Workforce planning was one of the hottest areas within HR during the 1980s. Now it’s back on top of the hot HR issues list. Why is workforce planning a burning HR issue again? There are four basic driving factors:
- A shortage of talent. No one wants to go through the rapid growth element of the business cycle without having the capability to recruit and retain the top talent necessary for that rapid growth.
- Forecasting the downturn. Following the dramatic shortage of talent came the rapid drop in economic conditions. Almost no one forecasted the downturn. No one wants to be surprised again by that dramatic of a downturn.
- Avoiding layoffs. When the downturn came, organizations found themselves overstaffed with full-time employees and with no well thought-out plan to painlessly cut excess staff.
- Exploding out of the box. Everyone knows an upturn is coming and the best companies want to anticipate it and be prepared to “explode out of the box” when it does come.
Don’t Be Na?ve Whether the economy takes another downturn or a rebound is imminent, it is important to anticipate and eventually smooth out the negative impacts of the “talent cycle.” It makes sense to put resources and time into workforce planning. However, there is one caveat. If you have been a part of the human resource profession for more than 15 years you probably already know that the track record of workforce planning is dismal. Some firms like Microsoft and Motorola have done some excellent work, but I estimate that over 90% of the “old model” workforce plans failed. It’s to know why these plans failed. Unfortunately, it’s hard to discover the reasons for their failure because most workforce planners were laid off years ago and their plans have long since been unceremoniously placed in the dumpster. Fortunately, old salts like me have been studying workforce plans for decades, so I have compiled a list from my experience as to why they fail. So before you charge into any workforce planning effort, make sure you are aware of all the possible “failure factors” and the best way around each of them. Some of the reasons are outlined below. The 8 Catastrophic Mistakes in Workforce Planning All errors in workforce planning are not equal. There are some that are so impactful that, when they do occur, they can doom any workforce planning effort from the very start. Initially these errors may seem a little difficult to understand but I assure you that they are catastrophic and all too commonly found errors.
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- Plans are too ambitious. Most workforce plans are either too broad or too narrow. Both are serious problems, but of the two, too ambitious is the more serious fault. Most large-scale efforts included many difficult to assess factors such as competency studies, leadership assessment, and skills inventories, which took forever and almost never worked. Many others utilized sophisticated succession-planning charts, where in fact a simple backfill requirement for key jobs would have been sufficient. If workforce plans are to be effective, they must be “right sized” so that they only cover the areas where they can have a significant business impact. Others went in the opposite direction and defined workforce planning narrowly by focusing just on headcount projections. As a result of this narrow focus, many excluded the important HR functions of redeployment, retention, rewards, and the use of a contingency workforce.
- Unprepared for the negative. Most HR people, and managers for that matter, are optimistic. In the past, they and their workforce plans focused exclusively on the positive or growth side. They assumed growth will be needed much more often than they assumed downsizing. (Because most managers are inherently positive thinkers, workforce plans must go out of their way to overemphasize the negative. It’s much more likely that negative events will sneak up on management than that surprise growth and other positive events will.) As a result, there were no forecasts for a business downturn. And when the time came for layoffs and downsizing, most workforce plans had no element that outlined a plan for a reduction in force. Consequently, when layoffs became necessary they were done independently of the workforce plan. This fault eventually doomed workforce planning and the jobs of workforce planners along with it. The lesson learned is to design your workforce plans so that they are more robust during tight times and during layoffs.
- Underestimating the impact a powerful recruiting. Most workforce plans focused on (and still do focus on) the potential shortage of labor and on how it would eventually impact the entire industry (or even the entire country). Great workforce planning leaders must realize that effective recruiting, employee development, compensation, and poaching (especially for small- and medium-sized firms) can essentially eliminate the impact of industry-wide worker shortages on your company. In other words, most workforce planning becomes unnecessary with great recruiting, retention, employment branding, poaching and employee development programs. If you are a “magnet” company that develops its own talent and you excel at poaching talent from competitors, most shortages can be avoided. Until management realizes the impact of effective recruiting and employee development efforts, they are likely to repeat the same error of believing “doom forecasts” about the upcoming quality or the amount of available labor. In modern times with the use of technology and remote work, talent shortages in one country can easily be alleviated by shifting work to regions where there is a labor surplus.
- Ineffective internal movement. Most workforce plans rely heavily on the rapid internal movement of talent. Unfortunately, almost all internal movement processes (or job posting programs) are ineffective at best. Most rely on workers to actively seek out new positions. The net result is that the “right” workers must decide on their own when and where to move. Instead management needs to take the position that rather than leaving internal movement to “chance,” they must proactively direct top-performing workers to the areas within the firm where they will have the highest potential impact. That proactive process is called “intraplacement.”
- Ignoring contingency workforce percentages. Many workforce plans contain contingency workforce elements (where a certain percentage of the workforce must remain contingent, temporary, or contract workers). Unfortunately, those contingent workforce “targets” are seldom enforced or backed up with penalties. If managers are not required to maintain their target percentage of contingent workers then workforce planning will fail. Why? Because most managers and HR people are reluctant to fire permanent workers. Without a large contingent workforce, the task of reducing headcount becomes almost impossible without large-scale layoffs (rather than reducing contingent workers first).
- Managers didn’t own it. Most workforce planning programs are designed exclusively and “owned” by HR. That is a big mistake. During tight economic times, only CFOs and senior line managers have any real authority. And in the past, neither of them were involved in developing the workforce plan. Great workforce plans are “owned” by line managers. In addition, CFOs see them as an effective tool that “they” can use for cutting labor costs without hurting a company’s competitive position.
- Narrow target. Attempting to forecast precise growth rates or precise headcount targets is a foolhardy task. Unfortunately, most workforce plans tried to define a single bull’s-eye for a target. Aiming for or trying to accurately forecast a single number is impossible. As a result, most forecasting failed. That failure impacted HR credibility and workforce planning hard. A more effective approach is to identify a reasonable range of possible targets and then to prepare for all eventualities within that range
- Failure to prioritize. You cannot effectively forecast and plan every element of a business. Effective plans prioritize and cover only high priority business units, customers, products, and jobs. Effective plans are designed to prioritize and focus management activity toward the areas where human resource planning is most effective and can have the highest business impact. The reality is that most HR people are unwilling or unable to stop treating all business units and positions equally.
Most importantly, remember that plans are not powerful enough tools to change behavior. Unless top management consistently pushes the need for plans — and unless metrics and rewards are in place to back them up — most plans will be ignored. The use of workforce planning can not be increased dramatically unless HR shifts its performance management and bonus systems so that they both measure and significantly reward accurate workforce planning. Without metrics, penalties and rewards workforce planning cannot work. Next week, in Part 2, we’ll take a look at some more detailed reasons why workforce plans have been prone to failure in the past.