W W W . W A T S O N W Y A T T . C O M
Workforce Planning:Data Analysis to SolutionsPresenter:
Henry E. Noey, Jr.
Senior Consultant and Account Manager
Session Objectives
About Watson Wyatt
A framework for workforce planning
10 questions a workforce plan should answer
Keys to success– Workforce planning in practice – 2 case studies
Gap analysis
Keys to success
Q&A
We’re Everywhere You Do Business
Consult to 70% of Fortune 100Advisors to half of the top 100 corporate pension
funds in the United Kingdom Dominant presence in many markets in Europe and
Latin America First firm in our industry to open an office in China
and the first approved to serve pension funds in Japan
We’re Everywhere You Do Business
Provide actuarial services for more than twice as many of the world’s 300 largest pension funds than our nearest competitor
Comprehensive research for multinational clientsGlobal 50 Remuneration Planning Report – preferred
reference work for international HR practitioners Human Capital Index® – includes results from more than
2,000 companies around the globe
We Turn Research Into Results
Our advice is grounded in the most extensive and respected research in the business
First to investigate the management impact of changing demographics, the shift from traditional pensions to hybrid plans and emerging trends in phased retirement
1994
“U.S. Retirement Policy: The Sleeping Giant Awakens”
1996
“From Baby Boom to Elder Boom: Providing Health Care for an Aging Population”
1999
“Phased Retirement: Reshaping the End of Work”
1999
“Global Aging - The Challenge of the New Millennium”
2000
“The Unfolding of a Predictable Surprise: An Analysis of the Shift from Traditional Pensions to Hybrid Plans”
Workforce Planning in Oil & Gas
Workforce Planning Roundtable– Platform for networking– Open forum re: common
issues & solutions Workforce analysis Sources of talent Availability of global
data
Apache BP
Baker Hughes ChevronPhillips
ConocoPhillips Cooper Cameron
Devon Energy Duke Energy
Exxon Mobil Halliburton
Marathon Oil Kerr-McGee
Key Energy Noble Energy
Schlumberger Shell
Transocean UNOCAL
Workforce Planning Defined Translate business strategy into human
capital needs Analyze
– Current demographics– Current and projected staffing levels– Current and projected skill mix– Turnover trends– Retirement risk– Assumed growth– Available external workforce supply and
demand Assess current people practices relative to
internal and external workforce situation Identify short- and long-term risks in
attracting and retaining critical talent Recommend recruiting and retention
programs to close the risk gap and protect intellectual capital
Prioritize programs/solutions by ROI
Finding The Right Answers
Ensuring an available pool of talent
Internal labor supply External labor market
Optimizing human capital investments
Reducing the cost of turnover
Targeting investments in recruitment and retention
Protecting intellectual capital Addressing the impact of an
aging workforce Facilitating the transfer of
knowledge
Key Workforce Planning Components
The right number & right mix of workers at the
right time
The right number & right mix of workers at the
right time
Supply
• Business Requirements• Internal Demographics• “Employment Deal”
Demand
• Labor Pool• Lifestyle Shifts• Economic and Regulatory
Environment
Op
tim
al
Wo
rkfo
rce
Mo
del
Workforce Levers
Talent Management
Total Rewards
Employee & Labor Relations
Training & Development
Recruiting
Leadership
Outcomes
Invest Well
Invest Well
High Customer
Satisfaction
High Customer
Satisfaction
Reduce
Costs
Reduce
Costs
Increase
Shareholder
Value
Increase
Shareholder
Value
ExecuteBusinessStrategy
ExecuteBusinessStrategy
Bu
sin
es
s S
tra
teg
y
10 Questions A Workforce Plan Should Answer…
Demand What does my current and projected overall workforce profile look like? What is the demographic profile of my top 5 to 10 critical positions? Where are we at risk due to unnecessary turnover and/or impending retirements?
Root Causes of Behavior What are the root causes and/or correlations to undesirable turnover? What are the characteristics of employees who stay and succeed? What motivates and retains our top performers and/or critical talent? What HR practices are getting in the way of or helping with attraction and retention of
desired talent?
Supply What and where is the supply of talent for our most critical positions, short and long
term? What is the external market perception of us as an employer?
Outcomes What are the characteristics of workforce models that produce the best outcomes
(e.g., productivity, financial outcomes, customer satisfaction)?
