Seeing Around Corners: Leveraging Advanced Workforce Analytics
Use advanced analytics for workforce planning and optimization, or stick with the status quo?
In these turbulent times, organizations all around the world are struggling with tough decisions about their workforces. Should they lay off more staff? Stand pat? Or crank up the recruiting machine to position themselves for the recovery and get an early jump on the competition?
Many organizations were caught off guard by the speed and severity of the downturn and are now being forced to slash their workforce with little regard for the long-term consequences. Was this situation the inevitable result of a once-in-a-lifetime economic crisis? Or could it have been avoided through better workforce planning and optimization? And most important, what can organizations do to get out of this mess and avoid running into similar problems in the future?
Here’s the debate:
|Use advanced analytics for workforce planning
Combining macro-economic data with financial and HR data on a regular basis can help you better understand the supply and demand for talent and optimize your talent spend
|Advanced workforce analytics can help you see around corners so you can set a steady course for the future and avoid the “accordion” cycle of “hire, hire, hire” followed by “fire, fire, fire.”||Although that sounds good in theory, it’s hard to be steady when the economy is on a roller coaster ride.|
|Organizations have made big investments in supply chain optimization and achieved impressive results. The workforce is an even bigger line item and deserves an approach that is just as rigorous.||It’s easier to manage widgets than people. Talent is variable and unpredictable, which makes it harder to apply rigorous analytics. All of that complexity makes effective workforce planning a monumental task that will require a fundamentally different approach.|
|Advanced workforce analytics can deliver tremendous benefits to the organization’s bottom-line.||That’s great for the organization. But if the benefits all flow through to other parts of the enterprise and don’t directly affect your department’s bottom line, then why focus on it?|
|Maintain the status quo
Your current approach to workforce planning is good enough streamlined infrastructure, reduced product complexity and new business models
|The current crisis was unavoidable and had nothing to do with inadequate workforce planning.||Although there is nothing you could have done to prevent the global economic meltdown, there are things you could have done to better manage its impact on your organization. Even more important, there are things you can do now to position your organization for the future.|
|Your traditional approach to workforce planning worked well enough in the past.||Those who do not learn from the past are doomed to repeat it. If you don’t improve your approach to workforce planning and analytics, what’s to prevent this problem from cropping up again? Also, your competitors are not standing still. Can you really afford to fall behind on talent?|
|Deploying advanced workforce analytics is complicated and expensive. Right now, you have your hands full just trying to stay afloat.||In many cases, organizations start seeing benefits and payback in less than three months. Also, advanced analytics can help inform the workforce decisions you face in the short-term by providing visibility across the enterprise and putting all executives on the same page about labor costs.|
Most organizations still rely on a decades-old approach to workforce planning. They develop hiring plans once a year based on annual business forecasts. And they implement those plans through leaders and managers who may be experts in a particular business area, but have limited insight about broader economic and talent trends.
That is one reason so many organizations were caught flat footed when the global recession hit. (And were severely punished by the capital markets because of it). Had organizations been using a more sophisticated approach to workforce planning and optimization, we believe they could have plotted a smoother course through these treacherous waters. Here are some principles that organizations should consider as they improve their workforce planning capabilities:
Look at the big picture. Few organizations routinely analyze their talent requirements and talent demand from an enterprise-wide perspective. Even fewer look beyond their four walls to understand the ebbs and flows of the global economy and talent supply. To do effective workforce planning, you need ready access to this kind of “big picture” information -- whether it comes from an in-house team of economists and demographers, or from an outside source.
Dig deeper. Strategic planning and financial data are generally too broadly aggregated to support detailed workforce planning. To make good decisions, you need in-depth information about where labor surpluses and deficits are likely to occur. You also need to understand exactly what skill sets are the most critical and hardest to come by.
Break through silos. In most cases, the data required for effective workforce planning and optimization already exists somewhere within the organization – it just needs to be located and then combined in useful ways. Typically, each department has its own unique reports and data definitions that make it hard to integrate and analyze data across organizational boundaries. To fix the problem, it’s important to get all key functions actively involved in designing the processes and systems and producing consistent data definitions.
