Building Strategic Workforce Planning Capabilities – Transcript

November 27, 2023
Season 5, Episode 5

Tony DiRomualdo:

When you develop these skills, what we saw is that they translate into much greater achievement of some of the key goals of the process, and some very tangible talent outcomes – things like measurably reducing competencies and skills gaps, and then other things like just reduction in open positions, and also reducing time to fill. When you’ve got your handle on skills, you’ve got a handle in understanding external markets where people with these skills are. You’re probably developing that talent pool. And that ultimately leads to much better performance of talent management processes overall.

Announcer:

Welcome to The Hackett Group’s “Business Excelleration Podcast.” Week after week, you’ll hear from top experts on how to avoid obstacles, manage detours and celebrate milestones on a journey to world-class performance.

Gary Baker:

Hello, and welcome to The Hackett Group’s “Business Excelleration Podcast.” I’m your host, Global Communications Director Gary Baker. Today, we’ll be talking about our latest research into strategic workforce planning. My guests are Senior Research Director Tony DiRomualdo and Global HR Executive Advisory Practice Leader Franco Girimonte. Tony, I will let you take the ball from here.

Tony DiRomualdo:

Thank you very much, Gary. Franco, I’d like you to kind of kick us off on this topic. You and I have been working on some intensive research on the topic of strategic workforce planning. But before we get into it, I think it’d be great if you can share our definition of what strategic workforce planning actually is, and encompasses, and why it’s such an important capability for HR organizations to have, especially in today’s very volatile and uncertain business environment.

Franco Girimonte:

Yeah, thank you, Tony. What strategic workforce planning is, is having the right people, at the right place, with the right skills, at the right time, and obviously, most importantly as well, is at the right cost. And when we put this study together, Tony, if you recall, we had to have some sort of idea framework of “What does it encompass?” And the best way to look at it is, thinking back within an organization, most organizations put together some form of a strategy. Typically, it’s a longer-term strategy – it could be a minimum one year out, but could go out to five years, who knows?

And a lot of times, the finance organization is part of that effort where they’re working with the business, putting together operational plans, financial plans, and so on. And we know that the business partners are part of those conversations, and they’re getting insights from it. But what they’re not doing is they’re not translating what I would call the talent demand requirements for those strategies. And so part of the piece around strategic workforce planning, let’s call it the numerator, or part of the formula here is that somebody, and typically, we expect is the HR business partners, to be defining what that talent requirements are. And then within the organization, HR is compiling a lot of information around the workforce profile. Every single employee within the organization has a profile. They capture information like demographic information – their address, their Social Security number, or other types of taxpayer identification numbers. They also track things like skills, data, and job titles, and so on.

And that information’s there, and what we expect is that the talent management organization, as well as the analytics team, are compiling what I would call the talent supply piece of things. So you’ve got on one side of the formula, the talent requirements or talent demand. On the other side, you’ve got the talent supply. And when you combine those two, you identify gaps in where your strategic plans are taking you, so gaps in talent. Some of it could be, you have too many people in certain places, or in certain business units – some of it could be less.

So good examples of that would be things like, “Hey, we want to grow into a new market. We want to grow our business, and therefore what are the talent requirements to get into that new market?” That defines it. And so, “Do we have the talent to suffice?” The cool thing about this though is that what it does is it gives HR considerable leeway or planning time to enact initiatives to deal with it.

So depending on your time horizons that you’re working with, the HR function could have anywhere from one year to five years out to plan for these activities. “Hey, we’re going to expand into a particular market.” All of a sudden, the talent recruiting organization, the talent management organization – all these groups have some lead time to start planning for it. Also, your succession planning, your employee relations groups in terms of turnover, those kinds of things – it all has downstream effects cause we know most of those groups within HR tend to take last year’s plans and make changes for the following year. But what this does is gives you two to three, even five years out timeline, depending on their planning horizons. It gives you that much more time for the HR function to prepare.

Tony DiRomualdo:

Excellent, Franco. And I would also add to that, that as the organizations get this process launched and smoothed out that often – and we’ll get into this more later in our conversation and sharing some of the results from our study – that those organizations that begin to develop more mature capabilities in a process around strategic workforce planning are able to do this on a more continuous basis. They’re constantly feeding in new information that’s affecting the demand for different types of talent and skills, as well as shifts – changes in the supply of skills. And what you were describing is a very important foundational step, and still happens consistently, where you’re doing, let’s say, a yearly look. But what we’re seeing with some of the more advanced organizations is, this becomes more of a rolling type of a planning process that’s being updated on maybe a quarterly, and in some organizations we found from our study, even on a monthly basis. They’re continually updating based on the dynamics of what’s going on in the marketplace.

