strategic workforce planning - the formula for success

the formula for successStrategic workforce planning – the right workforce, today and tomorrow, at the right cost

our solutions

1 the formula for success2 foreword4 the five rights6 right size8 right skills10 right shape12 right site14 right spend16 the beveridge curve18 working with hay group

the right workforce, today and tomorrow, at the right cost.

the formula for success

That’s what strategic workforce planning can provide. When you’ve got the right workforce at the right cost, that means better corporate performance. And a workforce that’s optimized is one that will create success for your organization.

Businesses follow strategies. These strategies require capabilities. And those capabilities are mostly based on people. For example, when a retailer starts to use new digital channels as well as traditional ones, it needs people with the skills and knowledge to make it happen. People who can tie the supply chain, big data and the customer experience together. This is why people are so essential to your business and why, for most organizations, people are their biggest investment.

But the right people aren’t easy to find. Fast-moving technology has created a need for new and rapidly evolving skillsets.

And when there’s a war for talent, identifying and investing in the right people is more important than ever.

Despite this, many organizations don’t track their investment in people. This is what strategic workforce planning gives you: the ability to define, track and measure your investment in people just as you would for other investments – reviewing and improving with continual maintenance.

There are two levels to strategic workforce planning - optimizing the workforce now, which is mostly about improving productivity; and scenario planning for the future, which looks at how to turn your strategy into the skills that you’ll need in the future. Looking into the future is never simple. But with our help and knowledge, you’ll be better able to prepare your company for its future challenges.

It’s all about making sure your people have the right skills to achieve your goals. That’s the right workforce. It’s about making decisions around cost optimization now while planning scenarios for the future. That’s today and tomorrow. And it’s all about doing it in a way that makes financial sense. That’s the right cost.

1© 2015 Hay Group. All rights reserved.

People are the last frontier to creating superior economic performance. Marketing, technology, procurement – all of these functions should be optimized. The big challenge ahead is to harness the collective energy of people in organizations. Strategic workforce planning will help you on that journey.

foreword

People are likely to be the biggest single cost for your company. They’re your biggest investment. People support most of the strategic capabilities and they carry the skills you need to deploy your strategy. People create economic performance and when organized right, are a source of competitive advantage.

Missing the next business cycle can often mean death for companies. One implication of today’s shortening cycles is that universities are late producing the graduates with the skills that are required. And when firms compete on products, they also compete on getting the right people, which are often the same people. That’s the talent war.

Strategic workforce planning is about responding to these challenges, by identifying the right people, today and tomorrow, with the right skills, at the right cost. It’s an important mission for HR today. It will be the core mission of HR for the future. HR’s important decisions will increasingly move from hiring policies and defining training and development needs, to redesigning jobs, optimizing the organization’s design and winning the talent war.

Strategic workforce planning is also important for all in the company, from the CEO to the CFO to business unit leaders, because people make strategy happen. Getting the right people is a key item on any CEO’s agenda.

By identifying your strategic capabilities and finding people with the right skills early, HR creates a competitive advantage for your company, helps improve its economic performance and becomes an integral part of its strategic decisions.

Eric S. Pelletier, Global director – strategic workforce planning

The formula for success2

WE’RE GROWING QUICKLY.WHO ARE THE RIGHT PEOPLE?MY BUSINESS MODEL IS CHANGING.

90% of the Top 20 companies use a formal talent review and planning process to �ll leadership positions, compared to 56% of all other respondents. BEST COMPANIES FORLEADERSHIP SURVEY 2014

PROMOTING DIVERSITY INCREASES YOUR PROFIT.WHERE SHOULD MY PEOPLE BE LOCATED? WE WANT TO REALISE THE BENEFITS FROM OUR RECENT ACQUISITION.

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w

WE HAVE TOO MANY PEOPLE.MY MARGINS ARE GETTING SQUEEZED.WE SPEND TOO MUCH ON PEOPLE.

