Workforce Planning Is the "Missing Link" for HR

If your bead on the future is looking blurry these days, you're not alone. The global recession has thrown off a lot of organizations' expectations and predictions. So, it's little wonder that many are now striving to do a much better job of strategic planning for the future, especially in the area of talent.

Workforce planning, or WFP, is not a new process, but it is an increasingly critical and fast-evolving one. It's come a long way since 40 years ago, when it tended to go by the name of "manpower planning," but there's still a long trek before it reaches its potential.

Over the past six months, i4cp has conducted nearly two dozen workshops and webinars for member organizations, has interviewed over a dozen members of our WFP advisory board and has completed a comprehensive survey. All were designed to uncover what is driving the revival and evolution of WFP and what high-performing organizations are doing differently in this area.

While there are many reasons for doing WFP today (talent shortages, productivity needs, demographic changes, leadership development, engagement concerns, etc.), the prevailing reason for the renewed interest in WFP was expressed by one of i4cp's WFP advisory board members: "The downturn got the attention of management and the broader HR community. We found ourselves lacking in our ability to understand our strategic talent needs."

The good news is that WFP is trending upward. About 70% of the respondents to our survey said that they are doing some form of workforce planning in their organizations today, and 43% of those who are not doing WFP now plan on implementing this process in the future.

But that doesn't mean that most companies are doing it well. There are three types of workforce planning: operational, tactical and strategic. While most organizations with WFP are highly engaged in short-term operational workforce planning - which includes actions such as headcount forecasting and staffing requisitions - relatively few are highly engaged in long-term strategic workforce planning, which includes actions such as business planning, needs assessments and scenario creation.

But, of course, in today's tough markets, excellent strategy development and implementation is the name of the game. HR must play its role, and workforce planning is the critical link between the business strategy and HR strategy. That is, excellent WFP starts with a thorough understanding of the business strategy. Fully 97% of survey respondents who have highly or very highly effective WFP processes said that the main benefit of WFP is that it supports the strategy and business planning process. And over three-quarters (78%) of high market performing organizations responded the same way.

One member of our advisory board noted, "We work within the context of the strategic plan. We're interested in two components: identifying role segments and talents that need to be either acquired or downsized to be successful and gain a competitive advantage."

Indeed, our research shows that talent and strategy go hand in hand. Executing your strategy without the right players in the right positions is nearly impossible. Eighty-six percent of respondents whose organizations have very effective workforce planning processes cited critical talent as a key benefit of such planning.

But, unlike many other talent-related initiatives, WFP does not focus on individuals. Rather, it concentrates on groups, roles, regions, business units and, yes, trends. Organizations use WFP to find out which significant issues emerge when they're analyzed by various groupings. Planners want to know, "Is there a trend or pattern that is significant enough to warrant a specific workforce strategy?"

Of course, organizations are going to analyze by whichever grouping makes most sense given their business strategy. "We segment our population into four categories: strategic, core, requisite and non-core roles," noted one advisory board member. "We're trying to ensure that we have the right number and quality of people in our strategic and core roles. At the same time, we're looking for ways to deliver the expected outcomes of the non-core and requisite roles."

Based on such critical roles, planners use WFP to examine both the internal and external environments to determine the supply and demand for talent. Then they can develop a gap analysis that helps drive the HR strategy and talent management. In some cases, our research shows, HR operating plans grow out of these planning efforts, meaning that WFP actually drives what HR delivers. As one board member said, "It is an integral component to the annual HR offering, informing it in a major way." As such, WFP has the potential to serve as the "missing link" between major HR initiatives and top-level strategic decision-making in organizations.

Unfortunately, the wise and effective use of WFP continues to be the exception rather than the rule. Only about one in five participants in our major survey said their WFP processes are either highly or very highly effective. So what's holding them back?

One of the biggest challenges is that too many people outside the HR function see WFP as an HR activity being done by HR and for HR. To increase its chances of success, WFP needs a champion at the senior management level. And WFP itself needs to become the responsibility of others aside from HR professionals. After all, it is other managers who will actually implement the plans, and it is the whole organization that will derive the performance benefit.

i4cp's 4-Part Recommendation:

1. If your organization doesn't have a formal workforce planning process, then it should evaluate whether its long-term performance could be improved by one.
2. If your organization has or adopts a WFP process, determine how to make it strategic rather than just operational.
3. Make sure there's a champion for it at the senior management level, someone who understands its importance to long-term organizational success.
4. HR should provide the necessary support and data for WFP, but it must have the business partners necessary to ensure that plans turn into realities, the kinds that support strategic business goals.