Franco Girimonte:

Yeah, that’s absolutely right. And I think, Tony, that gives these organizations much more capability to compete for talent cause we know talent is going to be… the talent management area within HR functions is going to be getting tougher and tougher with… we forecast population shortages around… most of the industrialized countries are experiencing that from ages 25 and below. And so it’s going to just be harder to retain talent, find talent, and if you’re not planning for it appropriately, it’s probably going to cost you a lot of money because obviously it’s better if you could develop and grow your people into these positions versus constantly hiring from the street. So that would help. Shifting, Tony, to the study itself, I mean, what did we learn from our performance study that we just finished up on this topic about the benefits that can be achieved through mature and effective strategic workforce planning process?

Tony DiRomualdo:

Sure. That’s a great question because one of the things that we saw is quite a significant percentage – about 40% of the companies that we surveyed – HR organizations had relatively immature, or were just starting their strategic workforce planning processes. And this is not an undertaking for those just starting out, or HR organizations that are basically struggling to master anything beyond the basics. And so it requires some investment in people, in skills, in tools and technology, and probably most importantly, in the attention and focus of the right people in the HR organization in order to execute on this process, and build this capability. It’s not something you just put in over a couple of months’ period – it takes longer.

And so there’s got to be significant benefits to that. Because with so much going on in HR, and with such a scarcity of budget and people, they’ve got to make the business case. And what we saw is a very strong case for strategic workforce planning. And we derived that conclusion by looking at, for example, what these organizations that we isolated in our study – we call them strategic workforce planning maturity leaders – those with the most advanced, most mature capabilities that they were far more effective at a number of key tasks related.

So you talked about the process, and that it requires translating business strategies, and the plans for execution of those strategies into talent implications. Because what it comes down to is, “OK, we want to go into a new marketplace.” Or, “We want to launch a new product.” There are always going to be talent implications. We’re going to use a certain type of workforce, or additional people, or we’re going to hire in, or need extra roles, skills, competencies, and we’ve got to be able to translate that.

And what we saw is maturity leaders much better at doing that. They’re also much better, and again, utilizing the capabilities that they’ve developed around strategic workforce planning, identifying risks associated with the attraction and retention of critical talent, shifting market conditions that suddenly there may be a spike in demand for a certain type of engineer, or the market in terms of compensation and benefits is shifting, and you’ve got to stay on top of that, and adjust your comp, and reward programs. Or identifying drivers of turnovers, or parts of your workforce that are critical, who may be more at risk at leaving, and addressing that before you experience turnover.

So many other things, for example, defining… You talked about getting a handle on talent demand. And what we see here is more sophisticated. It’s not just about, well, head count, but also getting more deeper into the specific roles – different kinds of skills. And then the converse is the talent supply, and not just internal, but external. And there’s a lot of data out there, depending on your workforce, but the more diverse you have a workforce in terms of the different job categories and skills necessary, you’re going to have to process, and analyze, and draw insights from large amounts of data externally, in terms of talent pools, and what’s happening in labor markets. Where are the sources of this talent? How that shifting, as well as getting a handle on, internally, what your skills are in your workforce.

A lot of organizations struggle with that. They don’t necessarily have all of that information because often it’s very difficult to get. It requires some kind of a framework and skills competency frameworks, and then you have to have someone evaluate people and evaluate the skills, and then input them into a system. And, of course, once they’re inputted, you’re in a dynamic world. They start changing and what not. So you’ve got to keep that updated.

So these are not trivial things to be able to do, others are… I guess the last thing I just wanted to mention is analyzing talent dynamics. So all of these things, then looking at, “OK…” you begin to anticipate and forecast how demand might change, or how supply might change. So these are things that are very sophisticated competencies that we see in the maturity leaders. And I think most importantly is when you develop these skills, what we saw is that they translate into much greater achievement of some of the key goals of the process, and some very tangible talent outcomes as well. Things like measurably reducing competencies and skills gaps. So you look at when you have a need for a certain software programmer, or certain type of engineer, that these people in your organization, or you have people in your organization, ready to step into those roles.

