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Why Data is a Must for Workforce Planning

Why Undertake Workforce Planning?

The nature of business is very complex today, with ever-changing business scenarios and customer expectations. Organizations are expected to keep pace, by becoming agile, responsive and strategic in their service delivery. Organizations are expected to stay lean for higher profits and better Return on Investment. And these leaner models are demanding automation in HR. For this, organizations need to align their talent inputs with the changing business deliverables. This in turn translates into sky-high expectations from employees- they must deliver beyond expectations in this ambiguous environment. The roles of HR are also changing as observed in our interview with HR leader – Barry Wolfe.

To help employees give their best, employers must design and implement the right talent solutions. The right talent tools can help employees apply their skills at the right place, at the right time, and in the right way to achieve the desired productivity outcomes. This is possible through a systematic workforce planning process.

What is Workforce Planning?

Workforce planning is a process to ensure the right number of people with the right skills are employed in the right place at the right time to deliver an organizations’ short- and long-term objectives*1. In the modern context, we also have two more additional constructs to this definition i.e. “with the right contract” and “at the right cost”*2. Here is a detailed look at each of these elements:

  • Right number of people: Companies should have available the necessary person-hours to meet the business deliverables.
  • Right time: Customers nowadays require immediate servicing in real-time. Hence companies must make available resources at the moment when they are needed, without any delay.
  • Right skills: Companies should have readily available the right-skilled people for immediate as well as future anticipated needs.
  • Right contract: The employment status of the employee should fit with the company’s overall resourcing and talent strategy.
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In order to meet each of the above requirements, HR must develop a well-thought-out hiring and resourcing strategy. An optimal allocation of resources can ensure that organizational business goals are met. According to a CIPD survey, workforce planning includes, but is not limited to the following major HR activities:

  • Succession planning (62%)
  • Flexible working (53%)
  • Demand supply forecasting (53%)
  • Skills audit/gap analysis (49%)
  • Talent management (42%)
  • Multi-skilling (36%)
  • Role design (35%)
  • Risk management (34%)
  • Outsourcing (29%)
  • Career planning (28%)
  • Scenario planning (20%)

Workforce planning is thus, not a standalone process, but involves an interlink of various talent interventions. Traditionally it was called manpower planning, but today it is commonly referred to as “resource planning”, “resource allocation” or the umbrella term workforce planning.

Types of Workforce Planning:

The approach to workforce planning differs greatly by factors such as company size, sector, market scenario, talent landscape etc. But essentially, the process can be divided into two categories:

  • “Hard” or operational workforce planning: ‘Hard’ workforce planning is about numbers. Making predictions of the future using historical data, doing a quantitative analysis of the labor market to match supply with demand. Such quantitative analysis and actions are included in this approach. This is the traditional approach to workforce planning, with limited context-setting and understanding of the subconscious factors that go into optimal resource management.
  • Soft or strategic workforce planning: ‘Soft’ workforce planning is the modern-approach. Today it is important to understand the underlying cause and effect relationships that affect the talent landscape. A strategic workforce plan helps set a better context by gathering qualitative insights about talent. Armed with both quantitative and qualitative data, managers can evaluate a range of options to identify and maximize the drivers of performance.

Workforce planning cannot be either-approach. Employers must get the right balance between the above two methods, to be able to staff people optimally.

Why Undertake Workforce Planning?

Workforce planning is not a new area of HR, it has long since been used to link business strategy to talent strategy. Now we are merely seeing a change- the nature of workforce planning is evolving thanks to advanced technologies like big data, people analytics etc. Earlier, employers used to engage in resource allocation in a sporadic manner, at an operational level. Managers used to open their workforce planning books only in the event of a sudden shift in customer demands or business direction. It was more of an “event-based” activity rather than an ongoing commitment, that too at a highly operational level.