Get the right tools. Workforce planning is primarily a business challenge, not an IT challenge. Too many organizations pin their hopes on a shiny new workforce planning system that the vendor claims can magically produce the answers they seek – only to find it just isn’t so. That said, the right technology can definitely make the process faster and easier and provide a view of the data that is more accurate and comprehensive. In particular, technology can help integrate and analyze all of an organization’s workforce planning information – including macro-economic, financial and HR data – and enable decision-makers across the enterprise to communicate and coordinate their plans.
Plan continuously. Workforce planning cannot be effectively executed as a once-a-year exercise, or as a knee-jerk response to a crisis. To reap the benefits, the analysis and plans must be revised and updated on at least a quarterly basis, preferably monthly – both in good times and bad. This way, organizations will be better positioned to look into the future and make small adjustments as needed, instead of getting frozen in place and then having to overreact when problems arise.
An improved approach to workforce planning can have a major impact on an organization’s bottom line. For example, a major U.S. bank used these principles to increase employee redeployment from 12 percent to 18 percent. This reduced the need for layoffs – as well as the need to recruit for open positions – saving the company $18 million.
A rigorous, fact-based approach to workforce planning and optimization can help an organization tackle today’s urgent cost and talent challenges more effectively. It can also help the organization position itself to outmaneuver the competition and capitalize on the recovery when the economy bounces back.
A view from the C-suite
Mike Fucci, Principal, National Managing Director, Human Capital, Deloitte Consulting LLP
In the midst of one of the most significant economic downturns in history, C-suite leaders are analyzing issues around the core of what makes their organization run – its people. In assessing an organizational strategy, it’s clear to me that investing in what the market titles “advanced workforce analytics,” enables comprehensive and successful workforce planning, which can lead to an improved bottom line.
In order to develop a meaningful and effective “talent plan,” senior executives need answers to some key questions. What are the critical talent gaps our company faces over the next few years and what programs does our company have in place to fill them? Do we know what capability gaps need to be filled? What is our company doing to retain mission-critical and high-potential talent? How do we know who they are? Robust data from software packages and traditional systems can help answer those questions, yet the concept of advanced analytics can help predict the risk long before anything happens.
Workforce analytics is a proactive, strategic way to analyze the workforce – typically, a company’s biggest investment on their balance sheet. C-suite executives should consider the following benefits as they look to improve their workforce planning capabilities:
- Improved decision-making. There is inherent strategic value to be derived from strong analytics and planning, as workforce analytics goes beyond simple reporting to forecasting, predicting, optimizing and providing key insights into how to effectively manage talent. This is critical for execs to make strategic workforce decisions that position the organization to achieve its business goals.
- Growth of profitability. C-suite executives cannot merely focus on cost cutting and expenses – which are the job basics. Survival may be all about expense management, but strategy is about growth. You need to focus on contributions that change the game, but it’s difficult to focus on those contributions if you don’t have the necessary information.
- Enhanced planning and forecasting. It’s not a strategy if there isn’t a plan and effective workforce planning requires vision and insight. This can only be achieved if you are armed with valuable information. One important tenet is that metrics highlight problems that should/could be solved today, whereas analytics identify future opportunities and challenges that organizations can prepare for.
- Effective workforce performance standards. Workforce analytics can be the driving force to help an organization develop talent strategies. One reason for its importance is that it can provide the information, analysis and knowledge necessary to allow senior management to run the business more effectively. Another value proposition is that there is more focus on improving the immediate effectiveness and efficiency of the workforce through optimization of processes.
- Identification of critical workforce segments. Another way workforce analytics can be effective is in helping companies identify critical workforce segments and how they change over time. Critical workforce segments are those groups and individuals that drive a disproportionate share of their company’s business performance and generate above-average value for customers and shareholders. For example, organizations need to know what C-level succession planning process is in place. If the bench strength isn’t already in place for the senior level executive jobs, then laying a foundation, forecasting scenarios and having a contingency plan in place to have leaders waiting in the wings, can better position you for a quick, long-term return on investment.
Adopting workforce analytics requires a deep understanding of business and the factors that impact business, the persistence to look beyond the obvious to see the relationships between metrics and a culture of continuous improvement. Workforce analytics can help organizations be prepared to deal with business situations, pre-empt adverse consequences and develop an orientation towards creating a desired future state.