Workforce Planning: Keys to Success
Don’t assume you know your workforce: There are typically “hidden” behavior patterns not readily apparent
Take a focused approach: Zero in on critical jobs and segmentation for actionable findings
Apply quantitative methods: Establishes ability to model behaviors and determine cost and ROI drivers
Be open minded and flexible: A “one-size-fits-all” strategy of the past may not work for the future
Develop an integrated strategy: Rewards and benefits are total package
Case Study #1: Aging Workforce Problem:
– Significantly aging workforce in key field supervisory jobs– Limited documentation of processes– Recruiting has been primarily from college graduates and then OJT
Hypothesis:– Hiring needs driven from both aging and internal movement– Recruiting “net” will need to be broadened– Knowledge transfer processes will be critical to meet business demand
for talent– Problem more/less severe from location to location
Actions:– Multi-faceted– Focused on employee life cycle
Executive SummaryNew Entrant
Average Age (Promotion)
32.0
Average Age (Internal Move)
36.8
Retirements/TurnoverAverage Age (Ret) 59.1
Average Age (Int/Ext)* 43.4 / 37.9
Turnover (Int/Ext) 4% / 3%
Hiring Needs2007** 143 18%
2010** 369 45%
2012** 527 65%
Current Population
Employee Count
814
Average Age 43.9
Average Service
17.9
% over 50 36%
% Retirement Eligible
15%
* Average age of turnover** Column 3 represents the # of cumulative hires as a percentage of current employees
Projected Hiring Needs Over the next 7 years:
- 527 need to be hired to maintain current population (cumulative)
- 20% of the current population will be gone due to retirements
* Internal Attrition includes employees moving from Exempt to Union as well as to other non-operations positions
Objectives
0%
10%
20%
30%
40%
50%
60%
0-5 yrs 5-10yrs
10-15yrs
15-20yrs
20-25yrs
25-30yrs
30+yrs
Employee RetirementDistribution
Years to Retirement
#1 Objective–Optimize costs associated with acquiring employees subject to appropriate mix of job skills/ competencies required to meet the projected demand for XYZ’s services
#2 Objective–Reinforce and solidify relations with current employees to ensure effective future workforce staffing required to meet projected demand for XYZ’s services
Outcomes10-15 Years to Retirement Group
A. Maximize retention of current high-performing employees
B. Transition employees from other parts of the organization
C. Implement phased retirement program
Sources to Fill the Gap
Internal Labor Market
External Labor Market
D. Acquire new hires at entry level and professionally develop employees
E. Acquire mid-career professionals seeking a change in employment
Job Group #E
Job Group #D
Job Group #C
Job Group #B
Job Group #A
Workforce Planning Resulted in Data-Driven Investments…
Demand Analysis Projected Key Talent Needs Geography Turnover Workforce Aging Retirement Rates
Supply Analysis Labor Forecasts
– New Graduates– Competitor sources
Industry Influences
Gap Analysis Programs& Practices Employee Satisfaction Employee Demographics Talent Sourcing
Business Strategy & Human Capital Implications
Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer
Retire
Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work
Arrangements
Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits
New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation
Employee Satisfaction Work/Life Balance Compensation and
Benefits Work Environment Leadership
Attract Recruit Invest Retain
Employee Life Cycle Immediate Solutions
Attract: How can we become an employer of choice to the desired talent to support the business?
– Robust and compelling employer brand
Recruit: How do we ensure that our recruiting approach and tools are as efficient and effective as possible to get the talent we need when we need it?
– Enhanced mid-career hiring program– Measurement processes for sources of talent and success rate
Phased Retirement
Retirement Benefits
Retiree Medical
Mentoring Knowledge
Transfer
Retire
Branding Preferred
Employer Sourcing
Strategy Career Web Site Alternate Work
Arrangements
Attract
Targeted Recruiting
Applicant Tracking
Selection Process
Compensation Benefits
Recruit New Hire
Orientation Training &
Development Mentor Programs Talent
Management Performance
Evaluation
Invest
Employee Satisfaction
Work/Life Balance Compensation
and Benefits Work
Environment Leadership
Retain
Employee Life Cycle Immediate Solutions
Invest: What are the optimal investments in developing and managing talent?
– Training and development processes and programs revised to decrease the time to proficiency
– Recognition for knowledge transfer
Retain: How do we ensure that we are retaining the right people?
– Employee development integrated into leader performance evaluation
– Robust communications for understanding and appreciation of total rewards and opportunities
Phased Retirement
Retirement Benefits
Retiree Medical
Mentoring Knowledge
Transfer
Retire
Branding Preferred
Employer Sourcing
Strategy Career Web Site Alternate Work
Arrangements
Attract
Targeted Recruiting
Applicant Tracking
Selection Process
Compensation Benefits
Recruit New Hire
Orientation Training &
Development Mentor Programs Talent
Management Performance
Evaluation
Invest
Employee Satisfaction
Work/Life Balance Compensation
and Benefits Work
Environment Leadership
Retain
Employee Life Cycle Solutions
Retire: How can we best manage the exit of our workforce and intellectual capital?
