Most Employers Lack Workforce-Management Strategies

CU360
December 17, 2009 | COMMENTS

Last year's severe financial crisis and the massive layoffs that came in its wake beg a question: Is workforce planning possible in any meaningful way?

Yes it is, say firms that sell workforce planning software—products designed to anticipate future staffing needs.

But the tools, which tend to focus on either short-range or long-term planning, aren't perfect, notes Workforce Management magazine. Over-reliance on data-crunching software can, for example, cause you to lose sight of intangibles that are crucial to your credit union's culture. And as the recession demonstrates, business predictions are subject to change.

Workforce management software is selling at a brisk pace, with vendors arguing that many firms responded to the downturn with crude people cuts that cost them key talent or undercut their growth. Wisely implemented, they say, workforce planning tools help organizations handle variable business demand.

Planning strategies

Workforce planning software refers to applications that allow employers to forecast the number and kind of employees they will need in the future. A cousin to succession management, which focuses on specific positions in a firm, workforce planning focuses on key job groups or skills employers will need. The tools let firms experiment with different scenarios, examining what workforce costs or risks may result from taking steps, such as entering a new market or eliminating a product.

Workforce management software tends to fall into two categories. The first provides short-term or operational workforce planning, meaning preparing for changes within months—such as a restructuring or merger. Longer-term, strategic workforce planning products are designed to help envision the workforce as far out as five years.

Long-term workforce planning is missing in most organizations, according to a recent report from research firm Bersin & Associates. About 92% of companies have some level of workforce planning, but only 21% “take a strategic, long-term approach to addressing the talent demand, talent supply, and the actions necessary to close the gap between the two,” says Bersin.

Organizations are, in effect, “bingeing on talent” when times are good and “purging talent” when times are tough, according to Bersin. The approach is costly and can hurt workforce stability.

Growing interest in workforce planning has to do with the way organizations have focused on their talent in the past couple years. Firms have worked harder to identify and retain key performers. That shows the importance of understanding your workforce.

That understanding is limited at the moment, according to a recent survey conducted by Knowledge Infusion and the International Association for Human Resources Information Management. Only 48% of respondents say their companies have necessary workforce data readily available to make immediate workforce decisions, such as layoffs.

The figure suggests that much of the workforce cutting during the past year or so was less than thoughtful. Talented people were cut and companies sometimes slashed more than necessary. Many laid-off employees eventually were hired back, and the net cost of the cutbacks was higher than it needed to be in many firms, Sacks says.

Scanning the workforce landscape

One of the keys to long-term workforce planning is an “environmental scan,” which considers the range of external factors that could affect a firm's supply and demand for talent.

Once organizations figure out what data sources to include in their planning calculations and how to weight different factors, they typically lay out a number of scenarios and segment their talent. Firms may want to categorize their positions into:

• Strategic roles critical for a long-term advantage.
• Key roles crucial to short-term results.
• Core roles that are marginally important to business priorities but are nonetheless necessary.
• Non-core roles that may represent places to cut or make more efficient.