And when you can reduce that, that has very strong positive impact on productivity. You don’t have to necessarily go out and hire someone and pay the external costs. You may be able to move someone into that role, and part of that would be an increase of internal placements. We know the higher the percentage of placements vis-a-vis internal, the more efficient the talent acquisition processes are in organizations, and also the more productive of the workforce. And then other things like just reduction in open positions, and also reducing time to fill. When you’ve got your handle on skills, you’ve got a handle in understanding external markets where people with these skills are, you’re probably developing that talent pool, and may have them prepped so that when your recruiters reach out, you can move people more quickly, and bring them into the organization.

And that ultimately leads to much better performance of talent management processes overall. Strategic workforce maturity leaders – what our study found – they consistently exceed the expectations on the efficiency, the effectiveness, the customer satisfaction, business stakeholder satisfaction, and value of the talent management processes. And so there’s some strong rewards and benefits that can be had by having better execution of some of these tasks.

So Franco, I’ve been alluding to a lot of the benefits, and we’ve talked about some of the things involved with strategic workforce planning, but we, in the study, did a very deep dive on laying out different levels of strategic workforce planning capabilities that are needed by organizations, and then we collected data to measure where organizations were on these different capabilities. Can you talk a little bit about those categories?

Franco Girimonte:

Yes, Tony, thank you. So in the study itself, we looked at what… and we helped define, I guess, as part of the research, what are the foundational, and intermediate, and advanced capabilities. And obviously, we can’t go through all those three sections, so I thought, Tony, the best way to think about this is, think about it from an advanced perspective, and then our listeners can take a look at that and backtrack from there in terms of where they are in terms of level of maturity.

But before I even say that, I always tell my clients as I’m working with them is that… and I think you alluded to this, Tony, at the beginning of the call, where this is not something that you could just put in place tomorrow. You have to have some foundational capabilities. And I think some of the assumptions we have is that you have a fairly robust HCM environment, you’ve got a centralized, or somewhat… not centralized, but you have a robust technology environment where most of your sub-functions and groups within HR are enabled through technology, and that system, or systems, are producing data. And do you have a robust data governance around that? So are you looking at roles in the same way? Are you looking at the data in the same way? The costing? And so on.

So you’ve got a really good HCM system, backed up with some really good data governance to make sure that you’re getting robust data. Then you have an analytics team out there – capability – where you’re leveraging the insights from the data itself. And what I always tell people is the “what’s next after you’ve achieved those sorts of three stages” is the strategic workforce planning capability. So it goes beyond just the analytics team and the data. It’s also starting to leverage the power of your business partner organization – to integrate with the business, to bring back those talent requirements. So that has to be in place.

But when we think about the advanced capabilities, one of the common things we look at is extensive reporting and sophisticated analytics capabilities. So do you have things like a dashboard? Obviously. And the data to back it up? And the high-quality data to back up the metrics and the reporting that are in your dashboard? But also looking at what-if scenarios. It’s one thing to lay this out, but it’s much more powerful if you could start to do some scenarios, some what-if analysis like, “Hey, if we go into this country in a two years’ time frame, or if we go into this country in the next year, what are the implications? Because this would give the power of just additional insights to our business partners. But it would also give them some ability to start to consult the business and advise them on maybe some change in direction if they decide to go down that way.”

Another capability is just direct access to comprehensive data. I think it’s important that the data is very good, and you could access it – things like the skills data, the head count data, the cost data. We’ve heard from our finance clients as well – [they] told us that that’s one of the biggest frustrations that they have with HR is that they may have some information on cost of labor, and head count, and it doesn’t reconcile with what HR has. So I think ensuring that there’s a single source of the truth, and that all key stakeholders can access that information without violating any compliance or privacy regulations, of course, but having some ability to access this data, so that they’re all part of it.

Because the one thing I will say, I think it’s going to be very complicated or very hard for business partners to do some of this modeling in isolation. They’re going to have to work very, very carefully. You can almost envision a conference room where you have the finance business partners doing their financial modeling, and they’re talking and discussing potential scenarios that they see, and what the implications are on the financial capital. And at the same time, HR could do the same, but stressing more the human capital implications as you go through those scenarios as well. That would be the ideal state if they’re able to do that.

And I believe the only way is that you’re going to have to have access to each other’s information to figure out what they’re doing like, “How is finance forecasting certain things? And how is HR forecasting certain things?” I think bringing them two together and sharing of… allowing access to each other’s data, I think, could be very powerful.

The other is the extensive internal and external workforce demographic and skills. I think skills data is so, so important. We have to go beyond just the FTE cost data. I’ll give you a really good example that brings us to the point. One of my clients is primarily in the hardware business of producing security hardware for doors, and all sorts of different type of mechanisms and stuff like that, and they are now getting into the software side of that business, and it requires a whole different change like a skill set. And this is a very profitable business for them. It’s newer and so on, and who knows how long HR has known about this from a planning perspective, but it requires a totally different set of skill sets. Now, normally you could say, “Well, if we don’t have any insights to what kind of skill sets we have within the organization,” the knee-jerk reaction will be is to go out to the marketplace and acquire this talent.