THE MOST POWERFUL FORECASTING TOOL AVAILABLE

84% of the Top 20 companies actively manage a pool of successors for mission critical roles, compared to just half of all other respondents. BEST COMPANIES FORLEADERSHIP SURVEY 2014

80% of the Top 20 companies develop career paths and assignments to prepare people for the most important roles, compared to 47% of the rest. BEST COMPANIES FORLEADERSHIP SURVEY 2014

what issues are you facing?

read on to find out how we can help


the 5 rightsIf you want to make the most out of your investment in your people, you need an approach that’s focused around achieving the right workforce, today and tomorrow, at the right cost.

We use the “5 RightS” to define and implement this approach.

these 5 rights are:

right site

right shape

right size

right spend


right skills

You can start by focusing on the right skills, identifying the strategic capabilities for the future. Once you have done that, you can size the number of people required carrying those skills. Then you may decide, for example, that you want to increase gender diversity in your research division, getting to the right shape you desire. You can test these hypotheses and check they are economically viable.

On the other hand, if you want help with all aspects of your workforce, taking into account both cost optimization and planning for the future, we can use the 5 RightS to do this.

The advantage of this scalability means that it’s an approach that can help you regardless of the size of your organization or its level of complexity. We recommend that our clients start with pilot projects, for

example covering a business unit, a country or a function like IT or marketing. Once you have successfully piloted a smaller project then you can expand the approach.

At Hay Group we have been working on jobs and organizations for the past 70 years. We have the data and the insight to be able to understand and help with both large-scale issues and small details. We intimately understand the link between strategy and strategic capabilities. We know how to translate strategy into skills, jobs and organizations.

But more importantly, we know how to work with you. We’ll partner with you to find the right solutions for you, and assist you in putting the 5 RightS into practice for yourself. We’ll partner with you to develop strategic workforce planning capability in your organization.

The 5 RightS approach is flexible, so we can scale what we offer to suit your individual situation. That flexibility allows us to cover one or more of these areas, and also to cover the crossover between these dimensions. It also gives concrete and proven results.


definition: the required number of staff for the jobs

that are needed to achieve the strategic goals efficiently and effectively.

the right sizeSome companies will need more people to achieve their goals. They will have to expand their workforce to process their additional workload in the future. Others will reduce their workforce to lock in productivity gains and respond to shifting market conditions. In fact, most companies experience these two situations at the same time in different divisions.

When you optimize your workforce, you need a dynamic process to respond to whatever changes you experience – from new technology to competitive pressures. You have to constantly reevaluate what the right size is. We’ll help you develop systems to make sure you know what that size should be and that you consistently reach the right size.

We can help you tie your staffing decisions to your strategy and your operational constraints. This means that if you’re reducing your staff, you can do it in a way that protects your core strategic capabilities, making your company both leaner and stronger. And if you’re increasing your workforce, you’re building up the capabilities that support your strategy.

What should you be asking?• Istheworkloadsignificantly

increasing or decreasing?• Aretheredisruptionsinthe

environment that will impact staffing needs?

• Aretheremajorpeopleshortagesin any critical areas, today or tomorrow?

• Isthereanyroomtoreduceyourworkforce in any areas?

• Doesitmakesensetooutsourcenon-core business processes? Is technology leading to more changes or causing issues with productivity?

• Arenewtechnologiescreatingchanges in your structure or in your productivity? This can dramatically change the number of people that you need. Are you ready?


Their situationAt one of the largest delivery firms in the world, Internet competition dramatically altered the sales process away from letters and towards parcels. With a cost structure driven largely by labor costs, it was becoming clear that our client’s profitability would continue to be squeezed in the future. The question was what staffing level the company should adopt in the next 5 to 10 years to adapt to this change in market conditions.

Our client needed a way to assess what workforce reductions it needed to make, and then to make sure the remaining workforce was best able to achieve its goals.

Our solutionWe identified activity drivers, established productivity benchmarks and then helped our client to create an activity forecast model fed by different scenarios. This was then refined to take regional and local differences into account. In parallel we created a model to project pension and retirement healthcare obligations under the different scenarios, integrating funding data. We looked at assumptions around normal attrition and validated them, then developed projections assuming a higher rate of attrition driven by accelerated retirement programs.

