Staffing, Down to a Science

By Fay Hansen

Apr. 25, 2008

When the financial services industry tumbled into crisis in June 2007, Capital One chairman and CEO Richard Fairbank issued a mandate to strip $700 million out of the company’s operating costs by 2009. Given total operating expenses of $6.6 billion for 2007, the mandate posed a significant challenge. The cost reduction plan includes consolidating and stream­lining functions, reducing layers of management and eliminating approximately 2,000 jobs.

    The mandate did not set off a mad scramble in workforce planning, however. Instead, the planning staff simply added new defined variables to their simulations and modified their projections for the company’s talent needs.

    “The key to workforce planning is to start with the long-term vision of the organization and its future business goals, and work back from there,” says Matthew Schuyler, chief human resources officer for Capital One and its 27,000 employees. “We anticipate the strategic needs of the business and make sure that we have the workforce required to meet those needs. The $700 million mandate gives us goals and boundaries that we didn’t have before. We made the adjustments.”

    Capital One and other leading companies are now developing a set of best practices for workforce planning that reach into the future for each business unit and evolve with corporate strategic planning. In an increasingly unstable global business environment, the value of a long-term vision is clear, but effective workforce planning requires dedicated resources, heavy analytics and, perhaps most important, the full engagement of business unit leaders and line managers.

    Few human resources executives share Schuyler’s ability to harness the value and power of workforce planning, however. At most companies, human resources is lagging other business functions in its ability to plan.

“The beauty of workforce planning is that it allows the flexibility to be right on target. We don’t have to wait for the next budget cycle to get it right.”
—Matthew Schuyler, Capitol One

    “We bring this up with executive groups,” says Jamie Hale, practice leader for workforce planning at Watson Wyatt Worldwide. “We ask why there is rigor in analyses in other functions but not in workforce planning. Companies make huge capital expenditures without available staffing,” Hale says.

    Most companies do their planning for staffing going out a few months, she notes, but not workforce planning with analyses and forecasts for talent demand and supply as the organization moves forward with its business strategy.

    Fifty-nine percent of HR executives report that their organizations are not adequately staffed for the future, but only 46 percent have any kind of workforce planning framework in place, according to a 2007 survey by Aruspex. In a 2007 survey by Infohrm, only 14 percent of firms reported that they are largely prepared for the potential loss of skills, corporate knowledge and leadership that is likely to occur over the next five years.

    Forty-three percent report that they have some kind of formal workforce planning process in place, but only 20 percent report that their pro­cess is to a large extent integrated into the firm’s strategic business plan. The Infohrm survey also found that companies with workforce planning in place still struggle with forecasting skills availability.

    All this will have to change. CEOs, CFOs and COOs are increasingly demanding that human resources push past short-term projections and provide detailed forecasts for workforce needs and the associated costs over a two- to three-year horizon.

    “The fact is that CEOs now recognize sustainable talent supply as crucial to the success of the organization,” says Cathy Farley, global leader of Accenture’s talent and organizational performance practice. “It takes the workforce planning agenda to a whole new level.” Both Hale and Farley report that they have seen a significant surge in the C-suite’s demand for workforce planning over the past year  

Working backward
    The workforce planning simulations at Capital One stem from a process executed by a metrics and analytics group of 20 people, plus hundreds of executives, managers and analysts pulled from all the business lines and corporate functions. Leaders and analysts from the business lines work in blended teams with human resources generalists and members of the metrics group to build models for each line and the entire workforce. The models flow to Schuyler, who reports directly to the CEO.

    Schuyler, who holds an MBA from University of Michi­gan, was a partner at PricewaterhouseCoopers and then Cisco’s vice president for human resources before he joined Capital One in 2002. He now sits on Capital One’s executive committee.

    “You have to garner your long-term vision of the organization from your seat at the table and from the time you spend with business leaders and immersed in places where you can get data,” Schuyler says. “You have to probe the business leaders and know what their endgame looks like.”

Percentage of HR executives reporting biggest barriers to workforce planning, 2007

1. Clear accountability


2. Lack of resources


3. Overwhelmed by data


4. Insufficient attention to the future


5. Establishing a sense of urgency


6. Difficult to quantify results


7. ROI/value not financially justified


Note: Survey of HR executives, primarily at companies with 10,000-20,000 employees.




    Workforce planning is in place with customized metrics for business units within Capital One and for corporate staff groups, including IT, finance and legal. “Workforce planning should be similar to and integrated with strategy planning and budget planning,” Schuyler says.

    Planning varies by business line depending on the line’s stage in its lifecycle. Some lines are stable, while others are restructuring or moving through rapid growth. “We triage depending on business needs,” Schuyler reports. “Planning differs based on the unit’s goals for the year.”

    Part of Schuyler’s job is to ensure that senior business line leaders are engaged in the process. “Their door is open,” he notes. “Your ticket through the door is to show business leaders the bundles of money they can save if their workforce is the right size with the right mix and the right skills. Once you’re inside, you have to act on the promise.”

    The potential cost savings come from minimizing the inherent costs associated with the size of the workforce, plus savings from lower recruiting and severance costs and avoiding the costs of a disengaged workforce. “The cost of disengagement is difficult to quantify, but business leaders intuitively understand the cost,” Schuyler says. “There is a toll paid when a workforce is disempowered, disengaged and not sufficiently busy.”

