The Executive’s Guide to Strategic Workforce Planning
Why strategic workforce matters to you
Strategic Workforce Planning is a process that ensures that your business has the right people in the right jobs at the right time to achieve your expected results. This discipline helps organizations understand their current state, forecast talent gaps and take the necessary steps to close those gaps. It is a core business process that is often handled by the HR department, but it is so important to the success of a business that business leaders should approach it proactively and take ownership of it.
We’ve all heard the saying that “failing to plan is planning to fail.” The traditional strategic planning process often focuses heavily on large capital expenditures, technology and marketing investments. But the traditional process focuses too little on the organization and the human resources necessary for sound execution.
It is almost as if the business takes for granted that it already has the people with the necessary capabilities. The truth is that it can take several months, if not years, to get the right people in the right jobs, and this can seriously hinder the execution of even the most well-thought-out strategy. Profiles International polled their experts and asked them to define a simple, straightforward strategic workforce management process.
The steps in the strategic workforce planning process are:
1. Establish where your business is going.
2. Understand where the labor market is going.
3. Understand your future talent demands.
4. Assess your current talent inventory.
5. Identify your talent gaps and strategies to close them.
6. Implement your strategies.
We will elaborate on these six steps and offer some commonsense advice for undertaking this important process.
1 – Establish where your business is going.
Business strategy drives the organizational structure and jobs.
The first step in the Strategic Workforce Planning (SWP) process is to have a clear understanding of your business strategy. At the end of the day, your workforce is there to implement the strategy and achieve the expected business results. Elements of your business strategy that will have the greatest impact on your talent strategy include:
1. Areas of your business that you want to grow.
2. Areas of your business you want to maintain but make it more profitable.
3. Areas of your business that you want to divest or exit.
What does this changing strategy mean for your business?
This is a crucial question that must be understood at the execution level, the business unit level and the front-line operational level. Strategic change fails when the people implementing the change don’t know what they need to do differently in order to support the new strategy. These disconnects create confusion, conflicts, and stress, and even put the best people in a position to fail. Make sure you have thought through the operational details of your strategy, and that you have sufficient facts and support to make a good decision,
How far, how fast?
Know how far and how fast you can reasonably move. It takes time, money, and thought to design and build technological infrastructure, production facilities and distribution capability. Similarly, it takes time to source, deploy, and train talent. This is even more true when your workforce requires special skills or credentials, or when jobs are in a talent-poor or highly competitive region.
The bottom line is that you need to know your business strategy, and the impact of that strategy before you can create a meaningful workforce plan.
Although 92% of companies have some level of workforce planning, only 21% of companies take a strategic, long-term approach.
2 – Understand where the labor market is going. Scanning the market helps you identify talent supply and limitations.
Understanding the labor market for the jobs necessary to drive your strategy will help you better understand the length of time it will take to fill a job, the salary you should expect to pay for the job and potential challenges to fill the job. For example, maybe there is a need for a new school in a growing suburb, but the area is expensive, and it is difficult to attract teachers. You need to take these factors into account as you build your SWP.
Common factors to consider include:
1. Macroeconomic forecasts – a vibrant growing economy usually increases demand for talent and raises the cost of employment. Conversely, a challenging economy often increases the supply and affordability of even the very best talent.
2. Demographic trends – the age of the available workforce can be an indicator of the capability and availability of workers in an area. Therefore, it may be desirable to locate a technology business near a college town as opposed to a retirement community.
3. Regulator changes – think about what would happen if the U.S. government suddenly offered universal healthcare. People who work for larger organizations because of the health benefits may choose to enter business independently, and this changes employment mix.
4. Talent movement trends within your industry – who’s moving, where are they moving and why? This can be driven by many external factors such as better job security, better pay or the opportunity to do the most interesting work.
3 – Identify your future talent demands. Business strategy drives organizations and job design.
Once you have translated your business strategy into operational requirements, you must design the organization and the jobs necessary to implement the strategy. If you contrast this with your organization and the jobs as they stand right now, you can identify the jobs you will need to create, the jobs you will need to phase out, and the optimal timing of your transition.
As with most forecasting efforts, identifying talent demands can be part art and part science. We need to make certain assumptions when we develop our business strategies, and the further ahead we plan, the more uncertain those assumptions become. Rather than getting bogged down in the minutiae, we recommend first focusing on critical roles and critical employee segments.