We concluded that the company needed to reduce its workforce by 180,000 over the next four years and we identified where these reductions should be distributed regionally. Our projects helped make this process smoother, using voluntary retirement incentives and ensuring that financial targets would be met.

we concluded that the company needed to reduce its workforce by 180,000 over the next four years and we identified where these reductions should be distributed regionally.

case study


the right skills

definition:clarity about the capabilities that are

necessary and pivotal to meet future goals and bridge current gaps.

Strategic capabilities are the set of skills you need to successfully implement your strategy. By nature they vary by sector. In retail, merchandising is critical. Compliance is key in banking as regulators exert more pressure. Oil exploration needs project management. IT needs cryptography experts. In life sciences, bioinformatics is essential. When an organization has many different functions and new ones in the pipeline, it can be difficult to determine which ones really matter. You may end up spending money in areas that aren’t critical, while experiencing a skill shortage elsewhere.

Identifying the skills that underpin strategic capabilities is the key to translating strategy into people requirements and converting business models into skills. Leaders and managers have a good sense of the skills required in the future to sustain and develop their operations. But this information often disappears in the fog of business war. There’s little incentive to focus on long-term needs when the pressure is on quarterly profits.

Thanks to our catalogue of job families and our deep understanding of strategic capabilities across many industries, we can help you identify the right skills for your business. We go beyond the mere technical and functional skills, as behavioral skills also matter. For example, because most research is now conducted in teams, you want

your scientists to have a collaborative mindset. We also help you prioritize strategic capabilities because in an era of talent scarcity, you need to focus on skills that will truly build competitive advantage. Finally, we help you create an internal language so you can talk with business leaders in a structured way and help them flag the skills they require early on.

What should you be asking?• Howdoyourstrategyandevolving

business model impact strategic capabilities?

• Areyourtechnologicalbetssupported by an internal skill set?

• Doyouhavetherightskillstodeliver key processes in the future?

• Whatarethecriticalcapabilitiesforthe organization?

• Whatarethejobfamiliesinwhich required skill profiles will significantly change?


Their situationWorking out how to apply skills in the right way isn’t always intuitive. Sometimes, it can be about making the most of the skills you already have. A medical equipment manufacturer recently asked whether we could help improve the effectiveness of its salesforce. The complexity of the products they sell had increased in recent years – procurement was becoming even more complicated and many medical applications were unheard of ten years ago.

Our solutionWe quickly realized that the core issue was that the sales process now demanded a very high level of technical knowledge together with the ability to manage a large network of contacts with specialists on many levels, from neurosurgeons to hospital administrators. The skill set of the current salesforce (traditional salespeople with a business background) had become irrelevant. We identified new technical skills (such as a thorough understanding of imaging technology) and the behavioral skills (ability to field and manage large sales teams) needed.

When it became clear that the current salesforce could not be trained into these new skills, we developed some career-pathing options and associated development programs, for engineers that were about to be made redundant in another division. In essence, we couldn’t train the salesforce to be engineers, but we could train the engineers to be salespeople. We created a program where the engineers could upgrade their technical skills, and develop new behavioral skills critical to complex sales processes.

This led to an improvement of salesforce productivity of 40 per cent over three years, driven in part by new behaviors.

we identified new technical skills (such as a thorough understanding of imaging technology) and the behavioral skills (ability to field and manage large sales teams) needed.

case study


the right shape

definition:the right composition of workforce,

in terms of structure and purpose, as well as the appropriate

demographic mix.

The shape of your company – which functions it keeps in-house, its diversity mix, its age pyramid – tends to be the result of circumstances. However it should be managed proactively. Steve Jobs used to remark that because Apple was focused on innovation, technology and design, he didn’t want manufacturing within the firm. The shape of your company should be something you decide.

