The journey towards up to date and realistic skills management has begun. Anticipating the skills necessary to reach objectives has become essential to managing employee professional development and ensuring the company stays competitive. Let’s say hello to workforce planning!
Competition makes the world go round
The technological revolution has changed the game so much that business forecasters aren’t sure what the future holds. The five largest American companies now only employ 434,000 people. That’s 20% less than the top five in the year 2000 and almost 50% less than 30 years ago. Moreover, new start-ups in the digital market create relatively few jobs, the nature of which is very different to even 10 years ago.
Businesses must adapt to stay competitive in the face of these new dominant models. They will have to do more, with less people, and a with different set of skills. HR is at the heart of most business strategies today precisely because of this transformation.
If we define a profession as a set of skills, we can see Most of these new skills focus on learning, reasoning, and interactivity so as to deal with non-routine tasks.
Simple, repetitive tasks are now more easily automated. Just like there are no more lamp lighters for our streets, many of today’s common professions will be obsolete in just a few years. A company’s economic performance will consist of restructuring and anticipating the future to avoid major social conflicts and damage.
Skills planning is the most powerful tool
for both corporate social responsibility
and future performance
Businesses which do not adopt skills planning will fail. Perhaps sooner, or perhaps later, but it is inevitable as they will be simply unable to compete. In the near future, the question will not be where to use machines, but rather where to use humans! Nonetheless, we are on track towards a permanent transition, requiring a rethinking of how to stay competitive. The logical next step in this paradigm would be to improve the anticipation of skills needs.
This anticipation is integral to workforce planning. Brought to Europe by US and UK practices focussing on competition and performance, workforce planning is primarily concerned with assisting business reach their strategic goals, whilst older HR approaches concentrated (a little too much) on social aspects rather than business development.
Workforce Planning as the HR orchestra conductor
In modern and informed companies, all HR actions stem from workforce planning. Although not terribly well-known or -understood in France, it has been developing rapidly across the Atlantic. Workforce Planning revolves around planning the skills necessary for businesses in the near future. Although HR in France tackles workforce planning elements in their own unique and legalistic way, workforce planning is similar in function to business strategic planning.
Workforce Planning is the missing link between strategy and HR.
The literature goes into great detail about methodologies, but generally speaking, we can distinguish four principal phases of workforce planning:
- Identify and assess the skills need to reach objectives
- Identify and assess the existing internal translatable skills
- Identify and assess the skills gap
- Determine the methods for addressing the skills gap in the most cost-effective and socially responsible manner
After close analysis of the macro-economic factors and data for that business sector, the strategy defines the business’ orientation and objectives, over a realistic timeframe. It is these choices which determine the nature, quantity, and level of skills necessary to achieve the set objectives. And this task is the first step for workforce planning experts.
These experts tend to come from non-traditional HR backgrounds, including economists, IT developers, industry or sector experts. The first step is critical, as it sets the pace for later actions. In the second phase, the company conducts a comprehensive audit of its existing skills. This audit must also ensure that “interdependent” skills are grouped together.
Jargon aside, this audit finds out who can do what within the business. One person alone may have more than 100 distinct skills. Nonetheless, they can’t be expected to employ them all at once; even Superman had difficulty holding down two jobs at once, so what hope for mere mortals?!
The conclusion: just because the skills are there, it doesn’t mean they can all be used. Choices must be made and priorities set, according to the rarity and importance of each skill.
If it seems we are moving far from the purview of classic HR with the idea of workforce planning, read on…
Once businesses know what’s necessary to attain strategic objectives, and which skills they already possess, we come to the third phase: assessing the gap between the existing, “usable” skills, and those which are needed. It may sound simple, but this stage can be extremely complex, as it consists of identifying the lack of skills, and creating favored groups of skills.
These skill groups are what forms the core of a profession. In other words, this phase is where new professions are made. No more, no less. The last phase is a bit less glamorous. With math, economics, and sociology done, it’s time for accounting! Now we have to identify those missing skills.
There are several ways to accomplish this:
- Train employees to develop the skills. This is the most responsible method, as it is efficient in developing employability, but it’s limited by the workloads involved in using these new skills.
- Encourage internal mobility. Shuffling employees’ roles around can be a real headache, but it’s profitable in that it retains current talent while optimising the arrangement of skills within the business. However, it seems clear that training will be the path taken by the vast majority of businesses in their digital transformation.
