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Strategic workforce planning has become a hot issue for many organisations as they seek to more effectively manage their most vital intangible asset – their people. Colin Beames prepares a quick checklist of dos and don’ts.
Whist most organisations have a marketing strategy and/or an IT strategy, they typically lack a strategy to manage their largest cost item in the budget (between 40-80% of the cost base). Furthermore research confirms that the people factor is the largest single driver of business outcomes. Therefore the business case for developing a strategic workforce plan (SWP) would appear to be compelling (i.e., a no brainer).
Advanced Workforce Strategies’ research, based on surveying over 100 large Australian, UK based and global organisations with the Workforce Strategy Audit Survey (WSAS), confirms that many are only at a rudimentary stage of having developed a SWP.
The adverse consequences of no SWP
The adverse consequences of not having developed a SWP include:
- A lack of insight and poor, inconsistent or ad hoc people decisions;
- A waste of resources (e.g., paying the wrong people too much and the right people too little);
- Locking in low performers by over delivering, and pushing out high performers by under delivering on expectations;
- Operational inefficiencies, poorer performance, excessive vacancies and lack of capability resulting in dissatisfied customers;
- Lack of labour flexibility;
- Lower engagement levels and increased turnover;
- Ignorance of people risks; and
- A lower ROI in people.
Thus without a SWP, an organisation is unlikely to be effectively harnessing its human capital to deliver on business outcomes.
Many organisations delusional about their SWP claims
Whist many organisations may have bundles of HR policies, may conduct talent management and succession planning, and may undertake leadership development programmes, this falls well short of having developed an integrated SWP.
Many HR functions are typically disparate or siloed, yet integration multiplies business value. Furthermore too often business goals, plans and strategies are developed without any accompanying detail describing how people will be managed and assisted to deliver and achieve what the business has set out to do.
Properly thought through, integrated, and appropriately applied people management strategies and practices, customised to a particular organisational circumstances, are the most powerful driver of sustainable success (Lepak & Snell, 1999).
A ‘make’ role requires a more significant initial investment in T&D for new recruits, or requires a longer time to acquire proficiency in the role, compared to a ‘buy’ role.
A SWP should include a whole of workforce focus (including the contingent and outsourced workforce), and should provide a rationale for determining levels of investment in people in various roles, the allocation of people resources, and the identification of people risks.
Ultimately the essence of developing a SWP is making choices about the importance of roles to business outcomes. This involves segmenting roles based on a deeper understanding of their characteristics (e.g., make versus buy roles, including critical roles) and how various roles create value and contribute to business outcomes. This includes understanding the line-of-sight between these various roles and the execution of the business strategy.
Segmenting roles, according to their value creation, investment (cost) and relative importance, is the key to treating an organisation’s workforce asset as a portfolio that can be analysed and managed, and then applying differentiated HR policies and practices accordingly.
A workforce (or human capital) strategy is a form of asset management, the sum of actions taken to acquire, retain, develop, motivate, and deploy human capital in the service of an organisation’s mission. It is more than ‘having the right people in the right roles at the right time’. This description fails to address how roles are linked to the business strategy, including what levels of investment should be directed to various roles.
A number of misconceptions abound by what is meant by the term ‘strategic workforce planning’. Furthermore many organisations are still lacking the concepts, models, strategies and measures that matter most. They are locked into mindsets that have exceeded their use-by date or are now of limited utility. Today’s workforce management complexity cannot be solved by recourse to yesterday’s models!
Advanced Workforce Strategies has identified the 12 deadly traps of strategic workforce planning:
- Associating the importance of a role/job with its position in the organisational chart.
- Relying on traditional job evaluation methodologies to identify the true value and contribution of roles to the business strategy and outcomes.
- Failing to distinguish between make versus buy roles, critical roles, and roles suitable for outsourcing. A ‘make’ role requires a more significant initial investment in training and development for new recruits, or requires a longer time to acquire proficiency in the role, compared to a ‘buy’ role. Vastly different HR policies and practices should apply to the two roles.
- Segmenting the workforce primarily on a job/organisational level, by job families, or by generational cohort.
- Offering the same employment value proposition (EVP) for all roles.
- Paying all people at the same market point.
- Reporting turnover for the organisational as a whole.
- Loosely adopting the term ‘strategic workforce planning’ but missing the strategic component in the plan.
- Not explaining precisely how business and workforce strategies are linked or aligned.
- Failing to recognise the difference between lag and lead HR data.
- Embracing HR analytics and investing in associated technology before having developed a workforce strategy.
- Not involving CEOs, CFOs and executives in the development of a workforce strategy.
Configuring and then managing a workforce that is accessible, skilled, motivated and efficiently deployed will increasingly be a key differentiator of business performance and financial success.
It is speculated that we are at the dawn of a new era in people management, which will include:
- Adopting a HRM architecture and human capital models that address the complexities and challenges of contemporary workforce management;
- Moving beyond a suite of HR policies, succession planning, talent management, and workforce planning focused on gap analysis and supply and demand, to a whole of workforce strategy that is integrated with the business strategy;
- Adopting a deeper approach in understanding the characteristics of roles (both their costs and value) and their relative importance;
- Identifying people risk and developing sound business cases for investments in people.
Best practice is now about adopting a sound framework and models to underpin human capital/workforce management, rather than simply attempting to replicate what another organisation may be doing.
HR’s new role
CEOs and HR professionals are under increasing pressure to demonstrate to board members and shareholders how they are managing their most vital intangible asset. At the same time, HR is struggling to exert the required influence and gain a seat at the table. They have been a maligned service provider. Their most critical function now is to focus sharply on the interface and alignment between workforce and business strategies.
Developing a comprehensive SWP is an imperative for all organisations, being consistent with the corporate priorities of managing people risk and good governance.
The author, Colin Beames is managing director of Advanced Workforce Strategies, based in Australia. He is also the trainer for HR Academy’s ‘Strategic Workforce Planning and Risk Management’ course taking place in Singapore and Malaysia. For more details, visit www.hracademy.asia.