Workforce planning is one of the most critical competencies for an HR organization. It is the foundation of the partnership between the business and HR and provides the organization with critical information about how to meet its staffing needs and how to allocate its HR resources to meet business goals. Workforce planning can help a business answer questions ranging from how many people it needs, where they should be located, what jobs they should do, how much they should be paid, and even whether they should be working for your company. It can help determine the right investments in recruiting, compensation, training, and a host of other things. There’s another level to workforce planning, and some businesses are using it to determine potential transformation opportunities or threats to their business model.
Just as a refresher, a business model, according to Ostwalder and Pigneur (2010), “describes the rationale of how an organization creates, delivers, and captures value”. The building blocks of a business model are:
• Customer Segments
• Value Propositions
• Channels
• Customer Relationships
• Revenue Streams
• Key Resources
• Key Activities
• Key Partnerships
• Cost Structure
In recent years, there has been quite a bit of focus on business models, how they can transform a business (think Amazon vs. book retailers and Netflix vs. Blockbuster), and how workforce planning results can be a leading indicator of the need to transform your business model. This includes both the ability to identify the need for change as well as determining the organization’s capability to change successfully. According to Nunes and Breene (2011), many businesses face stalls in their business growth, and once they do there is only a 10% chance of ever fully recovering. One of the keys to this is working to change things that don’t appear to be broken yet – in other words, business model reinvention needs to take place before a crisis! That’s where workforce planning comes in.
Many of the recent studies on business model reinvention focus on the importance of talent in the process. A few key points:
• Organizations must ensure they have talent that can take them through to new business models, with the right capabilities and skills
• Ensuring that leadership succession takes place early and with appropriate overlap
• Avoiding the downward spiral of talent loss that often happens when companies start to see revenue, growth or market share start to erode
• Ensure that workloads are appropriate – leaders and key talent need to think, analyze trends, and drive transformation
In addition to the talent implications, another key step in avoiding business model crisis is getting early warning of changing conditions in the marketplace – another area where workforce planning can contribute. Since we are already doing environmental scanning on a regular basis (you are doing that, right?), we can and should dedicate some of that focus to trends that impact the business. It is particularly important to focus on trends that may be distant or outside of our usual markets, but could pose a long-term threat. Some additional ways that workforce planning can help:
• Intelligence for the potential re-design (quantitative / qualitative)
• How trends are changing talent – for example, are you losing people that you would normally hire to a non-competitor? Has the relative attractiveness of your industry or company gone down?
• Understand the capabilities that the organization has and how to build new ones
There are a number of critical data points to watch when looking for business model implications in workforce planning. These include:
• Business Performance Metrics
• Turnover (appropriately segmented)
• Time in Position
• Workloads
• Current and Evolving Skills
• Appropriate Surplus of Talent
• Number of Development Assignments / Talent Mobility
• Business Process Performance
Workforce planning focused on business model transformation requires strong workforce planning fundamentals. My previous post discusses the fundamentals of workforce planning. Other ways that workforce planning can contribute to business model reinvention:
• Workforce Planning should devote resources to exploring trends that happen outside your turf (Ofek and Wathieu, 2010)
• Scenario Modeling and “What Ifs” focused not just on talent, but on emerging trends and their impact on business performance
• Don’t ignore potentially disturbing data – help the business understand its implications
• Perform capability test on potential new business models to determine feasibility and likelihood of success
Examples of next level workforce planning in action
In one case, workforce planners noted an increase in turnover in a key area of the business. When they explored this trend in more detail, they noted that many of those leaving were going to the same competitor. Additional research discovered that this competitor was making a push into several key product areas and markets of the company. The lagging performance indicators had not yet indicated a change in sales, market share, or other metrics, but through this intelligence, the company was able to head off a number of their competitor’s moves before they started to have an impact and they were able to lock in key talent and avoid further losses.
Another example had workforce planners exploring potential pools of talent for a position that was hard to source. They found an industry and a number of companies where the scarce skills they needed were employed that the company had never thought. Further exploration led to a new pool of talent and the discovery of some far future products and services that were very complimentary to the company’s own (and could have been a disruptive threat over the long-term). This eventually led the company to target some of these organizations for acquisition.
Yet another example was related to location analysis and outsource modeling (techniques I have discussed before). While looking at the analytics associated with these 2 techniques, a company discovered a labor migration and cost differential that was in the very early phases of emerging. They were able to capitalize on this and gain a significant cost and productivity improvement in a hypercompetitive sector.
A final example was a company that was in a fairly established marketplace with a stable set of competitors. In this case, there were some very subtle changes in offer accept rates and sources of candidates that one of the planners noticed when looking at routine metrics. Though they could have been easily seen as natural variation, the planner decided to follow up on them and through a series of analyses, discovered an emerging weakness in a competitor that eventually led to that competitor exiting a key market. The company was able to capitalize on this insight and take market share.
This is not workforce planning 101. This requires a solid foundation in place and a good understanding of business and your specific business model. To learn more about how to drive innovation through workforce planning, start the conversation today!
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