- Recruit. The most expensive option; as it requires a significant initial outlay and fixed costs over time. Provided the scope is the same, recruiting often involves a departure. This is a financial AND social cost.
- Outsource. For a company’s non-strategic skills, this is a realistic option. Many businesses subcontract tasks and services not included as part of their core business, or to ensure they reach a deadline. No fixed costs. With this approach, businesses can redefine themselves as ecosystems in which internal and external skills complement and enhance each other’s value.
Each option brings its own pros and cons, costs and risks. These financial and social costs must be weighed up and priorities need to be defined in order to select the best method of obtaining the necessary skills. This discussion is best accomplished with all the major participants from HR, the finance department, management, and the workforce.
Once the conductor(s) have written the sheet music; it’s time for the concert. Each section of HR will have clear figures and objectives, linked to strategy: objectives for training, recruiting, and mobility, etc.
Workforce planning as the spearhead of company strategy
No matter what the decision taken by the company, it will impact the provisional supply of skills. In more human terms, decisions impact the people possessing these skills, as the following example of Kodak well illustrates.
Previously the market leader in the film photography sector, Kodak was completely toppled by their new competitors in the digital photography field. Kodak suddenly found itself in a digital world which had no need for its chemical core business.
If you were Kodak, would you: A – Retrain your chemists into digital developers? B – Switch to industrial chemistry? C – None of the above?
The digital disruption experienced by Kodak forced them to make a choice known as the Innovator’s Dilemma. For a market in a state of upheaval, this dilemma questions whether it’s best to embrace the rupture, and divest from present vital revenue in order to reap profits later, or persevere with current assets and models in the hope that they will remain distinctive and profitable (changing the market approach if required).
Returning to our main area of interest, the issue is this: should they have stuck to their chemical expertise and applied it to other sectors (fertilisers, detergents, etc.), or rapidly acquired massive expertise in digital technology in order to stay competitive in the photography market?
An all the more legitimate a question considering Kodak possessed the most advanced patents in terms of digital technology for photography. Had Kodak analyzed the market from the human capital perspective, they would have realized that the skills necessary to remain competitive in the market were not the ones they currently possessed. Of course, any analysis adds to the capacity of leaders to make good decisions. But the human capital approach would have seen these decisions arising from a logical framework.
As the Gary Becker, winner of the 1992 Nobel Memorial Prize in Economic Sciences, reminds us, human capital is the single most important determining factor in an organisation’s long term competitiveness. His theory of human capital strongly links training to growth. The logical extension of his analysis is that market expertise alone won’t help you make wise strategic choices if you don’t have a deep understanding of the strengths within your organization and workforce.
Workforce planning as competition and CSR safeguard
Using workforce planning, a company’s strategy can be challenged, through data directly linking the status of internal strengths to the market. When this data is available, recruiting, internal mobility, training, and external mobility can be truly effective. This brings us to the questions: which skills can be acquired internally? Which should be sought externally? Which are obsolete?
With this approach, recruiting, training, and internal mobility can be optimized, and external mobility projects take their place in a healthy work environment. Employees must be trained today with new skills both relevant to the core business, and valued by other companies, as well, if their jobs are at risk of becoming obsolete.
Companies must regard workforce planning as not only a tool for competition but also a social responsibility.
By striving for competitiveness and optimisation, workforce planning enables business to ensure employability within or outside of the company. There is a concrete return on investment too, measurable by the savings made on recruiting and mobility, or financial and social savings in terms of departures, all too often handled insensitively.
More than that, when employees are secure in the knowledge that they are competitive in the market, they will concentrate more easily on their work. Workforce planning is a strategic necessity for businesses, to give themselves a major tactical asset. Behind the mathematical and rational logic behind this topic, is the idea of preserving the company’s competitiveness.
Workforce planning encourages businesses to treat HR issues more holistically, and be sure they are closely matched to business strategy. Internal mobility, recruiting, training, and engagement need to be successfully interlinked and work together.
For once, businesses have been given a tool allowing them to perfectly unite social responsibility and economic performance. We only improve the things we see as being valuable over time, and now more than ever in terms of provisional skills management.
Management and staff can find that workforce planning, equally valuable to both parties, enables business performance at the same time as fixing the human aspect at its core.