The Workforce Expert

Welcome to the Workforce Expert

Welcome to the Workforce Expert! This blog is dedicated to the practice of workforce planning in organizations. One can't really open an HR magazine or web site these days without some reference to workforce planning, and the number of conferences, workshops, articles, etc. dedicated to the topic has grown immensely. In this blog, I will attempt to separate some of the hype (which there is a lot of) from the reality and give a relatively balanced view of what is and isn't working out there.

This blog is targeted towards practitioners, but consultants are certainly welcome to join the conversation. Being one myself, I know the valuable contribution they make to the field. That said, I want the tone of this blog to be civil and professional, and I reserve the right to strike from the record any posts that don't adhere to that.

Over the next several weeks, I will attempt to put forward some of the foundations of what I have learned about doing workforce planning over the past 15 years or so (yes, it has been around that long). These are meant to be conversation starters, but certainly if there are other topics that readers would like to see addressed, please feel free to suggest!

Enjoy!

Brian

Contingency Planning Revisited

Sorry for my absence from the blog. Lots of projects and lots of travel lately...

I wanted to talk a bit about workforce planning and the role it can play in contingency planning. I know have talked a little bit about this in the past. Lately I have been asked about modeling everything from the economic impact of new conflicts in the Middle East to the impact of potential labor actions on the ability to continue operations. While the workforce is not the only factor that plays into these scenarios, it is an important element.

To do effective contingency planning, it is important to have a baseline workforce plan for the current operations. This plan needs to be more that just straight line projections, however. You really need to have the full view of processes, skills, outputs, hours, etc. that I have discussed in the "Techniques That Make a Difference" posts. In a contingency situation, you need maximum flexibility from your workforce and you need to understand the potential for redeployment of resources. Not only who can be redeployed and to where based on their skills, but what things will not happen in the case of those redeployments (i. e. what won't get done) and what are the impacts of this on the organization's overall metrics. This data allows decision-makers to see what the ideal redeployment approach might be and how long it can be sustained. It also allows decision makers to plan for prolonged response needs such as what happened with Hurricane Katrina. In those cases, decision makers may want to examine potential rotations of response staff based both on evolving needs and on the need to rotate staff back to their normal jobs. For example, you may be able to redeploy procurement specialists to the response effort for several weeks, but past that point the normal responsibilities of the agency in this area are compromised. How long can the agency afford to shift those staff to the response effort for? Past a certain point, the agency may need to look at a contingent workforce to either relieve those in the response zone or to cover its day-to-day work while the response effort continues. Good workforce planning can tell decision makers which option is the right one based on cost, efficiency, etc.

But to be clear, I am not just talking about some kind of natural disaster. There are a number of potential events for which a company might want to have this type of plan including:

- Labor Dispute / Action
- Supply Disruption
- Economic Crisis
- Pandemic or other Health-Related Event
- Power Outage
- Terrorist Attack

This is just a brief list - there are many potential issues. For global businesses they have to look at the potential for disruption in one country and how you might use your workforce from elsewhere to respond. And certainly the events of the past year alone illustrate the potential. Just look at the long-term impact that the Japanese earthquake has had on their economy and on the global supply of a number of goods.

Another facet that needs to be considered in this type of model is the potential for staff or contingent labor to be unavailable. Not necessarily because they are injured or such, but they could potentially be without transportation or something could have happened to their home / family that makes them unable to get to work or work a normal schedule. Your contingent labor could be in a similar situation. So what will your plans be if 10% of your workforce is unavailable? 20%? 30%? How would you redeploy resources and what would be impacted? How long could you survive? Will you need to deploy financial or other resources to assist your workers?

Yet another factor to analyze is the impact of stress, etc. on the productivity of your workers. As we have discussed before, if there is a reduction in productivity, you can't assume the same level of output from your existing workforce. How will that impact your performance and what resources will you deploy to address this? Will prolonged work in responding to a disruption further reduce the productivity of your workers and what impact will that have? How do you mitigate these dynamics?