– Revised retirement and retiree medical plans to drive the desired retirement behaviors
Phased Retirement
Retirement Benefits
Retiree Medical
Mentoring Knowledge
Transfer
Retire
Branding Preferred
Employer Sourcing
Strategy Career Web Site Alternate Work
Arrangements
Attract
Targeted Recruiting
Applicant Tracking
Selection Process
Compensation Benefits
Recruit New Hire
Orientation Training &
Development Mentor Programs Talent
Management Performance
Evaluation
Invest
Employee Satisfaction
Work/Life Balance Compensation
and Benefits Work
Environment Leadership
Retain
Longer-Term Solutions
Program to identify current feeder pool employees earlier in their career to develop into these positions
Alternative work arrangements for work/life balance
Phased retirement alternatives for selected individuals
Processes, tools and mentoring program for knowledge transfer
Case Study #2: Recruitment & Retention
Problem:– Significant retention issues at key career points– Very competitive recruiting/talent market– Diversity does not match customer base
Hypothesis:– Employees need different “deals” at different stages of life– Employer of choice brand will make a difference in recruiting the
necessary talent– Reward dollars can be allocated more effectively to reduce
turnover and recruiting “ramp up” costs
Actions:– Restructure of rewards to align with life stages
A first step is to improve the employment deal with customized recruiting and retention tools
On campus recruiting
Experienced hires
$
$
$$SR. ASSOC.
4-6 years
EXPERT/MANAGER7-9 years
SR. MANAGER10-12 years
EXECUTIVES
ASSOC.1-3 years
The challenge is to keep rewards
efficient for the Company and
relevant for every employee
A more responsive reward program can begin to improve the overall work experience
Lifecycle RewardsLifecycle Rewards
Annual Turnover
Lifecycle Rewards lets employees make choices that influence their decision to stay and remain motivated…
Julio, age 22, Engineer $23,500 in college loans Low to modest medical
coverage needs Going to work for the first time “Work hard, play hard”
Life Stage
Profile
Catastrophic healthcare coverage only
Lowest dental coverage No vision coverage Purchase 4 additional PTO days No 401(k) participation
Base salary Bonus Base healthcare and security
benefits Eligibility for retirement plan
Customized Benefits
Base Program
Julio’s Lifecycle Rewards Corinne’s Lifecycle Rewards Paul’s Lifecycle Rewards
Picture of young
professional woman
Picture of minority with
family
Corinne, age 38, Sr. Engineer Recently married Purchasing first home Evaluating career and family
options
Opts out of medical in favor of spouse’s plan
Purchases additional life and other security coverage
Takes balance of flex credits in cash
Milestone Award payment goes to down payment on home
Modest 401(k) participation
Paul, age 45, Engineering Manager
Married, two children Considering larger home Planning for college and
retirement
Lifecycle Rewards Family PPO, dental, and vision
Pending Milestone Award earmarked to fund a 529 plan
Maximum security elections No additional PTO days
purchased Maximum participation in 401(k)
Base salary Bonus Base healthcare and security
benefits Eligibility for retirement plan
Base salary Bonus Base healthcare and security
benefits Eligibility for retirement plan
Lifecycle RewardsLifecycle Rewards
…and helps manage compensation and benefits for employees throughout their career
Year 1: Cathy is hired as an Associate Engineer
Year 3: Cathy is married and adds her husband as part of her healthcare coverage
Year 5: Pays down her remaining college debt with her first Milestone Award
Year 6: Little Kelly is born, 7 pounds, 6 ounces. Cathy is promoted to Senior Engineer
Year 8: Second Milestone Award is paid, family purchases new home
Year 9: Uses three weeks from Leave Bank to be with ailing parent
Year 11: Promoted to Engineering Manager. Third Milestone Award is paid into Retirement Account
This is not just about “choice” – its also about
being responsive and understanding your
employees
Lifecycle RewardsLifecycle Rewards
The core objective is to make it compelling
for individuals to join and stay
Estimated savings associated with increased retention
$63
$226
$133
$454
$261
$670
$341
$895
$477
$1,085
$566
$1,246
$698
$1,351
$789
$1,414
$868
$1,443
$890
$1,456
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
1 2 3 4 5 6 7 8 9 10
Year of Program
Program Savings Opportunity(Dollars in Millions)
Cost Savings~$560 Million in cost savings over the next ten years + possible productivity gains among existing employees
Lifecycle RewardsLifecycle Rewards Sourcing & RecruitingSourcing & RecruitingWork/Life & Career Management
Work/Life & Career Management
Direct rewards will not solve all the issues…
Job Sharing
Job Rotations
Reduced Hours
Job Posting Technology
Interest-based
Competency-based
Management Training
Formal Mentor Program
Capacity Planning
Diversity
Sourcing Strategies
Screening & Profiling
Offer Management
Other Areas of FocusCurrent Focus
Lifecycle Rewards is not the “silver bullet”, there are other critical issues to address
Near-Term (1/1/06)
– Milestone Account– Enhanced Match
Medium-Term (1/1/07)
– Flexible Benefits– Leave Bank
Workforce Planning: Keys to Success
Don’t assume you know your workforce: There are typically “hidden” behavior patterns not readily apparent
Take a focused approach: Zero in on critical jobs and segmentation for actionable findings
Apply quantitative methods: Establishes ability to model behaviors and determine cost and ROI drivers
Be open minded and flexible: A “one-size-fits-all” strategy of the past may not work for the future
Develop an integrated strategy: Rewards and benefits are total package
Where are the gaps?
Lack of employee data, global systems and analytical tools
Majority focus on period costs – limited longer-term thinking
Limited connection between business strategy and future employee needs
‘Silo’ approach to rewards