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September 28, 2011. Workforce Planning in Times of Uncertainty. David Ulrich on where HR can add value.
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September 28, 2011 Workforce Planning in Times of Uncertainty
David Ulrich on where HR can add value “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
Challenges Resulting From Economic Conditions Companies and HR Professionals have faced challenges as a result of the economic crisis and unprecedented economic volatility: Source: Towers Watson “Creating a Sustainable Rewards and Talent Management Model” Results of the 2010 Global Talent Management and Rewards Survey
Ongoing Issues Source: Society for Human Resource Management poll of 50 executive-level HR leaders in February, 2009. 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
Emerging post-recession issues 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. 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**
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?
Occupations Expected to Show Shortages (Canadian Data) Source: HRSDC, Strategic Policy Research Directorate, Looking-Ahead: A 10-Year Outlook for the Canadian Labour Market (2006-2015), October 2006.
Estimated Labour Shortage in Ontario 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.
Labour Market Imbalances 2006-2015 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.
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.
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
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.
Addressing Challenges While Facing Uncertainty Workforce Planning
The Cost of Not Managing Talent Research has shown that the cost of replacing an employee ranges between6 to 12 months’ salary, depending on level, skill and difficulty in replacing. 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.
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
Talent Management & Workforce Planning Flexible & Productive Organization Talent Resource Planning Pipeline of Talent Succession & Talent Issues/ Gaps Business Goals Talent Definition Talent Retention & Productivity
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
Reasons for Talent Management • Provides increased opportunities for “high potential” workers • Identifies “Replacement Needs” • Increases talent pool of promotable employees • Contributes to implementing the organization’s strategic plan • Assists in the realization of career plans • Allows the organization to tap its intellectual capital • Accelerates development of diverse groups • Increases ability to respond to changing environmental demands • Improves employee morale • Increases capacity to cope with effects of voluntary separation programs & possible restructuring • Highlights employee value to the organization • Increases capability of the organization to cope with the effects of downsizing • Identifies essential workers and work practices Source: 1999 survey results of members for the Society for Human Resources Management (SHRM)
Model for Systematic Talent Management Step 1 Make the commitment to systematic Talent Management planning and establish a Talent Management Program Step 2 Assess present work requirements Step 7 Evaluate the Talent Management program Organizational Success Step 3 Appraise individual job performance Organizational Success Step 6 Close the developmental gap so as to meet the Talent Management needs Step 4 Assess future work requirements Step 5 Assess individual potential W. Rothwell, 2001
Priority Candidates SolidPerformers Non-Performers Identification Through Segmentation RN Leadership/ Critical Skills BB Key Candidates Critical Position Value to Organization A0 JT Continuing Role SB Candidates for Exit Package BT Discontinuing Role/Project Candidates for Exit Package Candidates for Moving Internally Does Not MeetExpectations Meets Expectations Exceeds Expectations Current Performance
Who Should We Be Concerned About? High High Value to Organization Low High Risk of Leaving Once the top and priority candidates are identified, consider the risk that they would elect to leave the organization:
Assessment Grid: Retention Risk Prioritization RN Leadership/ Critical Skills Critical Position Value to Organization A0 Continuing Role SB BT Discontinuing Role/Project Low Risk Medium Risk High Risk Risk of Leaving
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.
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
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
Is Yours A Great Company? Great brands sell goods, great companies attract talent 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?
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?
Connectedness • Environment • Citizenship • Reputation • Recognition Pay and Benefits Work • Base Salary • Short & Long Term Variable Pay • Equity/Ownership • Health & Welfare • Retirement • Resourcing • Role Design • Contribution • Feedback • Development/ Advancement Culture • Work/Personal Balance • Communication • “Supervision” What is an “Employee Value Proposition”? Employee Value Proposition Clear understanding of the real investment made in all aspects of the “REWARD” system
What is an “Employee Value Proposition”? Clear objectives and goals related to what the investment is meant to achieve from all stakeholder perspectives.
What is an “Employee Value Proposition”? 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 Programs & Measurement HUMAN RESOURCE STRATEGY (What components leverage the best outcome) TOTAL REWARD STRATEGY
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..
Distinctive Value Proposition Companies with superior employee value propositions capture more and better talent share • 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?
Talent Management Considerations And what does that mean for the requirements of your human capital? 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
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?