A view from the oil and gas sector
Michael Boedewig, Principal, Deloitte Consulting LLP, Human Capital
For oil and gas companies, the need for improved data visibility and decision-making has never been greater. Senior management teams in the sector face a broad range of challenges, including enterprise cost reduction, safety and employee retention. In this challenging environment, workforce planning and optimization are critical to success.
Over half of all oil and gas workers are more than 45 years old. This aging workforce – caused by a low influx of new talent in the 1980s and 1990s – puts the industry under intense pressure to retain older workers. Other key challenges include: attracting and deploying the next generation of industry experts and growing a global resource pool that can meet the strong demand that is expected when commodity prices shoot up again. Tackling these challenges is more complex than simply matching workforce supply with workforce demand. For example, our recent research shows that Gen Y workers in the oil and gas industry are markedly different than in other industries, particularly in terms of loyalty, interest in direct interaction with executives and desire for advancement.
As oil and gas companies manage through the downturn, they are keeping a steady eye on the future. They know that when commodity prices return, they must be ready to deploy resources to whatever remote location holds the greatest promise. That’s why many organizations are using the downturn as an opportunity to gain a competitive edge on talent. Active workforce planning and analytics are essential in this regard. Companies with timely access to external macro-economic data and detailed internal data are likely to have a distinct advantage in the talent marketplace.
That said, there are a number of companies that believe the talent shortage is no longer a major issue and have put workforce planning on the back burner. They argue that the sharp drop in oil and gas prices has led to reduced capital investment and exploration, thereby reducing the demand for talent. They also argue that many older workers will be forced to stay in the workforce longer because their retirement nest egg has been ravaged by precipitous declines in stock prices and home values.
Those arguments might be true in the short term. But over the long term, nothing has really changed. In the oil and gas sector, 60 percent of the current workforce will be eligible for retirement within the next 10 years. Also, there continues to be a strong need for people with global experience, and with skills in new areas such as deep sea drilling. Meanwhile, engineering enrollment at universities continues to decline. Although reduced oil and gas investment and deferred retirements might ease the pain of the talent shortage for awhile, eventually the economy will recover and demand for talent will once again outstrip supply. To position themselves for long-term growth and success, oil and gas companies should use the downturn as a catalyst to improve their workforce analytics and develop more effective workforce plans.
A view from the federal government sector
Maria Grant, Principal, Deloitte Consulting LLP, Human Capital
With the retirement of the “Baby-Boomer” generation, many industry sectors will be heavily affected by the loss of talent and institutional knowledge – but none more so than the Federal government. The Federal government’s workforce is rapidly aging, with 60 percent more than 45 years old and only an estimated 3 percent under the age of 25. These trends, along with a shortage of critical talent and a need for new skill sets, have prompted several agencies to begin talent management efforts – specifically workforce planning, succession planning and recruitment. With the 2009 stimulus package and increased awareness of the importance of strategic HR, even more Federal agencies are poised to initiate talent management initiatives. But how do they know where to invest time and resources to ensure the challenges associated with the retirement wave and shrinking labor pool can be properly addressed?
Workforce analytics can be the driving force to help agencies develop and implement targeted talent strategies and solutions to eliminate wasteful redundancy in Federal programs. One reason for its importance is that it can provide the information, analysis and knowledge necessary to enable senior leadership to run the organization more effectively. For example, many Federal agencies understand that because of the current economic conditions, many employees projected to retire are actually not retiring. But the critical question is how long are they likely to stay past their standard retirement date? Workforce analytics can help answer this question – and many more – allowing senior leadership to make more informed decisions about their talent management strategy.
In addition, workforce analytics can provide deep insights about talent supply and demand by facilitating the analysis of current and historical data and trends. Understanding historical trends, internally and externally, can help improve an agency’s planning and forecasting process as well as its workforce allocation, deployment and performance. Workforce trends analysis becomes even more important when agencies need to improve how they address high turnover among critical occupations and to develop targeted retention strategies in order to sustain operational efficiency and performance.
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