Why maintain hordes of plant workers when you know that it’s research from your labs that will make you successful? By focusing on what you want to achieve, you can change the structure and shape of your organization in order to help you achieve it. For example, if a company becomes more technology-driven, the implication is that engineers need to be more important than they were. Why focus on logistics specialists when you can outsource your supply chain and its management?

Getting the right shape is about thinking through the issues of what is core and non-core, what needs to be kept and fostered internally and what should be outsourced. It’s about turning diversity programs into a competitive advantage – because we now know that companies with a higher level of diversity perform better, are more innovative and can attract talent from a larger pool. The right shape is also about getting the right mix of thinkers and doers, of managers and experts.

With our simulation tools we’ll help you assess scenarios about demand and sales levels and options about corporate organization, so you can focus on the most important parts of your business. This approach will also allow you to make sure that you have the right level of diversity, skills and capabilities across the board.

What should you be asking?• Areyoustrongenoughinyourcore

capabilities?• Doyouwastemoneyandenergyin

peripheral capabilities?• Areyourpeopleintherightroles

and places?• Isdistributionacrossgradesinline

with organizational requirements?• Willyourworkforcehavethe

appropriate demographic structure and diversity mix?

• Doyouseeyourdiversityprogramsas a constraint or as an opportunity to become more competitive?

• Isthereanappropriatebalanceofoperations, project, development and managerial positions?


Their situationEmploying around 5,000 people in a research and development (R&D) unit, a pharmaceutical company wanted a streamlined, more efficient organization that could deal with a new model where most research would be done externally. The company’s role would now be to shop for new molecules and take over the development of clinical trials. This led to a radical rethinking of the shape of the R&D entity. In parallel, our client’s strategy called for deploying resources closely to the markets, with less focus on the US and more on Europe and China.

Our solutionWe turned this new strategy – more outsourcing and different geographical deployment – into implications for the organization’s skill map. We plotted where the employee base was today and where it would have to be under the new shape that was required. With the client we created various outsourcing scenarios and factored in different outcomes of molecule development (from failure to blockbuster). We then reviewed at what speed could the shape evolve, taking into account the availability of new talent in the labor marketplace. That allowed us to model different potential shapes depending on new organizational design and revised hiring policies.

The client was then in a position to prepare its migration to the new outsourcing model and alter elements of its strategy to make it more relevant and easier to implement.

the client was then in a position to prepare its migration to the new outsourcing model and alter elements of its strategy to make it more relevant and easier to implement.

case study


the right site

definition:availability of people with the

right capabilities at the right locations, to be able to meet changing requirements

in the future.

As companies grow and become more complex and global, there often appears to be a disconnect between where people are physically located and where they are needed. Over time, organizations’ business units have tended to create their own approaches that respond to local needs but are not necessarily in line with corporate needs.

This reflects a tendency for organizations to modify the way they work without shifting their people accordingly. For example, car manufacturers decided to increase the local content of their vehicles to better serve specific markets. However it took them time to have engineering entities in countries beyond their original home market, to take into account the requirements of customers from new markets.

Other critical parameters are the evolution of labor costs in different geographies. Companies often have local units with too many people, and others operating below critical mass requirements. And when one considers the skill sets of the local employees, the gaps become even wider.

The right shape is about ensuring that employees are distributed in an optimal way along the current and future footprint of the company.

Hay Group has always been at the vanguard of these issues. Our history is about opening new offices in new countries to anticipate the international expansion of our multinational clients.

What should you be asking?• Arepeopleindifferentjobfamilies

in the right physical location?• Dostrategicshifts(e.g.

globalization) require a different distribution of staff across regions or locations?

• Willwegetadditionalresourceswhere we need them?

• Areyoucurrentlyinahigh-costarea and should you relocate resources in cheaper areas?

• Dowehavecriticalmassintheright locations?


Their situationAn engineering firm with 15 facilities employing around 2,000 people throughout the UK was unable to cope with changes in demand. Its workforce was disengaged and management felt disempowered.