Today, change is ongoing, and organizations must continuously plan their workforce allocations in line with the changing dynamics. Resource allocation and planning should become an ongoing priority for HR and business alike. Here are some reasons to undertake workforce planning as a top priority:

  1. To meet customer needs: To stay competitive, organizations must delight the customer on an ongoing basis. The customer needs may vary, for example, certain customers may have immediate needs as against long-term needs. This will call for a highly agile and just-in-time resource allocation approach.
  2. To align with the business objectives: The talent strategy must be in sync with the business strategy, which in turn is based on the market and economic forces. A workforce planning strategy is a key component of the talent strategy and must be made to align with the business objectives.
  3. To engage and retain top talent: In today’s volatile talent market, employers are finding it increasingly difficult to retain top talent. Employers must engage with employees, providing them the right career growth opportunities. Workforce planning can help HR do this by creating a real-time talent view across the length and breadth of the organization. For example, HR can plan better leadership development initiatives by knowing the gaps in leadership skills early-on.
  4. To manage workforce risk: Workforce planning helps pre-empt talent-risks such as staff shortage, staff unavailability, lack of skilled staff, etc. For example, managers can access a workforce planning tool to have a look at the over-committed and under-committed team members. They can take an immediate decision to reallocate projects, leading to better productivity.
  5. To develop future skills roadmap: Workforce planning is not just for the present. People analytics can help make predictions, which in turn can help companies understand the future skills needs. Companies can thus plan and develop labor for the future. For example, if managers can have an easy view of the skills gaps in their teams, they can plan to nominate certain employees for relevant training, leading to better performance
  6. To optimize labor costs: Profitability is the ultimate goal of any business, and labor costs are an important component of overall costs. Businesses must optimize labor costs so as to pass on a cost-benefit to customers. With workforce planning tools, managers can get a view of the financial aspects of their teams, and HR can get a view of the labor market.

How to Develop a Workforce Plan

Both business and HR inputs go into making an optimal workforce plan. Here’s how:

  1. Define the business strategy: The first step is to lay out clearly, the organizational strategy, the operations plan at various levels /functions, and the subsequent people strategy.
  2. Analyze and discuss relevant data points: HR and business leaders and managers must take stock of the available resourcing data. It is not merely about volumes of data, but having the right data in the right form. Data from systems and software (both internal and external), high-level data available publicly such as labor data, as well as qualitative inputs from people in the form of observations, discussions, and feedback must be noted.
  3. Define the resourcing objectives: The next step is to define the objectives of the strategic workforce plan. What does the organization wish to achieve? Is there a recurring problem that HR wishes to solve? Seek answers to these questions, by thinking from the perspective of all stakeholders- customers, vendors, partners, employees, etc. HR must also assess the internal workforce capability and see whether it is sufficient to deliver the objective.
  4. Define the supporting HR processes: An ideal workforce plan is one that is well-integrated with all HR processes. Hence, HR must identify the possible changes in recruitment, learning and development, performance and potential management, career planning and succession planning etc., so as to align with the workforce plan. Also look at internal communications related to the plan- “How will HR and business managers convey the right messaging to the people in a timely manner to ensure effective implementation?” Managers must be educated and oriented to the new planning process, so that they can operate in line with the new construct.
  5. Define evaluation criteria: Before implementation, it is important to define the right evaluation criteria to track the workforce allocation as per plan.

The Data-Driven Approach to Workforce Planning

We can see that optimal resource allocation draws a number of inputs, both qualitative and quantitative, from various sources and stakeholders. Implementing a workforce planning system may seem too complicated if you wish to do it manually. This is especially true with the extremely high focus on getting and using the right data. The solution is to turn to emerge technologies- automation, big data and analytics, cloud etc. to build a workforce analytics solution. But this also requires a certain degree of data-proficiency. The reality is that much of HR is still swimming in the data swamp- HR departments have a lot of data, but not necessarily the relevant data or in the right form. But the reality if that without the backing of reliable and valid data, workforce analytics is a sham. Wrong data can get HR the wrong insights, leading to the wrong talent-decisions. And a talent-mistake can prove costly to the organization at several levels. The faster HR gets out of this swamp and builds data-capabilities, the better it is. Here’s a look at why this data-clarity is essential to the success of optimal workforce planning.

