Strategic Workforce Planning

Transcription

1 yy Strategic Workforce Planning Winning Scenarios for Uncertain Times January 2010 Mollie Lombardi, Justin Bourke

2 Page 2 Executive Summary Workforce planning, the systematic approach of aligning business strategy, human capital strategy, and budgets in order to ensure that talent with the right skills and competencies are in place to support anticipated and unanticipated future business scenarios, is a hot topic for companies today. In this study, Aberdeen surveyed executives from over 240 organizations, to understand how they go about managing workforce needs in alignment with strategic priorities. This report outlines the strategies, processes, tools, and capabilities that organizations are putting in place to achieve the greatest returns on workforce planning efforts. Research Benchmark Aberdeen s Research Benchmarks provide an indepth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations Best-in-Class Performance Aberdeen used the following three key performance criteria to distinguish Best-in-Class companies: 13% decrease in key talent turnover in the past 12 months 53% of key positions have at least one ready and willing successor identified 90% of divisions have workforce plans in place Competitive Maturity Assessment Survey results show that the firms enjoying Best-in-Class performance shared several common characteristics, including: Involvement at the highest levels of executive management, including the CEO and Board of Directors, with workforce planning initiatives The ability to define and screen against competencies required for future business success The tools to integrate employee data with financial, customer, and other data to create a comprehensive view of the workforce Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must: Formalize workforce planning efforts and create a mindset of "no business plan without a talent plan" Hold the business accountable for creating, maintaining, and evaluating the results of workforce planning, with the support and collaboration of HR Lengthen the time horizon for talent planning to move beyond scheduling and succession and truly manage workforce related risk "As budgets tighten and productivity expectations continue to rise, we are being asked to do more with fewer people. It is important for us to know both what our workload is and the staff required to complete it, both short and long term." ~ VP of Operations, Telecommunications Company

3 Page 3 Table of Contents Executive Summary...2 Best-in-Class Performance...2 Competitive Maturity Assessment...2 Required Actions...2 Chapter One: Benchmarking the Best-in-Class...4 Business Context...4 The Maturity Class Framework...6 The Best-in-Class PACE Model...7 Best-in-Class Strategies...7 Chapter Two: Benchmarking Requirements for Success...13 Competitive Assessment...14 Capabilities and Enablers...15 Chapter Three: Required Actions...22 Laggard Steps to Success...22 Industry Average Steps to Success...22 Best-in-Class Steps to Success...23 Appendix A: Research Methodology...25 Appendix B: Related Aberdeen Research...27 Figures Figure 1: Pressures Putting a Focus on Workforce Planning...4 Figure 2: Internal Challenges to be Addressed by Workforce Planning...5 Figure 3: Top Strategies...8 Figure 4: Best-in-Class view of Top Pressures...8 Figure 5: Most Important Uses of Competencies...10 Figure 6: Results of a Collaborative Workforce Planning Process...11 Figure 7: Profit per FTE by Workforce Planning Structure...12 Figure 8: Ownership of Workforce Planning Efforts...16 Figure 9: Manual vs. Automated Workforce Planning...18 Figure 10: Workforce Planning Integrates Data from Talent Processes...20 Figure 11: Workforce Planning Integrates Data from the Business...21 Tables Table 1: Top Performers Earn Best-in-Class Status...6 Table 2: The Best-in-Class PACE Framework...7 Table 3: The Competitive Framework...14 Table 4: Workforce Planning Outputs...17 Table 5: The PACE Framework Key...26 Table 6: The Competitive Framework Key...26 Table 7: The Relationship Between PACE and the Competitive Framework...26

