workforce planning in times of uncertainty september 28, 2011

Workforce Planning in Times of Uncertainty

September 28, 2011

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David Ulrich on where HR can add value

OCG STRATEGY AND ORGANIZATION CONSULTING

“In recession, HR should coach leaders to make prudent business decisions. Some of this means redesigning HR practices like compensation to save money in the short term. HR should also play a major role in communication and restructuring the organisation to be efficient in all operations. At the same time, HR can be the voice of the employee to ensure that tough decisions are made fairly. Finally, HR need to conceive of the future after the recession so that their organisation is better positioned to go forward.”

Source: Purple Line Consulting citing from an interview published by Municipal Journal. March 13, 2009

http://purplelineconsulting.co.uk/hr/dave-ulrich-on-where-hr-can-add-value.html

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Challenges Resulting From Economic Conditions


Companies and HR Professionals have faced challenges as a result of the economic crisis and unprecedented economic volatility:

During the economic crisis

• cutting and managing costs;

• eliminating or reducing compensation and total rewards increases;

• managing morale issues• re-evaluating business and

human resource strategies

As we emerge from the recession to face economic

uncertainty

• developing new leadership competencies for senior leaders

• responding to demands by staff for security, stability and opportunity

• addressing a lack of career advancement opportunities for top talent and employees with critical skills

Source: Towers Watson “Creating a Sustainable Rewards and Talent Management Model” Results of the 2010 Global Talent Management and Rewards Survey

4

Ongoing Issues

Organizations are facing these critical HR issues: • Financial Stability

• Uncertainty, reducing expenses including salary expenses, and maintaining or increasing staff productivity in profit-driving areas

• Talent Management and Staffing• Predicting short and long term staffing requirements, layoff decisions

• Business Stability and Efficiency• Employee Engagement and Employee Morale

• Keeping employees motivated, engaged and positive during a time of uncertainty, staff reductions and business slow-down


Source: Society for Human Resource Management poll of 50 executive-level HR leaders in February, 2009.

5

Emerging post-recession issues

As the economy begins its recovery, HR’s goal must be:To prepare and position its organization and its workforce for the growth and opportunities that lie ahead in a new economy.

Current top staffing challenges:• Ability to provide competitive compensation*• Maintaining productivity levels*• Being able to retain top talent*/**

• Reducing employee headcount**• Training and development**


Sources: *CareerBuilder Survey of 2,720 HR professionals in November 2009.

** Deloitte Special Report on Talent Retention. “Managing talent in a turbulent economy: Leaning into the recovery” November 2009.

6

Conflicting Labour Force Trends

These trends have been predicting labour shortages for years• Demographics

• baby boomers are approaching retirement • population growth rate to slow from 1.5% to 1.2% from 2026-2030 • labour force growth rate to fall from 1.8% this decade to 0.7% 2011-

2020, and 0.5% from 2021-2025• Education

• education and skill misalignment will result in a surplus of unskilled workers who cannot fill the jobs companies need

• Immigration• a large pool of potential workforce – will it be the right skill level?

Is there alignment with the jobs our economy needs?


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Group Occupation

Business, finance and administration

Senior managementHuman resource managers HR & business service professionals

Natural and applied sciences Civil, mechanical, computer and software engineers

Health occupations

Managers in health, education, social & community services; Physicians, dentists and veterinaries; Optometrists, chiropractors, and other health diagnosing and treating professionals; Therapy and assessment professionals; Head nurses and supervisors; Nurse aides and orderlies; Other technical occupations, aides and assistants in health care; Medical radiation technologists

Social science, education, government service & religion

Managers in public administration

Trades, transport and equipment operators and related occupations

Residential home builders and renovators; Facility operation and maintenance managersContractors and supervisors, trades and related workers

Primary industry Supervisors, oil & gas drilling and service; Oil and gas well drillers, servicers, testers, and related workers

Processing, manufacturing and utilities

Supervisors, processing occupations such as in petroleum, gas & chemical processing and utilities, and plastic & rubber products manufacturing

Source: HRSDC, Strategic Policy Research Directorate, Looking-Ahead: A 10-Year Outlook for the Canadian LabourMarket (2006-2015), October 2006.