Certainly this type of planning is among the most complex and it involves a lot of judgment calls. There are numerous variables to consider and many unknowns. It also requires a thoughtful approach to determining what kinds of disruptions an organization can potentially face and what the appropriate responses are. I mentioned some of these above but each business needs to look at its operations and locations to determine the potential issues. But the value that come from being able to perform and respond when others can't is tremendous. And even the fact that the organization has a plan that is deliberate and communicated helps reduce the stress in the event of a disruption and helps the people respond more effectively.

That is not to say that organizations have not just "made it work" in terms of their response strategies in terms of some sort of disruption like a natural disaster or a labor dispute. But in my experience, the toll on the organization both in terms of its performance and its people goes well beyond the disruption itself. Having a plan helps ensure that the organization maximizes its ability to respond while minimizing the damage done to its operations and its people.
Brian E. Wilkerson
Revolution Advisors
(303) 926-5278
bwilkerson@revolution-advisors.com

Sales Force Workforce Planning

I recently had a conversation with a client related to workforce planning for their sales force. The basic premise was that you "can't do workforce planning for sales" based in the high levels of variation in sales achieved, process used, different customer groups, etc. While I understand how one might come to that conclusion, I don't necessarily buy into it. I have had some experience doing workforce planning for sales so I thought I would share just a few things on that topic.

The classic image of the lone road warrior sales person out on the road closing deals is still certainly the model in some companies. And in others the teams are multi-faceted and virtual, with a lot of web based interaction with clients and prospects. Regardless, there are some fundamentals that allow for workforce planning to be done:

1) There is a process. That process can be viewed and broken down in many ways, but at the highest level you identify / target customers, you pitch those customers and you close those customers. I wouldn't suggest just looking at those 3 steps of course, but there is a process to be examined.

2) There are metrics - both for the process and for the individual. Looking at traditional sales funnels and clients in each stage is one example. Looking at conversion rates from one stage of the sales cycle to the other is another one. And there are many more. There is some good research out there on what kinds of activities are most productive for sales people and lead to closed business. While certainly conversion ratios, etc., vary depending on a wide number of factors, there are still measurements to be had.

3) Outcomes can be affected. You can improve sales through any number of interventions such as automation, training, incentives, etc. Those improvements can be measured both in terms of cost and in terms of outcomes.

4) The associated skills can be measured. Companies can measure who is better at various sales-related activities and there are a number of skills-related competency models out there.

These are the fundamentals of many workforce planning efforts and they exist for sales as well. Now certainly, there are variations in performance among individuals. But this is true in any process, and while there are probably some bigger differences in those performance gaps, they can still be accounted for mathematically.

Now I am not saying that you would want to approach sales the same way you call center reps or other types of high-volume positions. But the same approaches that one might use for engineering or other high-skill positions can often be used with sales. It still involves understanding productivity, mobility, outcomes, skills, time, and the other factors used to do good workforce planning. The differences in across the sales process, product suite, etc. must be accounted for, but it can certainly be done.  

To be sure, workforce planning for sales can be one of the more complicated exercises, and I have really just begun to scratch the surface here. But at the same time, it can be done. The question is the same as always - is this where your biggest needs for workforce insights and strategies lies? Or is there another part of the organization that deserves the focus? Prioritization of where you use your workforce planning resources is still key!

Location Analysis

Lately I have heard from a number of companies interested in analyzing potential expansion scenarios. Good news from an economy perspective certainly! These companies have asked the question of where should they focus their expansion. Specifically, which of their locations should they try to expand in, or in some cases, should they start a new location. While there are always the traditional siting considerations, these companies were trying to analyze the location decision from a workforce perspective.

So I thought I would put out some of the workforce criteria that we have been analyzing. Here is a partial list:

• Labor Supply: in particular, is there an available workforce for the positions that they are going to be expanding
• Salary Differentials: what are the prevailing wages for target positions vs. other location
• Brand Attractiveness: does the company have an established brand in that geography or will they need to build one
• Competition for Talent: How many other businesses are going to be recruiting the same types of positions?
• Growth / Decline in Pool: How are workers in the target positions being produced? Is there an education infrastructure or other companies that are training / developing these skills? (include demographic analysis)
• Diversity: Does the location help or hurt the ability of the client to meet its diversity goals?
• Incentives: Are there workforce development programs or other incentives for hiring in this area?
• Real Estate Costs: How much does it cost to build / lease facilities vs. other locations?
• Wage Ascension: How fast are wages rising and how likely is that trend to continue?
• Business Environment Favorability / Stability: How likely are any labor advantages / incentives, etc. to be sustainable?
• Cost of Exit: One of the key considerations (particularly for international locations) is how much it will cost to close a location should that become necessary.  In some countries, labor laws make it quite expensive to shut a location or reduce staff.

