Strategic workforce planning is likely the only human capital process that focuses on forecasting, and perhaps, the only process with an outsized structural impact on organization culture. In this two-part article, I argue the impact of a skills based strategic workforce plan on culture and the evolution of HR technology. Part I focuses on how an evidence-based approach manifests in strategic workforce planning, a skills-based framework, its impact on culture and how it differs from traditional workforce planning. The framework introduced here was developed as part of a previous startup that I co-founded and is universal in its application, sector agnostic, fitting large corporates and startups alike.
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In Oct 2017, I found myself in a conference room somewhere in Ohio, US. Around the table were the CHRO, IT project managers, resource planning managers and the Head of Dev Ops, and the conversation revolved around a simple question.
“How do we know that we have the right skills to meet company goals?”
What should have been a straightforward answer was proving challenging. Why? Because data from multiple (at least 8 systems) needed to be collated and reconciled before providing some information. And even then, there was no common unit to tie up all the information to offer insight. This obviously meant that resources had to be committed to the task, which no one was willing to do because they were already stretched.
Inefficient? Yes, but how did we land up in this scenario in the first place? See the Talent Conundrum image.
First, some context…
In most industries, except research in academia, pharma and creative fields, project work or product development can be drilled down to the last task, time taken, and assigned to individual employees. This is especially so in tech and professional services. As such a resource plan captures the information required for decision making. However, traditional HR systems record information about existing employees and the department or function they are assigned to, their supervisor and demographic information. To perform an individual level productivity analysis, a resource planning executive pulls basic employee data, compensation data, work allocation, performance data, skills needed and proficiency, project completion status and project revenue.
But annual headcount planning (sometimes referred to as capacity planning) or resource planning is rarely done this way in organizations.
The annual operating plan is geared to arrive at employee cost (headcount budget) and in turn to calculate gross profit (GP)/full time equivalent (FTE). To be fair, assumptions on attrition, project overrun are made to build scenarios, but at a broad-spectrum enterprise level. Therefore, data is not available at unique roles or skill level. The advantage of viewing aggregate plans is that the CEO and CFO can focus resources on critical projects leaving operational issues to business as usual. GP/FTE is a handy metric where there is less complexity and skills needed are static and stable. However, Covid-19 and technology changes have ensured that the metric has limitations in addressing capability planning.
To overcome the challenge, HR and IT leaders build work arounds or applications that pull data from various systems and start aggregating them into one common database so they can perform requisite analysis on building capability. Large corporates can afford licenses from Workday or SAP SuccessFactors that have robust and intelligent platforms to build on, however, not everyone buys the full suite of applications. High license cost and time taken to migrate data leads to use of various tools e.g., JIRA, Trello, including MS-Excel to conduct analysis. The result is this giant web of applications pulling data from the system of record and creating multiple versions, making reconciliation a full-time job. If this sounds familiar, take comfort in knowing that you are not alone. And yes, we are back full circle to that day in Ohio.
The Talent Conundrum
Consider the talent conundrum playing out everywhere during resource planning. The CEO wants to know if there is an innovative, collaborative and engaged workforce to meet company goals. The CFO is balancing an improved bottom line performance with a managed investment in people whereas the CHRO is focused on identifying a “strawman” profile required for a high performance culture. Finally, the employee is asking herself how she can stay relevant and keep growing within the company. To address this conundrum, it is important to consider additional data points like how talent is measured, managed and developed and therefore to calculate the return on human capital (HCROI) in addition to GP/FTE.
Impact on culture
Reflect on how the annual operating plan is approved in your company. It probably starts with a template where department wise data on planned initiatives, costs and milestones are collated into a giant worksheet. After a few iterations, the department budget is approved, albeit with cuts. In a lighter vein, the meme of a CFO slashing through the costs with a giant scissors while amusing, is unfair but sadly true, at times. Business unit heads and function heads who are skilled at the art of persuasion return with their headcount budgets approved. The ones not so gifted are furious that they do not have sufficient resources to meet existing OKRs. A lopsided resource plan is a Petri dish for organization politics.
But it need not be.