Occupations Expected to Show Shortages(Canadian Data)

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Ontario is projected to face a shortage of 190,000 workers in 2020, 364,000 in 2025, and 564,000 by 2030.

Source: The Conference Board of Canada. Ontario’s Looming Labour Shortage Challenges. September 25, 2007.

Estimated Labour Shortage in Ontario

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OccupationExpected Demand

Expected Supply

Required % Supply Increase (Decrease)

All Occupations 6,550,100 6,441,800 1.6%

Managers in Financial / Business Services 39,700 24,500 58%

Managers in Retail Trade 139,100 56,500 140%

HR & Business Service Professionals 88,200 54,200 58%

Civil/Mechanical/Electrical / Chemical Engineers 64,200 92,100 (29%)

Physicians / Dentists / Veterinarians 54,900 35,500 51%

Nurse Supervisors & Registered Nurses 189,700 107,900 70%

Contractors & Supervisors, Trades & Related 104,600 16,300 509%

Machine Operators: Chemical / Plastic / Rubber 27,300 23,600 15%

Source: Human Resources & Skills Development Canada. “Assessment of Future Labour Market Imbalances by Occupation” in Looking Ahead: A 10-Year Outlook for the Canadian Labour Market (2006-2015). October 2006. Online.

Labour Market Imbalances 2006-2015

10

Skill Misalignment Exasperates Labour Shortage


Source: Elizabeth Church “Skilled labour will be in short supply, predicts former college president” Globe and Mail. Published February 2, 2010.

11

Conflicting Labour Force Trends

However, this labour shortage has not yet been seen.• As a result of the economic crisis

• a reduction in the number of jobs as companies downsize• employees are delaying retirement because of lost value in their

investments and economic uncertainty• As a result of economic uncertainty

• business forecasting is difficult • companies are hesitant to make labour market decisions

• Surveys show there is less loyalty between employees and organizations• top talent and those with critical skills can still find jobs and more

employees are proactively managing their own careers


12

Responding in Uncertain Times

How these trends will collide and what the future labour market will look like is uncertain. HR professionals must manage and be prepared for all conditions.

It is a crucial time for organizations to review and revise their compensation programs in order to retain key talent

Solutions for companies in today’s economy depends on the specific financial condition of your business and industry

Strong and trusted leadership helps assure employees that their best interests are being balanced with financial challenges confronting the business

Management of any company in these times becomes a challenging balancing act - between market-driven management and people management

Workforce planning and talent management are the critical components in assuring long-term sustainable growth when the economy rebounds – and competitive strength when the economy lags.


13

WORKFORCE PLANNINGAddressing Challenges While Facing Uncertainty


14

The Cost of Not Managing Talent

Recruiting Costs: direct HR, search firms, and interviewing. Assimilation and training programs. Unemployment, severance and other statutory costs. Employee learning curve, productivity drag. Departmental productivity loss, loss of morale. Loss of knowledge, intellectual property, customer relationships. Loss of revenue, delayed revenue realization. Embedded costs due to increased HR operating costs. Embedded costs due to increased management costs.


Research has shown that the cost of replacing an employee ranges between6 to 12 months’ salary, depending on level, skill and difficulty in replacing.Research has shown that the cost of replacing an employee ranges between6 to 12 months’ salary, depending on level, skill and difficulty in replacing.

15

HR Best Practices

Implement succession planning and career management programs that enable workers to gain skills and experience in areas critical to organization’s future strategic needs

Promote career management and development programs when recruiting

Improve retention and strengthen workforce capability, provide employees with career development and management opportunities– Can market their transferable skills internally while pursuing

new roles

Develop programs and best practices for assimilating industry-switching employees

Assess new recruits’ ability to fit within your organizational culture Manage an integrated approach to the employee value proposition


16

Talent Management & Workforce Planning


Succession & Talent

Issues/ Gaps

Talent Definition

Talent Resource Planning

Pipeline of

Talent

Flexible & Productive

Organization

Talent Retention & Productivity

Business Goals

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What is Workforce Planning?