While not a comprehensive list, these are some of the most important factors when looking at potential locations. There are of course a number of others such as impact on collaboration with other staff / locations, impact on culture, and many others. And some really are dependent on what factors are most important to the company. But these provide some foundations for location analysis.

Gaining Executive Buy-In

Happy New Year everyone. Hope it is a good one for all.

I thought I would focus a bit on gaining executive buy-in for your workforce planning efforts. In the speaking events I have done this year so far, I have seen continued interest in getting better at workforce planning, driven by everything from continued uncertainty to emerging scarcity in key skill areas. But many organizations are struggling not so much to be able to do workforce planning, but to get executives to use it. Here are five strategies that you can use to gain that executive buy-in.

1) Address a Pressing or Emerging Need: an intuitive one certainly, but I still see many organization starting off by trying to model the complex dynamics of the entire organization. This is hard to stand up, and initially, hard for the organization to absorb what you are telling them. Unless you are a very small organization, you should focus your scope on problem areas to show the potential value of WFP. This might be a high turnover or scarce skill area, or it might just be an area that is critical to the business. In any case, focus on things that leaders will immediately care about and will pay attention to. Even as you get WFP more established, you may put different levels of discipline on areas that vary in importance. You might use fairly linear projections or ratios in support areas, and more advanced approaches in core revenue areas for example.

2) Capitalize on an Issue: Often when the organization has just experienced some kind of human capital issues, there is a window of opportunity for workforce planning. Unexpected turnover, missing goals because of staffing issues, inability to find talent in the market, productivity problems - all of these present a very real opportunity to present the case for workforce planning. For these, it is often best to have some data to show how workforce planning would have helped avoid or mitigate the issues.

3)  Align with What Executives Care About: Understand how your business looks at decisions, and align your modeling accordingly. How are major decisions in the company made? Primarily via financial case with discounted cash flows? Consensus discussions among the leadership team? Business managers pitching their qualitative case? Some hybrid of these? Whatever it is, understand the makeup of your leaders and how they like to make decisions and then align your pitch for workforce planning (and how you eventually present workforce planning results) in the same way. This will help secure the buy-in.

4) Proactive Modeling: Even if your leaders don't necessarily buy-off on workforce planning, a lot of progress can be made by proactively modeling potential issues (internal or external) and showing executives just how bad things could get if action isn't taken. You don't even necessarily need to call this workforce planning, but it still helps illustrate the case. As an example, show what would happen if a new competitor entered your market and started competing for the same talent, or show what a disruption in the labor force or in the physical facilities would do to your ability to meet your goals. These kinds of things can show the utility of WFP and help you build the case. And what do they say about asking for forgiveness vs. seeking permission...

5) Integrate it into the Annual Budgeting Process: I talked about this a bit in a previous post. Here is an opportunity to partner with Finance by saying "wouldn't you like more visibility into why people need all the headcount they have/are asking for?". Most Finance organizations would say yes. If you can integrate even simple workforce planning into the annual budgeting process, managers will come to HR to figure out how to do it. This is a bit of falling back on the old compliance mentality, but sometimes you need to have a catalyst to get managers to try this.

None of these techniques are rocket science certainly, but over many, many organizations I have seen these consistently bring results.

 

 

End of the Year Analysis

Well another year is coming to a close. What sort of things should workforce planners be doing before the head off for some vacation?