Critical roles are those jobs that are mission critical to your future business strategy. If you don’t have a solid plan for filling these roles with capable people, the business strategy simply won’t come to life. For example, a new cardiac ward in a hospital needs cardiologists and acute care nurses to function.
Critical employee segments can include mature workers, visible minorities, members of Gen Z, ethnic groups, veterans, and others. They can be strategically important to certain organizations that need to fulfill requirements for certain types of government contracts or grants or want to meet the needs of key customer groups. For example, if a retail organization wants to position itself in areas of growing Latino populations, then they need to have Latino employees.
Focus on what really matters to avoid “paralysis by analysis”
4 – Assess your current talent inventory Who’s on first: what’s on second.
Once you understand future demand, the amount of change needed and the optimal timing of that change, you should inventory your current talent pool. This will help you determine how to eventually transition people into new roles. It will also give you insight into who won’t fit into the new organization and help you create an exit plan.
There are three key questions you need to answer:
How well will the worker “fit” the new job? You need to know if he/she has the behaviors and interests to be productive in the job. For example, if the new job requires him/her to think more strategically and less tactically, does he/she have the DNA and the desire to make that leap? If they do not fit well, you might be able to place them in a different job that fits them better.
Will the worker have the “skills” to perform the new job? It is much easier to teach skills than to change their behaviors. However, you need to know what skills the learner needs to acquire and how long it will take to acquire these skills. This helps you focus your training investments most effectively. There are several assessments to help you answer these questions.
How is talent currently moving in your organization? You need to understand how long talent stays in your organization. This can be accomplished by analyzing demographics and when they might retire, and by understanding your voluntary and forced attrition.
5 – Identify your talent gaps and your strategy to close them.
The age-old strategic planning questions: What? When? How?
once you have assed your internal talent inventory and understand the jobs necessary for executing your new strategy, you can identify your gaps, determine a time frame for closing those gaps, and create specific tactics for closing those gaps.
We mentioned earlier the importance of focusing on critical roles and employee segments. The next step is to run scenarios to understand how the availability of these critical roles or segments impacts the rest of your business plan. Timing is important, which is why we examined the labor market earlier in the process.
You typically have four options as you seek to fill these roles. They are “The Four B’s”
Build. Developing your internal talent helps you build a cohesive culture and sends a strong message to your people that you are committed to them. It also mitigates risk since you know the employee, the employee knows you and the transition can be relatively quick.
Bounce. Redeploy talent from obsolete or redundant jobs, as well as people who don’t fit well with the new jobs that they may be qualified to fill. This can also mean bouncing the employee from the organization altogether.
Buy. Recruit outside talent. This can be expensive, slow and risky. Recruiters are often involved, the process may be long, due diligence takes more time, and it is still difficult to predict whether the outside hire will be successful in your organization.
Borrow.Procure contingent or contract labor. This is increasingly popular for new ventures because it is highly flexible and allows you to “try before you buy”.
6 – Implementing the process. Process is the key word to remember.
Strategic workforce planning is a process, not a one-time event. Like other business processes such as Total Quality Management (TGM) or 6-Sigma, SWP requires a continuous improvement mindset. By standardizing our approach to a very important and challenging business problem, we reduce errors and better understand the factors that drive success. This ultimately reduces costs and increases effectiveness.
Below are three key lessons that will help SWP efforts succeed.
Secure top-level executive sponsorship.
Although the name “strategic workforce planning” is bound to get the attention of the HR department, its scope far exceeds the mandate of most HR departments and even senior-level HR executives. HR can facilitate the process, but the business and functional leaders need to be intimately involved in order to ensure that their needs are met. If they lose confidence in the process, they will resist it.
Don’t attempt to swallow the entire elephant at once.
As we mentioned, SWP is a process that reaches broadly within an organization and requires a continuous improvement mindset. It is best to focus on the critical roles or most significant pain points first and build positive momentum through quick wins. Use focused pilot projects to learn how the process will work in your organization before reaching out more broadly.
Establish and track leading metrics.
Inspect what you expect, starting with a few key metrics. Start simple and stay the course. This discipline will help you make informed decisions that maximize benefit the business.