The Workforce Expert

Staffing a Workforce Planning Function

I have been asked several times lately what the best way to staff a workforce planning function might be. Is it a centralized group? Should you teach the generalists how to do it? How should you use outsiders? And a host of other questions...

Beyond my default consulting answer of "it depends", there are some elements that I have seen be successful in multiple clients. Here are a few key tactics:

1) Have the Expertise you Need: I have seen a number of organizations try to "repurpose" staff to do workforce planning. For example, taking recruiting managers and putting them in charge of WFP (usually sending them to several conferences in the process to "learn how it's done"). This is almost always a disaster, unless the person has previous workforce planning experience. WFP is rapidly emerging as one of the more technical disciplines within HR, and it requires someone who has been there and done that to lead it. The leader of this function can very rarely learn "on the job" and be successful. So wherever they come from, you have to have at least one true expert on your team.

2) Have a Business Unit Link: While there are a number of ways to make this happen, it is very important that the WFP function serve the business units and have a close tie to them.  This gives the planners a much clearer understanding of what is needed and helps them be more responsive to what the business needs, and it also makes the business units feel like they are getting value for their specific area.

3) Use Outsiders Where it Makes Sense: Even when you have built internal capabilities, there are some analyses that just require an outside perspective, either because of their complexity or the politics involved. Don't be afraid to get outside help when you need it. A new model is actually emerging where companies are "co-sourcing" WFP where they have ongoing access to experts both to coach and assist their team, as well as be able to run complex analyses when required without the traditional learning curve.

4) Focus on Change Management: In addition to increasing analytic capability, it is important that companies focus on really getting their analysis to be used. This is a change management job. While showing the business that the analysis you are doing is valuable helps with adoption, it is often not enough by itself to get workforce planning truly embedded. Fundamentally, you want the business to change the way it makes decisions so that the workforce component is much more explicit and that key decisions are not made without that analysis. This is a behavior change like any other organization change...

The model that I have come to like (and that I have seen work well in a number of places) is a hybrid of centralization and decentralization. There is a "Center of Excellence" for workforce planning that is centralized. This can often be just 1 or 2 people, though in some organizations it is larger. This group is responsible for methods, tools, building capability, running complex analyses, and serving as a liaison to key groups such as Finance, IT, etc. This central group is responsible for supporting both company-wide analysis as well as enabling the HR teams embedded in the business units to run their own analyses and get the information they need for their decision makers. The generalists in the business unit then handle much of the day-to-day workforce planning demands. Usually this works best when there is some kind of software platform that the company is using as it drives consistency and helps make data gathering, etc. more streamlined.

Of course this isn't the only model, and I have seen others work. But if you are trying to determine how you might initially structure this function, this is a good starting place.

Techniques that Make a Difference Part 3

The next technique that I want to mention is one that has started to catch on in a number of places. It is called Time to Replace (TTR). Time to Replace is an alternative measure to Time to Fill, which is often used in workforce planning. While Time to Fill measures the time it takes to get a replacement candidate in the door, it misses the impact of lost productivity. And for many industries such as energy where the Time to Proficiency for a job can be 18-24 months, this impact can be significant. Using Time to Replace instead of Time to Fill can have a significant impact on your results. The equation for Time to Replace is:

Time to Replace = Time to Fill + Time to Proficiency

This is measured on a job-by-job basis. Using TTR leads to different results and different strategies. Let's take a simple example.

Suppose that an energy company is projecting retirements in their senior technical / field staff. There is some scarcity already in that area, so the Time to Fill these positions is roughly 6 months. The Time to Proficiency in those jobs is roughly 18 months. More importantly, the net impact to productivity for those new entrants who are not yet proficient is high, say 75%. Meaning that the new entrants during those 18 months are only 25% as productive as someone who is fully proficient.

If the company only used Time to Fill to project its needs, it would begin recruiting replacements roughly 6 months before its anticipated retirements, perhaps backing that up by 1-2 months too allow for transition time. But what would be the net impact? Under this model, the company would only be getting 25% productivity from those new hires for the first 18 months (perhaps that percentage would increase as they come up to speed). If the number of new entrants is significant, that type of productivity hit would be difficult to absorb, and it is likely that unit would not be able to meet its goals.

Assuming the company were using Time to Replace, the need would be identified a full 24 months before the retirements happened. Now that is not to say that the company would begin the process 24 months before projected requirements, but they might put in place other contingencies to address the problem. For example they might:

1) Begin the recruiting process earlier to give more time for new entrants to become productive

2) Create a phased retirement plan where they are still getting productivity from the retiring workers while the new entrants are coming up to speed

3) Supplement the new hires with contractors or other resources during the Time to Proficiency period

4) Create an accelerated training program to close the gap faster

By getting the early warning, the company has more options. And this is key in addressing significant workforce planning issues.  