Why Dig Data for Strategic Workforce Planning?

According to the Job Openings and Labor Turnover Survey 2016 by the Bureau of Labor Statistics, the number of hires have always exceeded job openings, except for very recently. This statistic shows that the ‘War for Talent’ is real, making it imperative for employers to make the best use of existing talent. Digging data to gain useful talent insights is one of the primary ways to win this war. Yes, dealing with volumes of data can be overwhelming if done manually, but not if you turn to data analytics tools and technologies. The traditional approach to workforce planning has been a finance-led process, focused primarily on managing headcount budget to prevent cost overruns. Companies must look at workforce planning beyond mere financials, and integrate HR data and predictive analytics. A data-driven approach can help achieve this.

What Data Should Companies Build and Maintain?

It is important to know what data to collate and use. Some of the key data points and their sources that must be fed into the workforce analytics system are:

  1. Business data:
  2. Customer / future target group data to forecast demand for services/goods through benchmarking information.
  3. External data like social trends, technological developments, consumer patterns.
  4. Data on potential new directions, technology scenario planning, new ways of working, etc. on a strategic and operational level.
  5. Talent data:
  6. External Labor market data: demographics, skills provision, the existence of training provision Immigration/emigration
  7. Internal workforce numbers such as employee turnover, employee absence, employee demographics, training, hiring, employer-employee work arrangements, succession plans, talent plans, competency levels and so on.
  8. Legal data such as offshoring/outsourcing assessments, rostering statutes, etc.
  9. Financial data:
  10. Company growth rates, company revenue trends, employee turnover costs, L&D costs, hiring costs, redeployment costs, contingent workforce costs, remuneration costs, training costs, labor costs as per changing labor market.
  11. At a manager-level, give managers a view of resource utilization (under-committed and over-committed) resources.

To create clean and relevant data points, companies need to carry out data-sorting and data-cleaning in the initial stages. HR should bring in the right people on board to do this i.e. data scientists and engineers who are well-versed in making data work for the right purposes. Once organizations have the right data handy, the next step is to get the right workforce planning system to make use of that data.


Workforce Planning Demands the Right Technology Tools

Data and technology go hand in hand. Hence, HR leaders who wish to dig the data-advantage to optimize the workforce must don the technology-hat and invest in the right workforce analytics tools. There are two ways to go about this i.e. build or buy.

  • Build: One approach is to build a workforce analytics tool from scratch. While it offers the advantage of the highest degree of customization, it may take a lot of time, investment and efforts to develop. Moreover, not all companies may have supporting resources for backend support of the system.
  • Buy: Another option is to buy off-the-shelf HCM Workforce Planning tools from solution providers. This offers the advantage of being cost-effective, small as well as large scale, and leveraging cloud capabilities. If you decide to buy, you must check for the right functionalities. Here are some key features to consider, as included in the ClayHR Workforce Planning tool:
  • Projects-View: Managers must be able to gain a single view of their business deliverables with details such as Accounts Managed, Projects undertaken under these accounts, Project Groups and Project Managers allocated
  • Resource Utilization Summary: Managers should be able to quickly know people-details such as the team count, number of projects, total allocation, total billable allocation, resource plans etc at a single glance.

  • For managers’ convenience sake, it is good to include an exclusive view of “Underutilized Resources” and “Overutilized Resources” for each team member, expressed as “% underutilized” and “%overbooked”, respectively like this:

Resource Forecasting: Managers should be able to view current and future resource count by various categorizations such as profile, skills, start date, and end date, etc. This will help managers correlate the team situation with the business direction and scale up or scale down in a systematic way

These readily available features can help organizations implement solutions quickly at an affordable cost and as per the business need.

Implementing a Workforce Planning solution is no longer an option, it is a business imperative. The right workforce planning solution can help organizations make the most of their existing talent pool, thereby reducing hiring costs and dependence on external resources. Most importantly, it can help adequately harness the power of people- the most important differentiators in today’s business economy.

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