August 8 2006 - A study from The
Conference Board reports that the aging workforce and an emerging retirement wave among
'baby boomers' are driving more businesses toward 'strategic workforce planning'.
Strategic workforce planning is a new approach to traditional human
resource planning that involves analyzing and forecasting the talent required by
organizations to meet the objectives of their business strategies. It helps:
- control employee costs
- assess talent needs
- make informed business decisions such as whether it's more cost effective
to outsource an activity or add full-time employees
- assess human-capital needs and risks
In short, according to the study, Strategic Workforce Planning: Forecasting Human Capital Needs to Execute Business Strategy,
strategic workforce planning is
aimed at helping businesses ensure they have the right
people in the right place at the right time and at the right price.
"In many companies, traditional workforce planning was an onerous
process that HR imposed on management," said Mary B. Young, Senior Research Associate,
The Conference Board and author of the report. "Too often, the net result was a humongous
report, blinding spreadsheets, and a dizzying amount of data that provided very little
value to the business."
Methodology has moved on to meet changing business needs, new tools and
technology. The study shows that some businesses have enhanced the
simple gap analysis (workforce demand versus supply) used for traditional 'manpower'
planning by adopting the logic and analytical tools of other management functions, including
finance, strategic planning, risk management, and marketing.
Rather than focusing on spreadsheets, the planning process needs to
concentrate on the business plan and its implications on the workforce. Consistent,
organization-wide data is essential. Other critical areas identified in the study include:
- making the process and tools simple and efficient
- developing HR's capabilities and comfort level
- establishing a common language to describe jobs and required competencies
- integrating workforce planning with business and budget planning
- driving the plan deep into the organization
While most companies in the study are finding their way in the process, strategic
human resource planning can deliver value already through:
- Generating insights and knowledge to help managers
make business decisions.
- Providing a deeper and subtler understanding of workforce dynamics
than was previously available.
- Enabling more efficient human capital management, for example by evaluating different
staffing options for their long-term impacts, taking advantage of software programs such as
or creating a stronger internal job market.
- Enabling the HR function to achieve a long-held desire to become a player and a
valued contributor at a higher level of strategic management.
"Strategic workforce planning enables the organization to slice-and-dice
its workforce data to discover critical issues, compare different groups, understand
patterns and trends, home in on critical segments of the workforce such as mature workers
and top performers, and customize its approach to managing different segments of its
workforce," said Mary Young. "By enabling leaders to see across lines of business,
workforce planning can leverage talent within a company. Ultimately, the same workforce
planning database tools will enable employees to shop for new jobs, assess their own
developmental needs, and prepare for career moves inside the organization."
Some of the techniques adopted by companies exampled in the study include:
- A workforce analytics approach - mining both current and historical workforce
data to identify the key relationships among the variables and between employee and business data.
Dow Chemical has used this approach throughout a 10-year evolution of its workforce planning process.
- Forecasting and scenario modeling - using data to create
forecasts that incorporate multiple what-if scenarios. These enable executives to evaluate
strategic options. The study describes how a "major bank" decides where to locate a new
call center based partly on this approach.
- Human capital planning - used by Corning and others to segment
jobs on a basis of their "mission-criticality", making different levels of workforce
investment in each segment. This approach focuses on broad 3-4 year trends,
rather than precise headcounts and short-term plans.
Hewlett-Packard and IBM are cited as being
committed to strategic workforce planning, customizing the process to address each company's
specific conditions and needs. IBM's HR and finance departments
help senior business leaders prepare realistic plans to execute their business strategy and
manage drivers of employee costs. At HP, the study states that high-level discussions and a two-way educational
process between business leaders and HR emphasizes qualitative over quantitative factors.
"While no organization claims to have achieved it yet, many believe that the ultimate
payoff from strategic workforce planning will be a vibrant, internal job market that
transcends the boundaries between business units and geographies," concluded Young. "The company will be able to mine employee data to locate talent anywhere in the organization, woo passive job candidates, and find the best use for each employee."
The full study can be purchased from The Conference Board.