Yet, you could have people within the organization that have these capabilities, or have the potential to develop these capabilities if you give them enough lead time, and it could cost you a whole lot less if you were to internally promote people versus constantly bringing people from the outside. So I think having that insight could be very, very helpful.

And the other piece of this, it really boils down to your business partners feeling very, very comfortable and adept at using strategic workforce planning data and the insights. So this process will produce scenarios, models, insights – all this kind of stuff. I think the business partners have to be there every step of the way – that is bringing in the requirements into the process, but also going back out to the business and sharing some perspectives on what they see – the implications. If they feel comfortable with it, that certainly talks to, what I would say is a very much an advanced capability to sort of put all those points together. So, Tony, as we go from the maturity side of the research we did, we also…

Tony DiRomualdo:

Sure, and I’ll say, there are no surprises there. I think what we see is, in particular for your typical HR organization, what we refer to as the peer group in the study, one of the biggest things that they struggle with is getting alignment with the business on the scope and value of strategic workforce planning. So getting this process off the ground, with active involvement of key business stakeholders. I mean, we’re talking at the business unit head level. So you talked about HR business partners, for example, you’ve got to have HR business partners who have the reputation and are perceived as someone that the business stakeholders can engage in productive conversations around this.

They may not see the value of it. It may seem like, “Oh, this is an exercise in me having to give this person a lot of information, and I’m not seeing what I’m going to get back for that.” And, of course, business unit leaders, regardless of where they’re working in today’s environment, have time demands far more than they can meet. So getting their time, and getting their mind share, is critical, and that’s a struggle for the peer group.

Interestingly, the maturity leaders have overcome that, and they’ve done that primarily by building capabilities in the information – be it the dashboards, but also most importantly, having those business partners, and even people working in a center of excellence around strategic workforce planning who may be doing the hardcore analytics, but who can speak the language of the business. That’s one of the big barriers here.

The other is just getting enough resources in order to invest in the tools, and build the process, and building the skills within HR, so that you can engage in some of these key activities, and have capabilities that are going to enable them. And then lastly, another thing is just kind of being able to focus and have the attention. Having your day-to-day HR operations, and running day-to-day HR in a way where you have some mind and headspace to focus on building these capabilities, and have people who can be dedicated, or at least carve out time to work in a focused manner on this.

And we’ve seen, over the years, and this got borne out again in this study, in our research on HR business partners, the definition of that role is to be primarily focused on strategic activities, and you can’t get more strategic than strategic workforce planning. Yet, in the reality, in many organizations, the business partners are doing everything, and they tend to be the one-person HR department in some cases, or the HR person on call for the business exec, and they’re handling all kinds of things that aren’t necessarily strategic. So breaking free from that, and dedicating time and resource, is really, really critical. Franco, just as we look further into the research, another area that we looked at was some of the practices that particularly the most mature organizations around strategic workforce planning were employing to generate better outcomes and better goal achievement. Can you speak to some of those key practices we identified?

Franco Girimonte:

Yeah, thank you, Tony. I think one area was in governance, and I’ll tell you, Tony, I was a little nervous or worried about this particular question like, “Who was actually going to own this process?” And my hypothesis, and what I always thought was, it should be the business partners, but I wasn’t sure until we actually did the research. And thankfully, our research did confirm that when we looked at these maturity leaders in the strategic workforce planning capabilities that they had the business partners, and to a certain degree, the business unit leaders sharing responsibility for this strategic workforce planning process. So it wasn’t up to what I’ve… and I’ve seen, in some cases, with some of my clients, where the analytics team, or the talent management and analytics teams own this process, it really should be on the onus of the HR business partners. They should be heavily involved, integrated with the business strategy, getting the business leaders involved, and finding out what’s going on from that talent demand perspective. So that was certainly one thing.

On the process side, we saw that maturity leaders were two times more likely to have implemented a standard strategic workforce planning process, which, to me, tells me that they take this seriously. Across business units, across regions of the world, they’re going to look at this, and they’re going to say, “Hey, this is a standard approach. This is the timelines we have to…” Cause we know that finance does that when it comes to financial planning. We know that the business strategy groups do that. HR shouldn’t be any different. They should have a very similar process that looks very standardized across the world, as much as possible, obviously, but also integrated with those other groups, the strategy groups and the finance groups as well.