Include capability planning along with capacity planning, to consider additional data points to make a persuasive argument and to calculate human capital return on investment (HCROI). Whether your company should hire more data scientists, outsource work to a third party or up skill existing employees is an outcome of knowing whether those skills are available internally and what it takes to get the job done. Therefore, build-buy-borrow decisions follow a resource plan and do not precede it.
By moving the discussion away from artful negotiation and anecdotal data, an evidence-based workforce plan can unlock human potential into creative pursuits. The annual operating plan discussion can transform from a negotiation to debating the benefits of an initiative and how the initiative fulfils the organisation’s purpose. An organisation that can build evidence into its workforce plan is one that signals a logical, intelligent and analytical approach to its workforce. This is a sure way to becoming a talent magnet. In a previous article, I expanded on the concept of an evidence-based HR culture in creating a successful HR department.
Here is a great read by David Green in his book, “Excellence on People Analytics” on building an evidence-based culture featuring Kathleen Hogan, CHRO Microsoft.
What is a strategic workforce plan?
Strategic workforce planning (SWP) is an agile human capital process that focuses on forecasting the availability of right skills, in the right roles at the right time. Skills are the common unit or currency upon which a strategic workforce plan is built.
Crucially, it differs from a traditional workforce plan in that it is agile, focuses on critical skills, is a tailored fit to business context and scans the environment for emerging skills.
It is easier to remember a strategic workforce plan as an equation.
Strategic workforce plan = (capacity plan + capability plan) * multiple scenarios
Forward looking companies are focusing on addressing issues like, “How do we plan for multiple scenarios?”, “How many people are needed?”, “Where do they work from?”, “What kind of investment in technology is planned?”, “How can we build flexibility into our workforce plan?”
A strategic workforce plan addresses these questions.
I argue that there are 4 core elements to building a strategic workforce plan:
- Skills
- Expertise
- (Unique) Experience
- Preference
Let us address these one by one.
Skills:
When a role is defined in terms of goals, responsibilities, output and tasks, it becomes easier to collate skills. Skills here are defined as knowledge, technical, leadership skills and attitude. Another way to remember them is as a competency. A skills taxonomy is the start point of a strategic workforce plan. Different approaches can be taken to building a skills taxonomy — collating skills from job descriptions, skills audit to using industry specific skills taxonomies e.g., Kenexa.
Expertise:
While skills are the base requirement for performing a task, expertise or proficiency in those skills helps further define the capability and the organisation’s capability. Indeed, capability maturity models (CMM) are built by defining competencies or capabilities and then layering on proficiency.
Experience:
Adding specific experience adds flavor to the role requirement. Industry specialization, startup or corporate experience, cultural nuances count toward articulating unique experience required for the role. Admittedly, there is no easy way to categorize experience but specifying time spent in roles is one way. E.g., some MNCs specify experience for leadership roles as 2 countries + 2 functions + 2 business units. What is important is being as specific as possible and relevant to business context.
Preference:
Mobility, flexibility, health and wellbeing and aspiration are preferences. By stating this upfront for each unique role, it helps plan for various scenarios. For e.g., can a role be permanently performed from home, how much interaction does this role require with other roles in the company, does it involve travel, what percentage etc.
With these 4 elements, you have a lattice to map employee data to make it come ‘alive’ and address skill shortages by up skilling existing workforce, hiring for new skills or borrowing capabilities from experts.
Conclusion:
By taking away guess work, anecdotal evidence or broad benchmark data and replacing it with specific, company and individual level data allows for scenario building and to forecast into the future. With such detailed information, build, borrow or buy talent decisions become more evidence based and less random. All essential ingredients to building a great culture and being a talent magnet. The future of work is here, make no mistake about it. Employees in the US no longer want to return to the office on pre-covid terms and the great resignation is a much debated topic. In India, the context is a bit different but whichever way you look at it a hybrid model of working is here to stay. Question therefore is, is the resource plan strategic enough to plan for the future. In the Part II of this article, I focus on the evolution of HR technology in workforce planning and key success factors of a strategic workforce plan.
