used some type of formal process to connect organisational performance to strategic goals.
The same study went on to show that, for 50 per cent of the survey sample, the tactical efforts of line employees - who represent the largest employee population - are poorly, if at all, linked to corporate strategy.
HR must also learn to connect its programs to the changing organisational strategies. HR must, like the business, adapt to the changing business environment. HR strategies that work well in high-growth, low unemployment times, will more than likely be ineffective during a recession or periods of high unemployment. Unfortunately, HR often plans and then develops programmes and processes without considering the constantly changing environmental factors that impact business.
If HR leaders expect to be corporate heroes, they need to go beyond this static or historical model, and instead move towards a more flexible, or agile model that:
- is aligned with the future product development, growth and business initiatives for your company
- forecasts trends in your respective industry
- quickly adapts and adjusts to the ever-changing business and economic events that take place every day
So why doesn't HR forecast or plan?
Up until the 1980's, many large HR departments in the US (less so in Europe) included a centralised workforce planning function. Then, when a major recession hit around the globe, most workforce planning efforts were eliminated because they could not effectively demonstrate their economic value. And even when times got better in the 1990's, workforce planning remained dormant. As a result, no one in HR has any knowledge or experience in forecasting or workforce planning. Consequently, HR departments today don't even attempt to forecast the impact of external events (such as unemployment rates, changes in the economy, competitor actions, etc) that directly impact their firms' operations.
Even when HR does undertake workforce planning, it is often not effective. Reasons for HR's inability to plan may include:
- HR professionals often have skills and interests that are mostly operational and tactical in nature. Also, they often lack the business and economic acumen needed to understand how changes in demographics and economic factors directly impact on firms' talent strategy. Their short-term tactical focus prevents many from understanding the direction their organisation is moving in so that HR can align the workforce to meet the future product and service demands of the firm
- Most people who work in HR have neither a degree in business or profit and loss experience. Either could provide them with the insight they need to identify and take advantage of identifiable business patterns.
To excel at planning, HR must become more forward-looking. Instead of reacting to events, it must learn to anticipate them. Instead of having only one solution to each forecasted problem, HR must provide a range of solutions to meet the diverse needs of regional managers around the globe. A forward-looking HR strategy that includes data and information gathering elements could provide HR and managers with sufficient 'lead time' to avoid or minimise any talent problems that result from the changing business environment
A new era of workforce planning is upon us
Fortunately, more CEOs and CFOs today see the need to apply effective supply chain and inventory management techniques to the talent supply chain problem. Because of these and other changes within HR, additional tools and technologies now make forecasting and workforce planning more practical. They include:
- increased access to high-power computing resources within HR
- access to enterprise-wide software packages, which allow them to easily collect data not typically used by HR, such as historical sales performance and product development life cycles. Many of the larger enterprise resource plan programs already contain analytics and metrics components that could help HR and managers track trends as well as make more educated decisions
- increased access to a wealth of global information and data from government agencies around the world now available on the internet
- the development of 'if-then' and 'what if?' scenarios (scenario planning) and simulations to help us anticipate and improve our response to events
- an increase in the number of HR professionals who are trained in business, statistics, metrics and the use of advanced software
- access to numerous investment banking firms, stock analysts and
professional associations who are now making their forecasts available to the
public
Forecasting and planning can be complicated, but the ROI is high
Anticipating events is difficult but being strategic is, by definition, more difficult than being a tactical player. But rewards related to anticipating events are significantly higher than just reacting to them.
Incidentally, because downturns in an economy tend to come on more quickly than upturns, identifying and being prepared for downturns generally has a higher return on investment than anticipating an upturn. Ideally, you need to be prepared for both, but if you can only manage one... prepare for the downturns.
Conclusion
Dramatic improvement in HR forecasting and real workforce planning is now possible because of the emergence of technology and the internet, which gives any HR professional widespread access to a wealth of data and information on economic and industry trends. As more and more functions within the overall HR department begin to rely on databases and metrics, it will become even easier to share information, to identify patterns, and to accurately forecast upcoming events. The time to act is now. Vice-presidents of HR need to begin developing forecasting and planning functions and to identify workforce-planning leaders. In a fast changing world, the only other option is being outsourced.
Telling managers about yesterday is like rehashing bad news - it has no value. Nothing will 'wow' managers more than putting a stake in the sand and predicting a future event. If you accurately forecast what will happen, your status as an expert in people management will forever be etched in their minds.
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