4 Page 4 Chapter One: Benchmarking the Best-in-Class Business Context The myriad opportunities, challenges, and uncertainties in the current economy have given both individuals and organizations much reason to pause and take stock. Many are calling into question past decisions, wondering what went wrong and trying to hedge against similar results in the future. But regardless of the past, the only way to move forward is to look to the future and put into place the plans that we think will best position us for recovery and growth, as well as to adapt and capitalize on the inevitable uncertainties that await in the years to come. In order to do this, both individuals and companies are realizing that they need to think about how they plan for the future in new ways. Fast Facts 64% of organizations expect their efforts for workforce planning to increase in 2010 Failing to Plan is Planning to Fail Aberdeen's Economic Outlook for 2010 Analyst Insight found that the number one strategy to support growth in 2010 is to focus on improving business execution, and that execution will require a strong alignment between the skills and capabilities within the organization and the needs of the business. Combined with the economic realities of today's marketplace, organizations are also facing a shrinking labor pool due to the aging workforce and a rapidly changing landscape of both customers and competitors. These issues were all found to be key drivers pushing organizations to look at workforce planning today (Figure 1). Figure 1: Pressures Putting a Focus on Workforce Planning 45% 42% Percentage of Respondents, n=246 40% 35% 30% 25% 20% 15% 10% 5% 36% 35% 32% 31% 0% Aging/retiring workforce Economic uncertainty forcing more attention on longer term Economic climate Rapidly changing forcing business companies to do landscape more with less Changing customer demands

5 Page 5 For most organizations, addressing these concerns will require thinking differently about how to ensure that the right people and skills are in place to execute on strategic plans. This mindset puts the ideas of scenario planning, gap analysis and workforce planning front and center. And it's not surprising that 64% of organizations surveyed for this study indicated that they expect organizational efforts in workforce planning to increase. While the majority (58%) of companies surveyed indicated that workforce planning efforts were more focused on the short term (three to 18 months), today's challenges require that organizations must look beyond immediate headcount or hiring needs and plan for future workforce needs in terms of unique employee attributes and position requirements. If undertaken effectively, this ability can be a key competitive advantage, resulting in an organization s ability to model future states and align organizational capabilities, as well as follow through on the strategy needed to support these. Workforce Challenges are Business Challenges Four of the five top pressures identified as key drivers of workforce planning are also business challenges; ones focused on the economy's impact on the organization and changes in the marketplace. And organizations are realizing that the workforce must play a critical role in meeting these challenges. If there were ever a time when talent leaders need to step up to the plate and bring their deep knowledge of talent practices together with the extensive talent data they have collected to the business planning decision process, that time is now. Figure 2 shows the top internal challenges that organizations are seeking to address with workforce planning efforts, and they echo the external pressures. Definitions Long-term or strategic workforce planning: strategically focused planning that looks out 18 months or longer to align business demand for specific skills, capabilities and job roles with the available supply of talent both internally and externally in the marketplace Short-term workforce planning: more operationally focused planning that looks three to 18 months into the future to understand the volume of talent demand and plan for staffing to support near-term growth Figure 2: Internal Challenges to be Addressed by Workforce Planning 45% 42% 40% Percentage of Respondents, n=246 35% 30% 25% 20% 15% 10% 5% 32% 30% 29% 27% 0% Retention of key talent Changes to current business model Loss of key talent to retirement Need to shift organizational culture Career pathing / internal mobility of workers