Our solutionWe analyzed the workforce composition by site, reviewing its skill sets and whether it was operating at critical mass. We realized that demand had radically shifted from where the employees were situated. With the client, we created a detailed demand model that would take into account both skills and geographies. This enabled the client to model how to organize its facilities based on different scenarios.

Ultimately, it expanded some facilities with large teams of electrical and mechanical fitters. Others were downsized but specialized to make them more efficient, for example in high voltage electronics. We also designed new contract arrangements that were better suited to staff availability and work demand. This supported negotiations with trade unions.we helped our

client identify savings of more than 15 per cent in workforce costs, which more than funded the project.

the solution also allowed them to deal with peaks of demand that were up to 30 per cent higher.

case study


definition:the current and forecast staff

cost ratio is effective, generating desired profit and growth

the right spendBy concentrating on getting the right size, skills, shape and site, you’ll be getting the spend right. It’s the culmination of the other four ‘RightS’, as you’ll be focusing your spend on the areas that make the most sense.

The right spend can also be a starting point, as cost optimization is one of the most common reasons for organizations to consider strategic workforce planning. It is based on a detailed understanding of the way demand impacts staffing levels, for direct and indirect functions. It requires thorough analyses of productivity drivers.

Concentrating on the right spend in the first place can also define the value created by a successful project, helping make the budget case. Cost optimization programs often mean reviewing desired future size, skills, shape and site.

What should you be asking?• Whatarethebenchmarksformy

people costs? How can I optimize these costs?

• Willwehavetherightstaff/costratio in the future if we continue as usual?

• Willstaffcostsriseinlinewithexpected revenues?

• Dowehavestaffintherightlocations from a cost perspective? Could we move to a more cost-effective location?


Their situationHit by the 2008 financial crisis, high costs and political troubles in its home country, a major international airline went into the red for the first time in decades. Facing a loss of over $600m, the carrier put in place a transformation initiative to bring its financial performance back on course, focusing on employee productivity and cost control.

Our solutionTo make sure decisions and new policies could be agreed quickly, we worked at two levels, running workshops with major business unit executives and also with board members.

To make the transformation as cost-effective as possible, we helped each business unit fit its manpower to the tasks it needed to deliver. We identified where it was appropriate to shift jobs to outside companies, and then made the transfer happen. We set up a subsidiary to manage contract workers, which helped to control costs and increase standards of work. Finally, we helped the airline put in place short and medium-term initiatives for reducing staff costs, including a mutual separation plan.

Over 20 years it is estimated that this program has the potential to reduce people costs by an average of 17 per cent each year, with costs down by 47 per cent after 20 years – saving the airline a possible $1.3bn in staff costs.

over 20 years it is estimated that this program has the potential to reduce people costs by an average of 17 per cent each year, with costs down by 47 per cent after 20 years – saving the airline a possible $1.3bn in staff costs.

case study


The past 20 years have seen an explosion of complexity as jobs demand skill sets that education systems and company development programs are simply not producing. It’s a far cry from the old days of apprenticeships that provided a reliable flow of talent for specific slow-changing trades.

It’s one of the key reasons why the Beveridge Curve, which has historically described an inverse relationship between unemployment and vacancy rates, has moved in a different direction, and actually been ticking up. The example opposite shows countries in the European Union, and it shows the scale of the changes since 2006.

This is the result of the ‘talent paradox’ – a skills deficit in an era of post-recession unemployment. The growing complexity of jobs means that there’s not enough talent to go around. This is not likely to correct itself any time soon.

Business cycles are also accelerating. This means more competition for those people that have the skills as well. So it’s difficult to get the right people, and there are more organizations looking for them.

This is one of the reasons that it’s so important to make sure you know what talent, skills and capabilities you actually need. Because your investment in people means more now than it ever has, and getting the right people means that you’re making decisions that make more financial sense.

the beveridge curve


this is the result of the ‘talent paradox’ – a skills deficit in an era of

post-recession unemployment.

