Serious Progress in Strategic Workforce Planning

Five years ago, strategic workforce planning—the HR-led effort to ensure that an organization has sufficient talent to achieve future success, seemed like a nascent trend in the business world. Unfortunately, today the paradigm-shifting practice still remains more nascent than trend. But that may soon change, according to a recently published study by The Conference Board, a global business research organization.

Conference Board senior human capital researcher Mary Young, the study’s primary author, says that the severity of the global economic downturn in the late 2000s stalled the growth of strategic workforce planning, also know by its acronym, SWP. Companies were forced to focus on survival at the expense of preparing for the future.

“You couldn’t get business leaders to think long term when they were being forced to lay off workers and their companies were on the line,” Young says. “HR was compelled to be pretty much tactical.”

But as business conditions improve, Young believes that companies will return to developing strategic workforce planning, which she defines as “ensuring that you have the right people at the right time, in the right place, at the right price.”

The report presented case histories of a handful of early adopters who have forged ahead in linking human capital development with strategic goals, and for whom strategic workforce planning has been an effective tool. Their success bodes well for strategic workforce planning’s eventual wider acceptance, according to Young.

“SWP enables companies to make decisions based upon sound data and analytics,” Young says. “It’s all about figuring out where is the best place to make investments, where you are going to get the best return on human capital, where your business is growing and how you’re going to build your resources there. It’s about anticipating future demand and having the supply of critical skills and competencies to meet it.”

In particular, the study looked at four global organizations: 3M, UBS, Sun Microsystems and Saudi Aramco.

The study found that strategic workforce planning uncovered significant differences among business units and locations in terms of demographics, skill levels and labor costs. That, in turn, enabled the companies to get a more accurate picture of how well equipped they were to achieve strategic goals at the ground level and to make changes to meet their future human capital needs.

3M, for example, utilized strategic workforce planning to facilitate its business strategy of shifting from being primarily a domestic business into one with a global focus that sold 70 percent of its products outside the U.S.

3M’s early efforts at strategic workforce planning in 2006 foundered, mostly because they were not connected well enough to the company’s larger strategic planning and goals. But in 2007, after 3M chief executive George W. Buckley mandated companywide productivity gains, countries and business units found that they had no choice but to grow their headcount-to-revenue ratios, either by cutting workforces or increasing sales. That put more pressure on them to implement strategic workforce planning so they could analyze and project the economic return on their talent, according to the report.

Eventually, 3M became so effective at the process that it could not only track how its spending on human capital influenced revenue, but it also developed the ability to compare its metrics with competitors. More important, 3M was able to figure out how to gear its human capital efforts to take advantage of market opportunities, the report found. 3M’s strategic workforce planning team consulted with recruiters to learn about local talent supplies in various countries, and charted how future needs matched with supply.

3M’s effort was able to project “the demand for any workforce category, in any business, in any part of the world,” Brian Ronningen, 3M’s manager of human capital management, told The Conference Board.

Another successful practitioner of strategic workforce planning was UBS, which used the process to ensure that its expanding Chinese operation in the late 2000s had an adequate supply of talent to succeed.

After UBS began tracking human capital data, it made some painful discoveries about its staffing strategies. It found, for example, that its Chinese operation filled 56 percent of its positions by hiring developed talent, and that such acquisitions accounted for 75 percent of its sourcing costs. Additionally, the workforce had an unsustainable attrition rate of 20 percent.

Based upon such data, UBS planners came up with recommendations for how to better develop and retain talent in China, including an incubation program for middle managers, a graduate training program for new hires and improved career mobility across business units, so that employees could seek opportunities and gain experience within the organization.

In contrast, Saudi Aramco, a government-owned oil company based in Saudi Arabia, was motivated to develop strategic workforce planning for a different reason: About 40 percent of its aging workforce will be eligible for retirement in five years, and Saudi Aramco must have capable replacements in the pipeline.

The company employs 400 planners to analyze and model Saudi Aramco’s workforce needs for the next decade and beyond, based on both productivity targets and historical data, such as the typical time needed to train workers for various jobs. That modeling helps Saudi Aramco make decisions about the timing and capacity of new training facilities and project what its future company housing needs will be. Additionally, because the plan’s long-range projections show a slim supply of immediately ready Saudi job candidates, Saudi Aramco has developed a system of hiring the kingdom’s top high school graduates, sponsoring their college educations and further developing them through job experiences and training.

At Sun Microsystems, the strategic workforce planning effort made extensive use of data mining, aggregating information about international markets from a wide range of external sources—from World Bank and European Union statistics to articles in business publications—and integrating it with internal data on workforce trends, compensation, local labor regulations, revenue forecasts, and product and marketing information. That information is combined with observations gathered by HR professionals in the field. The aggregated data is analyzed and translated into scorecards, such as a graphic comparing the IT workforce supply and other factors in several Chinese cities, that assist Sun executives in making decisions.

The development of such sophisticated analytical tools will help drive the strategic workforce planning trend, according to Young. “Data mining, and the ability to combine data across different locations and make sense of it, is transforming business, and SWP is a perfect example of that,” she says. “Just as automation turned inventory and procurement into supply chain management, these tools are going to revolutionize human resources.”

The Conference Board researchers found that for strategic workforce planning to be effective, business leaders must learn to think of it as a source of business intelligence, rather than just as operational HR data.

For example, executives need to start integrating strategic workforce planning and other types of planning, such as risk management, supply chain and customer relationship management, to shape a unified, coherent strategy, Young says.

“I suspect that over time, we’re going to see companies merging their workforce data with lots of other analytics,” she says. “We’re already beginning to hear them describe it in the same way. They’re starting to think about optimizing the workforce, the way that they try to optimize the supply chain: How do you put your people to the highest and most productive use?”

Workforce Management Online, July 2010 — Register Now!