27 ismor personnel cost modelling technique 2 nd september 2010

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27 ISMOR

Personnel Cost Modelling Technique2nd September 2010

Steve Pretty, CORDA

2www.corda.co.uk © BAE SYSTEMS 2010. All rights reserved.

Contents

• Background

• RAF Requirement

• The RAF Personnel Costs Model

• Analysis

• Benefits

• Outcome

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Need for personnel analysis: organisation personnel profile

Organisations require the right personnel profile to function effectively, over time

How can we sustain this personnel

profile, in the most cost-effective way?

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Need for personnel analysis: change in terms & conditions

Terms & Conditions of employment

Reduce staff wages

Save money(lower pay

costs)

Harder to recruit new

staffSpend more

money(recruiting)

De-motivated staff

Decreased retention

Need more recruitment and training

Spend more money

(recruiting & training)

Reduce Personnel

Effectiveness

Terms & Conditions of employment

Reduce staff wages

Save money(lower pay

costs)

De-motivated staff

Reduce Personnel

Effectiveness

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History

Manning StudyEstablished the need for Personnel Modelling

Personnel Cost Modelling ApproachIn-house Personnel Model demonstrator

Support to Air CommandRAF Personnel Costs Model

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Air Command Requirement

RAF required a modelTo help them assess the cost implications of changing how they

treat their staffRAF Strategy for PeopleRAF input to SDSR

Needed to support three top level questions…

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Air Command Requirement

Three top-level questions:

What are the implications to the RAF on the total costs attributable to personnel of changing the way they employ, motivate, recompense and reward people?

Which policies have the biggest impact on managing cost growth while supporting desired force levels?

What are the relative differences in costs between employment models that prioritise retention, and employing people over shorter careers?

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Requirements Capture

Held a workshop with RAF Personnel Policy staff. Captured:

Broad model requirementsKey inputs and outputsPersonnel data availability

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Requirements Capture

Refined the requirements through smaller meetings over the next couple of weeks

EstablishedThe data requirementAcceptance tests

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Data collection

Data requirements document drawn up and circulated around Air Command at an early stage

Baseline dataset compiled from a range of MOD sourcesDASA22 GroupAir Command sources

Simplifying assumptionsJob type: assume 7 trade and branch “groupings”3 career stages for officers; 4 for airmenConstant “rank proportions” for each career stage

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The RAF Personnel Costs Model

Manpower flow model

CareerStage 1

CareerStage 2

CareerStage 3

Costs model

RAF strength

Outflow

Replacementrate

Postings

Replacementrate

Outflow

Outflow

Outflow

Manpower inputs Cost inputs

Ph3 Trg cost

Accomm.costs

Staff Pay

Pensioncost

Resettlementcost

Replacementcost

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The RAF Personnel Costs Model

The model…

• Is a flexible, “analyst’s tool”

• Represents “pools” of people (System Dynamics approach)

• Can compare the long-term cost impact of different personnel policies, over time

The model…

• Does not simulate the career progression of individuals

• Is not a manpower planning tool

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Sample analysis – what-if questions

Home ownership

What would be the overall cost impact of allowing individuals access to the pension lump sum early, to encourage home ownership?

What would be the overall cost impact of increasing Long Service Advance of Pay (LSAP) to encourage home ownership?

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Sample analysis – what-if questions

Length of service

What is the impact of a change in length of service on overall cost?

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Sample analysis – Pensions what-if question

Initial pensions “investment”

But estate costs fall

Increase in allowances

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Sample analysis – comparison with alternate strategy

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Outcome

RAF Strategy for PeoplePaper endorsed by Air Force BoardModel results in annex and summary in main body

RAF Career Management ReviewCurrently ongoing

Chairman’s Award for Personnel Cost Modelling approach

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Benefits

The application of dynamic modelling to personnel provides:

The ability to compare multiple and diverse personnel strategies

• On both a cost and personnel supply basis

• Over a period of time (rather than at a fixed point)

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Questions?

Steve PrettySenior AnalystCORDA,BAE Systems Tel: +44 (0) 1252 383520Fax: +44 (0) 1252 383544

steven.pretty@baesystems.com