The Critical Nature of Strategic Workforce Planning
It’s not about planning for every job, it is planning for critical ones.
Strategic workforce planning is HR’s participation at the beginning of the strategic planning process with the rest of top management.
Industry Week reported in February 2010 that strategic workforce planning was emerging as a top priority with up to 28 percent of best-in-class organisations holding the CEO or the Board of Directors as primarily accountable for workforce planning.
A mentor empowers a person to see a possible future, and believe it can be obtained – Shawn Hitchcock
Organisations around the world are constantly plagued by an inability to effectively source specialised talent. The problem of finding the right talent and strategic sourcing is a perennial problem, one that is really best addressed in a holistic manner, taking into account the insights that HR can bring to their role.
Organisations need to consider what their business strategy is, what their current and future talent requirements are and how the talent requirement is aligned to the business strategy. All of this needs to be rooted in hard business data. The imperative is HR involvement, not as the process is developed but from the very beginning.
The real difference is between workforce planning and strategic workforce planning. Workforce planning just looks at internal skills and turnover, external skills, gap analysis and maybe where the gap people can be found.
Researching this topic, I came across a HR.com blog post on strategic workforce planning and its importance in terms of HR’s role. It was written by Jacque Vilet, formerly a Global HR/Benefits Consultant at TriNet and now the Managing Director of Vilet International, an independent human resources consulting firm. With more than twenty years experience in International Human Resources with multinationals such as Intel, National Semiconductor and Seagate Technology, Jacque has worked in high tech all her life.
A keen blogger, Jacque has guest authored for the International HR Forum and written articles on strategic workforce planning. Of her many specialities, Jacque has worked on succession planning for international management in non-US countries as well as international Human Resource audits for compliance with local country labour laws.
Contacting Jacque, she was very happy to discuss her views on strategic workforce planning. When we started talking, she highlighted one crucial aspect. When looking at strategic workforce planning, according to her, you need to realise that this is not about planning for every job in the company. You plan for, at most, two or three that have the critical skills that will enable the company to reach its business goals.
You make the statement that strategic workforce planning is a relatively new management process that analyses and forecasts the talent companies need to put their strategies in place. What do you see as the crucial distinction between talent management and workforce planning? Would you argue that strategic workforce planning is very much process driven?
Jacque : The real difference is between workforce planning and strategic workforce planning. Workforce planning just looks at internal skills and turnover, external skills, gap analysis and maybe where the gap people can be found. This is handed over to the COO or CEO. There is no knowledge of what is done with the information as HR is not part of the strategic planning sessions. HR is given job requisitions through the year with no understanding of how hiring fits into the strategic plan.
Strategic workforce planning is HR’s participation at the beginning of the strategic planning process with the rest of top management. It has collaborated beforehand with the CFO to determine the labour cost as a percentage of revenue or whatever metric is used to determine what labour cost should be. At the end of the first strategic planning session, HR knows what revenues have been decided upon for the next year or whatever time frame the strategy is built on. It also knows which business units will get the additional talent.
HR then goes back to complete its work.
It knows how much it can spend on labour. The internal and external scans are done as well as the gap analysis. Next is the plan for how to find the people, whether it be for one country or multiples. Several scenarios are prepared that fit with the labour cost limit.
At the next strategic planning session, HR presents these scenarios and management selects one. Then, HR begins the implementation stage. Again, I must state here that strategic workforce planning is for one — at most two — critical skills. You aren’t planning for the entire organisation and for every job.
Let me explain how I see the terms talent acquisition, talent management and strategic workforce planning fitting together. It starts with strategic workforce planning. You must have a complete plan and strategy first. Then comes talent acquisition which is the implementation of the plan that is decided by top management in their strategic planning session. Talent management is the process encompassing the management of talent from the time that employees are hired with onboarding and retention programmes, succession planning, etc. It is the “managing” of talent/employees once hired and onboard. In essence, talent management encompasses the life cycle of employment.
In the workspace, we have to grapple with information overload on a daily basis. The pace of technology is unrelenting. Take the explosive growth of new media and its impact on the business world. What kind of new skills do you see that employees now need to possess?
Jacque : It really depends on the industry and each individual company’s strategy on how to attack the market. For example, at FedEx, top management decided that the most critical job in the company was the truck driver. If the truck delivery people don’t deliver the packages on time, the result is angry customers and their selecting another delivery service.
For a high tech company wanting to expand its product line, it might be that they need a different type of design engineer. This means either hiring external people with the particular skills for this market (which its current employees may not have) or acquiring a company that already has these skills. Obviously with the explosion of technology products, this is one industry that will need many new technical skills in the future.
Another industry is healthcare, especially for the elderly. Nurses and homecare workers are very scarce even now and with the populations in various countries aging, it is easy to see how the need for these skills will grow even more in the future.