The end of the year is a great time to take a look at some of the key underpinnings of your day-to-day workforce planning. Many planners use this opportunity to look at turnover and how those dynamics have changed from previous years. It is also a good time to look at other mobility trends such as promotions, transfers, special assignments and other variables that impact the flow of talent through your organization. It is also important to look at compensation trends and internal changes for key positions - has a skill become more or less scarce? Is the cost of acquiring key positions going up or down? What about the performance of your talent acquisition team - has your offer accept rate changed? Are you seeing less candidates for positions? Each of these can be an early warning of emerging trends that you may want to intervene in before they become statistically significant.

It is also a good time to look at some of the key business trends. How is the business doing against its forecasts? What are the executives saying about their performance for the year and plans for the rest of the year / next year? These could all have implications for your forecasts. All of these variables then need to be updated in your planning models and your forecasts refreshed to reflect their impacts. And these are just some examples. As a planner, you know what variables are most important and the end of the year is a good time to take a look at what has changed...

In most organizations, these variables don't necessarily change that much year-to-year when you look at the aggregate workforce. But as with anything else, the devil is in the details so to speak. Often the significant changes are within particular business units or related to particular skills or positions in the organization. Sometimes these are based on market factors or sometimes internal factors, but it is important to dig into the numbers at a fine enough level to understand what parts of your organization are changing, even if the overall workforce statistics are relatively stable. Otherwise, your analysis can start to skew over time and you can start to see errors that make a difference!

This will likely be my last post until after the holidays, unless some urgent topic comes up. Thanks for ready and have a great holiday season!

We Know What We Think We Need - Now What?

Have had some interesting conversations over the past 2 weeks regarding workforce planning. On one hand, they are encouraging because it shows that companies continue to focus on implementing workforce planning and expanding their capabilities in this area. But what I am finding is that many companies are still looking at workforce planning in a very simplistic way - they are looking at workforce planning as a way to build hiring plans. In other words, we need these people, go hire them.

To some degree, this may return to the basics a bit, but it is important to note that the answer to not having enough people is not always hiring - and workforce planning should definitely help sort that out. A workforce plan that shows the need for people over time could illustrate a need for hiring, but it could also illustrate opportunities for:

- Process automation to reduce the number of people required to perform a process

- Efficiency / productivity improvements to help reduce the amount of incremental staff needed

- Looking at other projects, programs, or parts of the organization that may be ramping down or have surplus for redeployment options

- Increased training or accelerated promotion paths

- Contingent Labor solutions

- Outsourcing

- Prioritization of resources and initiatives

- Even potential acquisitions if the need is great or specialized

Considerations that might drive which solution is the right one would be things like cost, risk, certainty, etc. All things I have discussed in previous posts. But it is very important as companies are standing up workforce planning and analytics to think outside of the "need people = hire and too many people = fire" mindset. Recruiting is an important linkage to executing workforce strategies, but it is not the only link! Companies need to think broadly and comprehensively about what workforce planning results mean and what to do about them.

Contingent Labor Analysis Part 2

Sometimes when I write blog posts I feel like I am having deja vu. Often because I find myself answering the same questions repeatedly "offline" so when I put a post together, it seems like I have posted about it before. This is one of those posts, as I seem to talk quite a bit to companies about contingent labor strategies. As I mentioned in the previous post, there are a number of good reasons to use contingent labor. Such as:

- Need is for a defined time period or to cover a temporary task or surge in volume

- The skills required to get the work done are not an ongoing need for the organization, but are unique or scarce in the market

- The need is ongoing but is not full-time (this could also be filled by a part-time employee of course)

- Future demand for this skill is uncertain

There are of course a number of others, and there are also other ways to address the needs above besides contingent labor. So what kinds of factors should workforce planners consider when deciding whether to use contingent labor or some other strategy? I tend to look at the following criteria:

1) Availability: How easy are these skills to acquire in the market? If you can easily acquire them when you need them, contingent labor may be fine. If there is a risk that you won't be able to get them when you need them, you might want them to reside in-house.

2) Duration and Intensity: How long is the need for and is it part-time or full-time? If it is short-term and/or part-time, contingent labor may be appropriate. The longer you have contingent labor on board, the more you create legal risk (and likely you will be paying too much). Volume spikes, project work, and things of that nature are great for contingent labor.

3) Cost: What is the cost differential between contingent labor and an employee for the same skill?