“Any effort designed to ensure the continued effective performance of an organization, division, department or work group by making provision for the development, replacement and strategic application of key people over time.”

“A deliberate and systematic effort by an organization to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future, and encourage individual enhancement.”

William J. Rothwell


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Reasons for Talent Management

1. Provides increased opportunities for “high potential” workers

2. Identifies “Replacement Needs”

3. Increases talent pool of promotable employees

4. Contributes to implementing the organization’s strategic plan

5. Assists in the realization of career plans

6. Allows the organization to tap its intellectual capital

7. Accelerates development of diverse groups

8. Increases ability to respond to changing environmental demands

9. Improves employee morale

10. Increases capacity to cope with effects of voluntary separation programs & possible restructuring

11. Highlights employee value to the organization

12. Increases capability of the organization to cope with the effects of downsizing

13. Identifies essential workers and work practices


Source: 1999 survey results of members for the Society for Human Resources Management (SHRM)

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Model for Systematic Talent Management

OCG STRATEGY AND ORGANIZATION CONSULTINGW. Rothwell, 2001

Organizational SuccessOrganizational

Success

Step 1Make the commitment to systematic Talent Management planning and establish a Talent Management Program

Step 2Assess present work requirements

Step 3Appraise individual job performance

Step 7Evaluate the Talent Management program

Step 6Close the developmental gap so as to meet the Talent Management needs

Step 4Assess future work requirements

Step 5Assess individual potential

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Identification Through Segmentation


Current Performance

Discontinuing Role/Project

Critical Position

Does Not MeetExpectations

Meets Expectations Exceeds Expectations

Val

ue

to O

rgan

izat

ion

Leadership/ Critical Skills

SB

RN

BT

A0

BB

JT

Priority Candidates

Key Candidates

SolidPerformers

Non-PerformersContinuing Role

Candidates for Exit Package

Candidates for Exit Package

Candidates for Moving Internally

21

Who Should We Be Concerned About?

Once the top and priority candidates are identified, consider the risk that they would elect to leave the organization:


Val

ue

to O

rgan

izat

ion

Risk of Leaving

High

HighLow

High

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Assessment Grid: Retention Risk Prioritization


BB

JT

Risk of Leaving

Critical Position

Low Risk Medium Risk High Risk

Val

ue

to O

rgan

izat

ion

Leadership/ Critical Skills

SB

RN

BT

A0Continuing

Role

Discontinuing Role/Project

23

Where is the Focus?

Critical positions:– Those which add significant value to the corporation; and– Which if they become vacant due to imminent retirement or to

another organization recruiting the incumbent, would expose the organization to risk because of the difficulty in sourcing a good candidate

Critical people:– Individuals who show the potential to move up through the

organization to fill senior positions;– Represent the talent pool to staff the senior positions and should

be retained and developed in order to potentially reduce the risk the organization faces from senior and other critical positions.


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More to the Issue Than Meets the Eye


Identifying Root Causes Turnover cause indicators by segment General understanding ...

Left for higher pay Better opportunity Job dissatisfaction Lack of career progress Ready for a change Personal reasons

To deeper, specific causes ... Disrespect from manager Burnout from pace of work A way to get more time off Manager not dealing with

low performers Inflexibility of work hours Other organization seems

to want me more

Months Tenure at exit

>3

• Poor performance management/ coaching

• Poor success profiling

• Inadequate training/ development

• Layoffs

• Limited career paths/ development

• Misaligned rewards• Lack of

autonomy/challenge• Uncompetitive pay• Poor organization

reputation, mission

<3

• Poor success profiling/ screening

• Inadequate initial training

• Uncompetitive pay (“job bridging”)

• Overselling job at recruitment

• Job content intolerable

• Poor coaching and management

Involuntary Voluntary

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The 5 Big Levers to Pay Attention To

Organization structure and business processes set up to support excellence

Resourcing practices deliver talent where and when it is needed

Healthy staff relationships sustain a productive focus and environment

A compelling “Employment Deal” makes people feel rewarded/wanting to stay

Performance and development programs drive high standards

– Role design and work processes– Reporting relationships– Decision and operating processes

– Competency models– Selection and promotion systems– Succession planning/leadership

resourcing

– Communications to integrate effort– Staff engagement and involvement– Compelling work environments– Good management

– Pay and benefits– Recognition programs/practices– Work and career opportunities

– Measures and feedback (PMP systems)– Development support/learning systems


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Is Yours A Great Company?