People need to identify the types of industries that will be growing and this information is available in various business magazines. They need to then look at these industries and see what skill they utilise. Then they can make decisions on how to gain these skills.
For many companies, the use of contractors, part-time workers and freelancers is increasingly the norm. Such use has increased over the years. But how do you plan around the use of this type of workforce? Where and when should they be included in workforce planning?
Jacque : Remember that we are talking about one or two critical skills for strategic workforce planning. If contract workers make up a large portion of people with these skills, then perhaps they should be hired as employees and included as part of the gap filling.
Hiring them as employees will usually cost less than keeping them as contractors. For contractors in other areas of the company which do not have the critical skills needed, it is up to the CFO and other top management whether to continue these types of employment relationships.
In your experience in the US, do you believe that the current available labour pool matches the skillset that is needed in the near future?
Jacque : No, it has been said more than once that one of the problems of the unemployment rate of 9.6 is that, in addition to the economic factors, companies that are beginning to hire again are hiring for selected positions with critical skills. Many of the people that have been laid off don’t have these skills, otherwise they wouldn’t have been laid off. The unemployed are beginning to realise that and many are going back to school to get new training.
In your experience, does strategic workforce planning always involve HR taking information from management after the strategy has been developed?
Jacque : No, true strategic workforce planning involves HR being a part of strategic planning from the beginning with the rest of top management. In that way, HR gets information on what revenues are being determined as well as which business units will get this new talent And HR will have input as far as which countries offer the best location for talent given such things as competition, unemployment rate, cost of labour, number of skilled people, infrastructure, etc. Of course, this assumes that HR already knows or has done research on the countries where the company has operations.
In your recent article entitled, Strategic Workforce Planning – A Crucial Role for Human Resources, you argued that, “Human Resources needs to use whatever metric the CFO uses for determining total acceptable labour cost as it will be this metric that top management expects to see. If this labour cost metric is unknown to Human Resources at the talent management/talent acquisition phase, and the demand for additional talent by line management begins to exceed the “estimated guess” (or no guess) top management made during their strategy planning process, Human Resources won’t know whether hiring 200 or 2,000 people is acceptable until it’s too late…”. Can you expand on this point?
Jacque : I was exaggerating a bit. HR needs to know the metric used to determine acceptable labour cost because that will determine how many critically skilled people can be hired.
I’m saying that strategic workforce planning will become the most important task for a company. CEOs are saying now that finding the correct skills for their companies will be one of the most critical things they will face in the future.
For example, if the metric is labour cost as a percentage of revenue, then the first calculation would be — given the revenues planned in the strategy meetings for the next one, two years etc (however long the period is in the strategy) how many of these skilled people can be hired company-wide.
Then, once that is agreed upon by the CFO and others, the question for top management is where will these new people be placed in terms of business units and/or locations. In this way, when line management asks for new hires, HR will be able to track how this requested new hire would impact the total number that this business unit is permitted to hire as well as the allotted labour cost.
Of course, management of the business unit ought to have been told this number in order to do his/her budget planning, but sometimes they panic and forget — or ask for too many people at the beginning of the strategy time period, etc.
What makes you believe that ‘the key difference in the future will be that all data for adding new talent will be provided to top management by Human Resources during the strategy planning stage’?
Jacque : I am saying that it should —- not that it will. I’m saying that strategic workforce planning will become the most important task for a company. CEOs are saying now that finding the correct skills for their companies will be one of the most critical things they will face in the future.
Given the current retirement rate of the workforce as well as the number of employees nearing retirement, both in the U.S as well as in other countries, this is viewed as a major problem. In fact, this is an excellent time for HR to rise to the occasion.
I strongly believe that given the fact that strategic workforce planning is becoming so critical, the failure of HR to provide it will eventually mean that it will be taken out of their hands and given either to the CFO or to a separate organisation that will be established to take charge of it.
I believe that, in most companies, HR is not paying this fact much attention.
They have to begin focusing on business issues such as costs of talent and learn how to speak the language of business that top management understands in order to gain credibility. They must also begin to do the research beforehand on where critical skills are located and how many exist in the company. Further, they must do their homework on other countries where the company has operations so that they can provide useful information to top management when locations are being picked to locate future talent.
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Jacque Vilet is the Managing Director of Vilet International, an independent human resources consulting firm. Jacque has over 20 years experience in international human resources. She has worked with both local nationals and expatriates and has been an expat twice during her career. Jacque holds the Global Professional in Human Resources (GPHR) from the Society of Human Resources Management, and Strategic Workforce Planning (SWP) from Human Capital Institute.
This article first appeared in the October 2010 issue of HR Matters Magazine. Headline image -I have a nice plan – courtesy Tolga [email protected]