We mentioned data. I can’t say this enough – we have to go beyond just the head count and cost data. We have to get better at our systems, and tracking more skills data, whether it’s certifications to certain types of skills that they pick up and so on. That would be important. So looking at your talent management space and types of tools that you have in there.

Technology, this one was a little bit different. I mean, the maturity leader certainly had better use, or were capable of getting more effectiveness out of the use of their tools, but some of the standouts in terms of capability was data visualizations tools and statistical modeling tools, even talent intelligent platforms to a certain degree were also important. And I think the reason for that – the latter – was that you get a lot more information about what’s going on in the markets that companies are operating in. So whether you’re looking to hire a nurse in some county in the state of Jersey, or New Jersey, or someplace in France, you have the ability to capture that kind of data like “What available talent is out there externally?” which could be part of your strategic workforce planning insights. So I think that was important as well.

And then lastly, I think integration with other talent management processes, this is the power of strategic workforce planning. If you just do this analysis, and identify the gaps, and it just dies in some dashboard, or on some PowerPoint presentation, it’s actually not a very fruitful effort here. What you have to do is figure out how to integrate those insights into downstream. What does it mean for your recruiting teams? What does this mean for your learning development teams? What does this mean for your succession planning teams? Your employee engagement teams? Your employee experience teams? Your shared services groups? All these groups have some sort of skin in the game here when it comes to these forecasts, and what you have to do is make sure that it’s connected in some way, shape, or form in order to get some value from all this effort.

Now, Tony, I know we’re getting close on time here, but we really can’t conclude this webcast without at least talking about some recommendations. So from the research we did, what are your thoughts on some insights we could share with clients around fixing this thing, or recommendations around building out a strategic workforce planning capability?

Tony DiRomualdo:

Sure, Franco, there are five or six that I would point to. First is, get a baseline measure of what capabilities, and what the necessarily elements, like data, for example, technology, etc., that you have in place in order to either build the strategic workforce planning capability, or just to get a sense cause many companies have this, but what’s the level of maturity that you really have? And identifying where are the critical gaps. Because, again, as we’ve been saying, this is a complex process. It has different pieces – some extremely critical like your HR business partners, and how they’re interacting with the business stakeholders, and whether or not they have key responsibility, or explicitly see that they’re responsible for executing this process, having the right people accountable for the outcomes. Those are things that you need to get a baseline on, so that you know, “Are we on the right path? Did we go down some wrong paths?” And correct that. That’s No. 1.

And as I say, a part of that is clear responsibilities for the strategic workforce planning activities because there are a lot of different moving parts. So who’s responsible for what? Who’s responsible for the goals? And that’s not just the HR business partner. It’s going to be some sort of center of excellence. Analytics team are going to have involvement, other parts of HR may have involvement, and of course, people in the business are going to have responsibility.

You talked a lot about data, and that’s an absolute critical first… One of the critical first steps is establishing those standardized data definitions and processes for collecting and validating, and we see where that’s a critical step there, is for finance, and HR to be absolutely in sync on definitions. And that may take some time to do, but once you get that right, then everybody’s basically singing off the same music sheet.

It’s also critical, I think, to focus on your business partners and their skills, as well as the talent management process owners in your organizations – people running a succession or talent acquisition, or learning and development. All of these individuals in these roles need to know how to take the outputs from strategic workforce planning process, and use those to inform their decisions and their actions in their roles. And I point to particularly the talent management process owners. Because to your point earlier, you can create all kinds of insights, but if they’re on a dashboard, and they don’t influence changes in who you’re recruiting, or where you’re recruiting, or identification in doing something about flight risk before they leave, then the consequences – often negative – are going to happen. So you want to avoid that, so this requires that kind of orchestration.

You talked about tools and technology, and it’s important to evolve the sophistication and make the investments. It’s probably not going to be a single investment, although some of the systems out there are modules that are in some of the HCMs now. We’ve seen recently introduction of those are important, but you’ve got to continually build that capability. And then last, but not least, is to track performance. Track the outcomes and measures of strategic workforce planning – performance and impact. So you can see whether or not, and where, and to what extent getting this heads-up information is actually being utilized, and the impact that it’s having.

Gary Baker:

Franco, Tony, thank you so much. That’s a lot for folks to kind of think about, and I appreciate you taking the time to talk with us today.

Franco Girimonte:

Thank you, Gary.

Tony DiRomualdo:

Thank you, Gary.

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