4) Risk: Is there a risk to having the knowledge associated with this work in the hands of outsiders? Is it core to your business and proprietary? Will there be a need for that knowledge in-house ongoing (to support a new system for example)? Is there a risk of intellectual property loss?

5) Urgency: How urgent is the need? It can sometimes be faster to get contingent labor on board and productive than an employee (but not always).

6) Criticality: How critical is this need to your business performance? Is there a risk in relying on outsiders to perform this work? Is it a core competency that it is better to have in-house?

7) Certainty: How certain is the demand over time? Is the demand predictable?

Obviously these factors interact and often there is not a clear cut answer and there are trade offs associated with any strategy. But using criteria such as these, the tradeoffs become clearer and planners can have a disciplined dialogue with the business about the appropriate strategies.

By the way, if there are particular topics that anyone would like me to cover, please don't hesitate to let me know.

Contingent Labor Analysis Part 1

I have mentioned this topic briefly in previous posts, but it seems to be getting a lot of attention lately. We continue to see a hesitance on the part of companies to make permanent hires - too much uncertainty still out there. But at the same time, there are risks associated with contingent labor ranging from knowledge loss and availability of resources to increased enforcement of independent contractor regulations. How do companies decide what their contingent labor strategies should be?

The simple answer of course is workforce planning, but there is obviously more to it. A company has to start with an inventory of their current contingent labor usage. While seemingly simple, this often quite a task. I have worked with clients where it has taken 3 months or more just to determine what contingent labor they are already using. While not in the scope of this discussion, the issue is often the way this spend is tracked in an organization and an accompanying lack of visibility. But at minimum, companies must be able to look at their contingent labor force and determine:

- How many are there?

- What are we using them for? (skills and outputs)

- How much are we paying them?

- How often are we using them? (including seasonality)

- Concentrations in certain functions and skills?

Getting a handle on these basic demand patterns is a first step. But in each of these areas, a comparison also needs to be made to permanent staff and if your contingent labor force is supplementing or substituting for your permanent staff. A simple example - many companies use contingent labor when the volume gets too big for permanent staff. Certainly an acceptable approach. But in many organizations, that initial supplement quickly becomes a "dedicated contractor" who works primarily for that one company and is kept busy with a string of new projects and ongoing work. This allows the company to effectively add another headcount without it looking like they are doing so. In addition to the legal risk, this often leads to paying too much for the skills you need and creates risk around the loss of intellectual property and process knowledge when that contractor is done. And often times what happens is that whenever there is a downturn there is a knee jerk reaction to cut all contractors, thus increasing this risk.

Companies need to be realistic about their needs. If you have a contractor working full time for long periods, the likelihood is that should be a permanent position. In some organizations the politics make it taboo to bring on new headcount, but that shouldn't get in the way of good business decisions. The exception in some cases is when the contractor brings a skill that the company knows it only needs for a finite time or that skill is too difficult to acquire on a permanent basis.

If the contingent labor is supplementing your workforce, there are still a number of considerations such as how much are you using that supplement? Are there ways to reduce the need such as by smoothing out volume patterns? Can you build capabilities you don't have in-house? Are there are alternatives such as automation or efficiency improvements? There are a number of areas to look at to determine if you are using contingent labor appropriately.

Not that I am against contingent labor - quite the contrary! There are many, many legitimate and desirable uses for contingent labor. But too often companies overuse it and both pay too much and create risks for themselves. In my next post I will talk in more detail about the criteria to use when determining contingent labor strategies.

Integration with Annual Budgeting

I am often asked the question of where workforce planning should fit in the annual budgeting process - before, during, after? While as with many of these things there is not a single answer that works for every company, I'll throw out some observations from recent years.

Traditionally workforce planning has come after the budgeting process. The business leaders figured out what they want to do and then HR tried to come up with a workforce plan to fit it. This is probably the least preferable approach. There are a number of workforce planning considerations when determining if a given strategy or goal is even feasible. Things such as:

- Do we currently have the workforce to achieve that goal? (numbers, capability)

- Can we get the workforce we need to achieve that goal? (scarcity) 

- Can we afford to get the workforce we need to achieve that goal? (cost)

- If we have them or if we can get them, what is the likelihood they will be able to achieve the goal? (risk)

These are just some of the simple considerations. Not every goal in an annual business plan is staff dependent, but many are. In some cases, the entire goal is premised on the ability to get the right workforce. For example, I worked with a company in the late 90s whose plan was premised on hiring 400 Java Programmers. If anyone was trying to hire Java Programmers in the late 90s, you know why that might not have been the best plan...