A company’s face to the world, its reputation, what it stands for, is it’s

employee value proposition

Why would a talented person choose to work here?

What are the two to three most competitive things your organization does to be an attractive place to work?

How are your company’s values and culture reflected in your employee value proposition?


Great brands sell goods, great companies attract talent

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The Employee Value Proposition Audit


Do employees think your organization is a great place to be? Do they want to stay? Do others want to join?

Do you have a clear, distinctive and compelling promise for your employees’?

Do you have enough leaders to grow your business? Of the leaders you have, are they the right ones?

Do you know your key positions and key individuals? Do you have plans for their development?

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What is an “Employee Value Proposition”?

Clear understanding of the real investment made in all aspects of the “REWARD” system


• Environment• Citizenship• Reputation• Recognition

Connectedness

• Resourcing• Role Design• Contribution• Feedback• Development/

Advancement

Work• Base Salary• Short & Long Term

Variable Pay• Equity/Ownership• Health & Welfare• Retirement

Pay and Benefits

• Work/Personal Balance• Communication• “Supervision”

Culture

Employee Value

Proposition

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Clear objectives and goals related to what the investment is meant to achieve from all stakeholder perspectives.

BUSINESS CUSTOMER EMPLOYEE

Financial performance

Operational performance

Service/product performance

Value for cost

Financial rewards

Non-financial rewards

Human resource productivity

ROS/RONA/Margins

Cycle time

Customer retention and growth

Service/product performance vs. industry standard

Contribution to customer “value”

Employee satisfaction

Growth

Turnover

Equity

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Definition of what is delivered in each major rewards component and how will it be delivered to meet specific objectives.

What programs are necessary to support the CRITICAL SUCCESS FACTORS of the business strategy?

BUSINESS STRATEGY

CRITICAL SUCCESS FACTORS

HUMAN RESOURCE IMPLICATIONS

HUMAN RESOURCE STRATEGY

TOTAL REWARD STRATEGY

Programs & Measurement(What components leverage the best outcome)

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Employee Value Proposition


Is unique versus competitors

Creates magnetism for talented staff or desirable recruits

Is really distinctive

Is reliably delivered

Is recognizable to employees and potential recruits

Is perceived as offering a fair exchange

A distinctive value proposition..

A distinctive value proposition provides

competitive advantage in the marketplace

as long as it..

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Distinctive Value Proposition

An employee value proposition delineates why an employee would be compelled to work for an organization. A great employee value proposition combines personal fulfillment with a chance to be part of a great company with rewards aligned to the value proposition. – What are the compelling reasons for top talent to join and stay with your

company? Does it differ by employee groups?– How well does your employee value proposition fit with your market value

proposition? How does it compare with your competition?– How does your company “manage” your employee value proposition?


Companies with superior employee value propositions capture more and better talent share

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Talent Management Considerations

Think about the current and future state of your organization relative to the following:

– Organization’s strategic plan– Organization’s structure– The quality of your “employee value proposition”– The quality of your talent pool– Workflow– Work methods– Will new key positions emerge?– Will old key positions fade?– “Best guess” for how your organization will function over the next 5 years


And what does that mean for the requirements of your human capital?

34OCG STRATEGY AND ORGANIZATION CONSULTING

Questions

Has your organization re-evaluated its priorities to face the new economic reality? In what ways?

What future opportunities for your organization do you anticipate? Is your organization prepared to capitalize on them?

How will your organization prepare and position itself and its workforce for the opportunities that will arise from economic recovery? How will your organization simultaneously prepare for a possible second recession?

What role does the HR function and HR leadership play?

workforce planning in times of uncertainty september 28, 2011

Documents

hr professionals

hr practices

critical hr issues

economic uncertainty

global talent management

areas talent management

talent retention

executivelevel hr leaders