    Schuyler breaks out costs this way: the cost to bring people in, the cost to move people around the organization and the cost to move people out. “If HR can talk about workforce planning and cost savings in sensible business terms and in the pragmatic language of business, it will be music to business leaders’ ears,” he says.

    Workforce planning at Capital One forecasts not only the headcount required to meet future business needs but the staffing mix—the ratio of internal to external resources—and the skills mix, including any changes in that mix that is required as the business moves forward. Schuyler also looks at any changes in spans of control, which determine the number of organizational layers, optimal methods for staffing managerial positions and the related costs. The planners also document both rational and emotional employee engagement, which affect current and future productivity and recruiting, training and turnover costs.

    The responsibility for workforce planning at Capital One resides in human resources, but the hard work takes place inside the business units, where the blended teams operate. This grounding in the business units keeps workforce planning focused on corporate goals.

    “Workforce planning really gets traction when it is linked to the line managers who understand business needs and can project their business growth and productivity changes,” Hale notes.

    The time frames for workforce planning at Capital One vary by unit and function. The legal function, for example, is very stable and can easily plan out two to four years. The credit card division, however, is rapidly evolving, so its forecasts stretch out two to four years but are reviewed every quarter. “It’s really an evergreen process,” Schuyler notes.

“You have to probe the business leaders and know what their
endgame looks like.”
—Matthew Schuyler

    The demand for some jobs follows the business cycle. Collections and recoveries work at Capital One was stable and predictable several years ago, for example. “But because of the current economic conditions, this work is now more important, and we had to ramp up very quickly,” Schuyler explains.

    Schuyler believes that simulations are part of best practices in workforce planning because they allow the company to modulate its plans, but simulations may not be practical if too many unknowns remain. “Push simulations as far as you can,” he recommends. “But you may have to blend them with static data models. Practically speaking, you don’t know all of the variables, so you have to fall back on static data.”

Managing demand, supply
    Schuyler refuses to choose between overshooting and undershooting staffing. “The beauty of workforce planning is that it allows the flexibility to be right on target,” he says. “We don’t have to wait for the next budget cycle to get it right.”

    That flexibility derives from a more sophisticated approach to planning that looks at a range of possible scenarios about business conditions and then calculates the labor needed to match them. Capital One’s workforce planning models allow business leaders to anticipate the talent requirements for each business option and the human resources and labor cost consequences of the choices they make.

    Capital One’s analyses of labor demand and supply do not adopt an explicit supply chain lexicon to describe various scenarios, but the overall approach and the calculations of costs and business impact are similar to supply chain management techniques honed over the past decade. Experts generally agree that in the supply chain arena, these techniques typically reduce costs by 10 percent to 15 percent.

    The supply chain approach is gaining traction in workforce planning practices, with good results. “The supply chain concept makes the point come to life about the activity between HR and the business,” Farley says. “The greatest need is to understand demand and source against that demand.”

    In managing the workforce inventory, Farley notes that the risk of overshooting is greater than the risk of undershooting. “Too much of a product or an aging product is a greater risk because the carrying costs are high and there are more opportunities to buy, borrow or rent than ever before,” she says. “The best way to deal with excess inventory is through tougher performance management.”

    Applying supply chain concepts also allows workforce planning to make modifications that reflect changes in the talent pool. “The new generation of talent that is coming up now will cycle through jobs much more quickly than the boomers,” Farley notes. “HR must be prepared for this. Just shuffling people around the organization is very expensive.”

    Hale also believes that the supply chain approach has validity. “If you can align procurement with business volume over time, you can align people to business volume as well,” she notes. “When you are dealing with people, there is less predictability, but with a level of rigor in the analytics, predictability improves.” She notes, however, that analytics are missing at most companies. “HR could leverage people in the organization with supply chain management skills, but there’s not much of that going on,” she says.

    Especially for companies that are just beginning to implement a workforce planning process, the best approach is to focus first on the critical roles in the organization and then expand out to cover more positions in greater detail.

    “You don’t want to drown in data, but you do need to break the data down on a critical-jobs basis,” Hale says. “Look at how the business breaks itself down so you can align staffing with business volume.”

    Many companies can benefit from lifting techniques from procurement and finance to improve workforce planning processes.

    “There’s a huge appreciation for workforce planning as a discipline that needs to be established, but it is an emerging discipline,” Farley says. “The tools, processes and systems are not well developed.” Although workforce planning now resides within human resources at most companies, Farley notes that it may be moved out to other functions or outsourced if human resources does not step up to the plate with meaningful forecasts and simulations tied to future performance among the business units.

    At Capital One, the workforce planning process reaches down through the entire executive structure for each business unit—five or six levels of leadership plus groups of managers. Business leaders see the talent management costs and consequences of the business options at hand. Each option carries its own implications for internal and external staffing levels, recruiting, training, promotions, engagement, attrition and total compensation costs over time.

    More important, workforce planning allows business leaders and line managers to see how different approaches to talent management can actually expand their business options and boost performance. “If workforce planning is done right, human resources can help business leaders think about what their endgame can be,” Schuyler says.

Workforce Management, April 21, 2008, p. 1, 14-19Subscribe Now!

Schedule, engage, and pay your staff in one system with