© European Union, 1995-2015

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unemployment rate

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2.3

2.2

2.1

2.0

1.9

1.8

1.7

1.6

1.5

1.4

1.3

1.2

EU-28

45 degree slope


18

working with hay groupOne of the most important things that we’ll do in order to help you plan your workforce will be to partner with you, and learn how you do business.

We’ll learn about your values, goals, risks and challenges, as well as about your key products and customers. We’ll learn about your structure, the ways you make decisions and your key capabilities, and we’ll take into account what your in-house capabilities are and what you’ve already done in terms of workforce planning. This will allow us to custom-design the right approach for you and make sure it has maximum economic impact.

Whether you’re looking to optimize your costs now or plan more for the future (or both), our experience and methods will be able to help you make the most of what you have, and make the right plans to achieve your goals. We’ll also help you turn strategic workforce planning into a core capability for your organization.

MEGATRENDMany of the Leadership 2030 megatrends demand greater investment from organizations, at a time when margins are already facing pressure. For example, technological convergence is likely to have a big impact on the way we live as advancements in science, genetics and technology develop quickly. Organizations will need a workforce who can keep up with rapid changes in the skills and systems they need to perform e�ectively – all at a cost.

SEE MORE ON THE MEGATRENDS HERE

WE HAVE TOO MANY PEOPLE

MY MARGINS AREGETTING SQUEEZED

THE MOST POWERFUL FORECASTING TOOL AVAILABLE

we’ll learn about your values, goals, risks and challenges, as well as about your key

products and customers.Eric S Pelletier, global director strategic workforce planning

© 2015 Hay Group. All rights reserved. 19

Cost optimizationOne of the main reasons people come to us to help is when they want to optimize their costs. When they want to do this, they don’t want to just make savings – they want to make their money work better for them. They want to make sure that they keep the quality of their output (or improve it) while they save money. We can help you to do this by considering how your business operates and making recommendations. In some cases, this may mean outsourcing elements of what you do, or it may involve understanding why it is crucial to keep a particular element internal and suggesting structural changes that allow you to streamline your processes.

Workforce optimization is about increasing productivity. It’s about getting more out of what you put in. We’ll assess what’s going on with your workforce, collecting data and analyzing it to get to the heart of your current situation.

We’ll then identify a reference point, in order to work out what you could achieve, and what you should be achieving. After that, we’ll identify the gaps in your workforce, as well as the appropriate levels of productivity, figuring out where you may be concentrating too much money or time, and where you need to concentrate more.

we spend too much on people.

who are the right people?

20

Scenario planningScenario planning is more about the long-term. It’s about working out the possibilities for different structures and different approaches. It’s a way to model the consequences of different changes to the way you work.

We’ll scope out your organization and job families, giving us as much information as possible about your organization as it is now. This will help us to build up a model combining the evolution of your workforce and hypotheses of what drives your business. Based on that, we’ll simulate various scenarios and test assumptions and policies, to show what the likely outcomes are.

To create these models, we use Dynaplan, one of the most powerful forecasting tools when it comes to future planning. You can use a huge amount of variables and hypotheses over different time periods to get the most relevant simulations of your workforce’s future, in all its

dimensions. That data and insight will be wrapped in bespoke interactive reports that are easy to understand. Dynaplan provides graphic insights you can take to the boardroom.

We won’t stop there, either. We’ll work closely with you while you make the changes to your business, and we’ll be around to make sure it rolls out and happens in the right way. We’ll pass on our learning as well, so you can maintain and support your plan in a way that works for you. We’ll also help you build your own strategic capability.

The result is an efficient and effective workforce that’s closely tied to your business strategy and improves your performance. It’s a clear framework for your workforce planning that will help you get the best out of recruitment, selection and talent development.

It will make sure you’ve got the right workforce now and for the future.

my business model is changing

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organizations realize their potential.

We have over 4000 employees working in 86 offices in 49 countries. Our insight is supported by robust data from over 125 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com

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strategic workforce planning - the formula for success

Documents

right people

right workforce

right skills

right cost

right shape

right size

right site

foreword people