Now one might ask, why don't we experience a bigger impact from this lost productivity in our current operations if we don't use Time to Replace now? In most cases, the number of new entrants vs. the number of incumbents who are already proficient is such that the incumbents can pick up the slack caused by the productivity loss. If the Time to Proficiency is short or the impact to productivity is small for new entrants, this type of hit is usually relatively easy to absorb in a group of any scale. But when the Time to Proficiency is long, the hit to productivity high, the group is small, or the number of new entrants is high, then this becomes more problematic.

All this doesn't imply that suddenly companies are going to start recruiting years before their needs and doubling up staff just to ensure productivity. But by understanding Time to Replace and using it in workforce planning calculations, companies can get a realistic picture of their needs and potential challenges and determine the right strategy to deal with them.

Techniques that Make a Difference Part 2

In the last post we discussed how doing workforce planning at the skill level can enhance the ability of organizations to find creative solutions to workforce challenges. A similar technique involves planning at a deeper level than is typical in organizations.

Most organizations focus their workforce planning efforts at the "output" level. The outputs that they measure can vary quite a bit. For example, a hospital might look at the number of beds filled or a product company might look at the number of products produced. And certainly for ongoing or annual planning, this level of detail might be appropriate. But there are opportunities for further optimization of the workforce by planning at a deeper level. This involves breaking down outputs to the processes and effort that is required to achieve them.

Taking the product example, the number of products produced can be further broken down to a number of discrete processes that lead to the product being produced. Each of these processes requires a certain amount of effort from workers with a certain level of skill. Each of these workers has a certain cost per hour associated with that effort. And each production process has some set of equipment, resources, etc. as inputs. All of these could be considered components of the production process.

By examining the production process at the component level, workforce planners can look at optimizing each individual element. This can help answer questions such as "what is the least expensive resource that can be used to produce this output"? Or "how much will our workforce needs reduce if we introduce automation into the production process"? 

Certainly this approach adds a significant level of complexity to the workforce planning process, and is often not necessary for day-to-day workforce planning. But when businesses are seeking ways to cut costs, improve efficiency, launch new products, or other complex objectives, this level of workforce planning can be appropriate (even necessary). The data required to conduct this type of analysis is significant, however, and often cannot be acquired quickly. So planners who might want to conduct this type of analysis, will need to have this data ahead of time. In addition, this type of analysis requires a much deeper understanding of detailed business processes and knowledge of actual production / service delivery approaches.  

As with planning at the skill level, planning by process and effort allows deeper insight into the relationship between the workforce and the outputs of the organization, and can provide new opportunities for workforce optimization.

 

Techniques that Make a Difference Part 1

As I mentioned in my last post, many companies are still at very early stages in their workforce planning efforts. But as I also mentioned, I have had the fortune to work with a number of companies who have been at it for a while, and have had the chance to evolve their practices. In the next few posts, I will talk about some of the techniques that have made a positive impact over time on their results. These may not be appropriate for those just starting out, but they are important to keep in mind as they are logical evolutions of many workforce planning efforts.

The first technique is related to the level at which planning is done. Most organizations tend to focus on the position. They are hoping to identify how many project managers or nuclear engineers they need over a given timeframe. This is a logical starting point. However, it is very limiting!

Take for example a client I worked with. They had a very expensive position that was hard to source, expensive to train, and highly compensated. The average cost of this position per year was more than $300,000. When the modeling started, they had roughly 200 of these positions filled and based on their demand projections, they would need another 200 of them at an annual cost of more than $6M + the cost of acquiring them. Certainly the client was looking for an alternative to that very expensive scenario.

This leads to the technique. One of the most powerful tools for workforce planning is looking at your workforce in terms of its skills and how they use those skills, rather than just as whole positions. In this example, we found that the incumbents in these positions were using their high level skills only about 30% of the time. The rest of the time was spent on largely administrative tasks. So the company was paying a premium to get low level work done. By modeling the future requirements based on skills and effort, rather than just position, we were able to reduce the needs from 200 to roughly 30 new positions. We were able to restructure the job so that they client could leverage the administrative work to lower level positions, hire fewer of the high level position, and save several million dollars in the process!

Had the client focused only on projecting the number of new people needed in that position, the answer would have been very different. But projecting workforce needs at the skill level opens up a wide range of additional analysis points such as best location for particular types of work, detailed outsource vs. insource comparisons, optimizing organization structure and a host of others. It also allows an organization to look at what is the most efficient position to do a certain type of work. Certainly understanding the dynamics of demand at the skill level vs. the position level is more complicated, but as illustrated by the simple example above, the payoff can be significant. It opens up a range of new options for analysis and a much more flexible way to look at deploying the right workforce.

Not all organizations may want to start with this level of planning, but as I mentioned, it is a natural and powerful evolution for workforce planning in most organizations.