While direct people costs make up an average of 40 percent of organisational costs, almost half of the workforce is in complex, knowledge-intensive roles that are fundamental to the success and profitability of their organisations. The cost therefore of getting workforce planning wrong can be significant.One size definitely does not fit all – especially when it comes to the workforce. This kind of mindset does not pay sufficient attention to role demands and the organisational hierarchies that determine the strategic perspective required from respective positions.
Integrating workforce supply and demand analysis into the strategic planning cycle ensures organisations have the ‘five rights’- the right number of people, with the right skills, in the right place, at the right level and at the right cost – in other words, strategic workforce planning (SWP).
A Recent Hay Group research, which surveyed over 1 400 HR professionals and senior management from around the world, found that the cost-cutting and efficiency priorities – introduced to weather the economic storm of recent years – have now evolved to a focus on driving performance and growth. Meanwhile, the emerging HR concerns for the years ahead lie around developing the workforce and ensuring the right people are in the right roles and doing the right work.
“As market demands continue to change, organisational success will hinge on HR’s ability to connect human capital decisions with business strategy. HR will need to stop clinging to traditional processes and inefficient silos and move toward an integrated approach that links work and people to business results. Such change is critical if HR is to transition to an effective strategic business partner,” said Phil Johnson, Hay Group’s Global Head of Work Measurement.
The research highlights how HR will lag behind management expectations if a holistic approach to people management – based on a framework of understanding work – is not adopted. Jobs are at the heart of HR processes, therefore it is crucial to analyse work if people resources are to be best deployed to deliver on business objectives.
“Many industries face critical shortages of essential talent, while others struggle to define the shape of the workforce they need in the midst of major and rapid change, where having the correct workforce in place is the critical gap between success and failure. Industry leaders need to be able to address external challenges and deliver their strategic plan,” said Lisete Harris, Sector Head at Hay Group South Africa.
As work requirements evolve, the demands on the workforce change too. A number of trends are having an impact on the shape and expectations of the workforce.
Aging – With 79 million baby boomers eligible to retire and a generation of Xers only half their number behind them, organisations are facing a critical shortage of talent. Taking a strategic and integrated approach involving all talent management activities has the greatest chance of minimising the impact of the demographic realities.
Skills and qualifications gap – despite investment in higher education, there are significant gaps in skills in scientific, technical, engineering and maths disciplines. Some 80 percent of the talent gap in organisations stems from a lack of appropriately qualified candidates.
Higher costs for scarce skills – linked to skills gap, critical skills attract a market premium for those organisations that fail to develop and retain key skills.
Changing career patterns and expectations – the traditional career with retirement in a person’s early sixties has been replaced with expectations of greater job fulfilment, flexible employment patterns and a smoother transition into retirement.
Workforce planning is not keeping up with fast-moving workforce trends. The cost of this failure is high both within organisations and across the whole economy. Strategic workforce planning provides the basis for the talent required to deliver your strategy, and to ensure that you integrate workforce supply and demand analysis into the strategic planning cycle, getting the right workforce in place means addressing the five rights:
the right size (the right number of people in the right roles spending the right amount of time achieving given outcomes);
the right shape (identify duplication and inefficiency to establish the right balance of admin to professionals, junior to seniors, experienced staff to new hires);
the right cost (benchmark pay and reward to pay the right price for required skills);
the right place (ensure the required staff resources are available in the right location to meet the current and future workload);
and the right skills (assess the gaps in the competencies and skills that will be needed to meet future goals.
“A proven and unique framework for strategic workforce planning helps organisations to analyse how effectively their current workforce is bringing their strategy to life,” said Harris. “Examining current structures and benchmarking their organisation against their peers and successful companies helps them to understand the gaps or overcapacity in the required workforce. Analysis of the organisation’s needs identifies the ideal size, shape, location, skills and cost of their workforce, which allows companies to make the necessary changes, implement the new structures and secure the required capability.”
”Organisations are largely limiting work measurement systems to the setting of base pay and for grading purposes, said Harris. “We are starting to see more companies use work measurement to support succession planning, career pathing and other talent management decisions, and as a job and organisation design diagnostic – but most are missing out on its true value. Used to its full extent, work measurement can feed enormously powerful information into strategic decisions and improve the overall efficiency of the organisation. Understanding people and work is at the core of what we see as next generation strategic HR.”