So this argues at the very least for some level of integration between budgeting and workforce planning - at least using workforce planning as a part of the feasibility analysis for the plan. But there are a lot more things that workforce planning can do in the budgeting process such as:

- Looking at alternative staffing / cost reduction measures such as outsourcing, automation, contingent labor, etc. to determine cost impacts and likelihood of success

- Analyzing the impacts of various revenue / project scenarios on staffing and goal achievement

- Finding cheaper ways to get a given set of work done

The list goes on and on. In addition, I continue to hear feedback from companies that integrating workforce planning into the annual budgeting process increases manager buy-in. Often it is just a compliance approach at first, but as they see the value of workforce planning, managers see it as an important part of the annual budget process.

I am seeing some companies start to have success with doing a preliminary workforce plan even before the annual budgeting process. This is somewhat related to my recent post on Annual Workforce Recalibration. But even at a simpler level, some companies are taking a snapshot of the workforce today and just running simple scenarios such as what happens if our revenue increases by 5% or our volume by 10%. Or they are even looking at what happens if we can increase productivity by 5%. In some cases they are modeling large customer wins or acquisitions as part of the process. And these days, most who look at macro factors are modeling some different economic scenarios to see potential impacts. They are then feeding the results of this process in to the budget guidance provided to business leaders and continuing to refine the workforce plan as the budget evolves.

So there are a number of options here. Integration is a good option for most organizations. But for those who have an established workforce planning process and some sophistication in your modeling, you may want to explore the preliminary plan approach as well.

Next post I will be talking about contingent labor analysis...

Annual Workforce Re-Calibration

I have been recently working with a client on their annual workforce plan refresh (tied to their budgeting process). But we have taken a little bit different of an approach that I thought I would share. Instead of just looking at what they currently have in terms of workforce as a baseline, we instead are doing almost a "zero based budgeting" exercise and building from the ground up what they should have in terms of a workforce. Basically if they had to rebuild the workforce from scratch today, how would they do it? And that includes looking at where they have staff located, levels and compensation of staff, automation approaches, and a host of other "wish list" type items. To get to this, we have had discussions with leaders in various parts of the organization to ask them how they would ideally build their organization if they had no constraints.

It has been an interesting exercise in that many of the leaders would actually have less people than they have today, but with different skills, in different locations, with different focus, and with different levels of technology enablement. Certainly in some areas there is a desire to shore up resources, but in many cases that is accompanied by a desire to reduce them in others but feeling like they can't because of current processes or technology. We are commonly hearing "oh we have to have xx number of resources here because it is so manual, but if I could I would get rid of that work altogether". And often we hear things like "area x is really where our growth potential is, but our resources are consumed supporting area y which is declining for us".

What is interesting about these kinds of concerns is that if the organization were given the mandate to make cost reductions, they would probably look at cutting some of these areas that they feel like they can't cut now. But in those cases they probably wouldn't get additional resources to do the things they feel like they need to do to focus on growth.

For this particular client, we are taking this information and feeding into the strategic planning process. We are looking at how we can best shift resources to focus on growth priorities and where we need to find ways to reduce resources. It is a bit challenging without the real urgency of cost-cutting and potential reductions in force, but the exercise is forcing the organization to look at their resources critically and they are making some tough choices about priorities. We have been encouraging to think of every headcount slot they have as a scarce resource (and it is in many companies today) and that they can't afford to waste any of it by having staff focused on the wrong activities or neglecting opportunities.

Certainly this is an annual exercise that organizations could do - rethinking what the optimum structure and resource levels for their workforce would be on an annual basis and using that information to inform strategic planning, budgets, organization design, etc. Companies could do true zero-based budgeting if they wanted, but this exercise is in many ways an even shorter path to get to the same result.