Strategic Workforce Planning

August 8 2006 - A study from The Conference Board reports that the aging workforce and an emerging retirement wave among 'baby boomers' are driving more businesses toward 'strategic workforce planning'.

Strategic workforce planning is a new approach to traditional human resource planning that involves analyzing and forecasting the talent required by organizations to meet the objectives of their business strategies. It helps:

• control employee costs
• assess talent needs
• make informed business decisions such as whether it's more cost effective to outsource an activity or add full-time employees
• assess human-capital needs and risks

In short, according to the study, Strategic Workforce Planning: Forecasting Human Capital Needs to Execute Business Strategy, strategic workforce planning is aimed at helping businesses ensure they have the right people in the right place at the right time and at the right price.

"In many companies, traditional workforce planning was an onerous process that HR imposed on management," said Mary B. Young, Senior Research Associate, The Conference Board and author of the report. "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 has moved on to meet changing business needs, new tools and technology. The study shows that some businesses have enhanced the simple gap analysis (workforce demand versus supply) used for traditional 'manpower' planning by adopting the logic and analytical tools of other management functions, including finance, strategic planning, risk management, and marketing.

Rather than focusing on spreadsheets, the planning process needs to concentrate on the business plan and its implications on the workforce. Consistent, organization-wide data is essential. Other critical areas identified in the study 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
• driving the plan deep into the organization

While most companies in the study are finding their way in the process, strategic human resource planning can deliver value already through:

• Generating insights and knowledge to help managers make business decisions.
• Providing a deeper and subtler understanding of workforce dynamics
than was previously available.
• Enabling more efficient human capital management, for example by evaluating different staffing options for their long-term impacts, taking advantage of software programs such as Workday, or creating a stronger internal job market.
• Enabling the HR function to achieve a long-held desire to become a player and a valued contributor at a higher level of strategic management.

"Strategic workforce planning enables the organization 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 customize its approach to managing different segments of its workforce," said Mary 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 organization."

Some of the techniques adopted by companies exampled in the study include:

• A workforce analytics approach - mining both current and historical workforce data to identify the key relationships among the variables and between employee and business data. Dow Chemical has used this approach throughout a 10-year evolution of its workforce planning process.
• Forecasting and scenario modeling - using data to create forecasts that incorporate multiple what-if scenarios. These enable executives to evaluate strategic options. The study describes how a "major bank" decides where to locate a new call center based partly on this approach.
• Human capital planning - used by Corning and others to segment jobs on a basis of their "mission-criticality", making different levels of workforce investment in each segment. This approach focuses on broad 3-4 year trends, rather than precise headcounts and short-term plans.

Hewlett-Packard and IBM are cited as being committed to strategic workforce planning, customizing the process to address each company's specific conditions and needs. IBM's HR and finance departments help senior business leaders prepare realistic plans to execute their business strategy and manage drivers of employee costs. At HP, the study states that high-level discussions and a two-way educational process between business leaders and HR emphasizes qualitative over quantitative factors.

"While no organization 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," concluded Young. "The company will be able to mine employee data to locate talent anywhere in the organization, woo passive job candidates, and find the best use for each employee."

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