6 Page 6 Strategic workforce planning that really looks beyond just individuals and focuses on understanding what types of skills, capabilities, and talents are required based on future business needs can have a huge impact on the ability to execute a new business model or shift the culture to better respond to the marketplace. While the need to impact retention is still widely felt as a driver of workforce planning efforts, an increasing number of organizations are really seeing how workforce planning can shift the organizational culture by changing the profile of talent in the company through selection and development. If a business is going to change how it goes to market or serves its customers without also planning for the type of talent required by that shift, the ability to adapt to that change and achieve longer-term success will be incredibly difficult. In the next section of this report we will look at how organizations are bringing together the skills, data and understanding required to create actionable, meaningful workforce plans that can drive the business forward, and have an impact on both talent and operational metrics. The Maturity Class Framework Aberdeen used three key performance criteria to distinguish the Best-in- Class from Industry Average and Laggard organizations: Turnover of key talent. Defined as the turnover among individuals rated has high performing / high potential, or in roles critical to the delivery of goods or services to customers. This metric was rated as the most important metric to quantify the impact of workforce planning by survey respondents, and also addresses the top internal challenge identified. Leadership bench strength. Defined as the percentage of key roles for which one or more ready and willing successors have been identified. This metric speaks to ensuring organizational continuity, as well as addressing concerns around career pathing and internal mobility that were identified as key issues for Best-in-Class organizations (discussed later in this chapter). Percentage of divisions that have workforce plans in place. In order to be Best-in-Class in workforce planning, it is important to put it into practice by creating and maintaining workforce plans within the organization. Table 1: Top Performers Earn Best-in-Class Status Definition of Maturity Class Best-in-Class: Top 20% of aggregate performance scorers Mean Class Performance 13% decrease in key talent turnover in the past 12 months 53% of key positions have at least one ready and willing successor identified 90% of divisions have workforce plans in place

7 Page 7 Definition of Maturity Class Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers The Best-in-Class PACE Model Mean Class Performance 7% decrease in key talent turnover in the past 12 months 29% of key positions have at least one ready and willing successor identified 43% of divisions have workforce plans in place 13% increase in key talent turnover in the past 12 months 15% of key positions have at least one ready and willing successor identified 13% of divisions have workforce plans in place Using workforce planning to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as follows: Aligning business and talent leadership to identify gaps between the current workforce, and the skills and behaviors needed to meet customer and organizational needs Integrating data and processes to take a comprehensive view of the workforce Surfacing and visualizing data to analyze current performance and future scenarios in order to guide planning efforts Table 2: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Rapidly changing business landscape Identify gaps between current workforce skills (supply) and anticipated future business requirements (demand) Integrate workforce planning with business planning and financial planning cycles Best-in-Class Strategies Results of workforce planning efforts are shared with CEO Executive-level buy-in or support for workforce planning Employees understand how their individual performance affects organizational goals Process in place to identify highperforming and high-potential employees Workforce planning strategy is integrated with company's strategic plan Given the rapidly changing marketplace, shifting demographics, and economic concerns that are all driving organizations to get a better handle on workforce needs, it makes sense that the top strategies being put in place are all about understanding and bridging those gaps between the Competency-based assessments Graphical data display tools Skills-based assessments Behavioral assessments Workforce planning software Competency management software Scenario planning / modeling software Workforce analytics software Advanced (predictive) analytics

8 Page 8 future of the organization and the current talent reality within the company (Figure 3). Figure 3: Top Strategies Percentage of Respondents, n=246 60% 50% 40% 30% 20% 10% 0% 53% 47% Identify gaps between current workforce skills and anticipated future requirements 42% 29% Integrate workforce planning with business and financial planning cycles 26% 20% Align training and development with business strategy Best in Class 21% All Others 30% Identify and develop successors for key job roles across the company "Strong integration of workforce planning and business objectives have driven required proactive staffing conversations and actions." ~ Director, Utilities Company These Best-in-Class strategies reflect an important fundamental difference between how top performing companies view the marketplace as compared to the combined Industry Average and Laggard (all others). As shown in Figure 1 of this report, the aging workforce ranked and the rapidly changing business landscape ranked first and fourth (respectively) as the predominant pressures driving Aberdeen's aggregate survey sample to pursue workforce planning. However, among Best-in-Class companies these perceptions are exactly opposite (Figure 4). Figure 4: Best-in-Class view of Top Pressures 50% Best in Class All Others 47% Percentage of Respondents, n=246 45% 40% 35% 30% 25% 20% 15% 10% 5% 42% 40% 30% 29% 35% 36% 28% 0% Rapidly changing business landscape Changing customer requirements Economic uncertainty Aging/retiring workforce

9 Page 9 Best-in-Class organizations are clearly focused on what's going on in the competitive landscape and the changing needs of customers as drivers for workforce planning, and this influences their workforce planning strategies. So it makes sense that the strategies Best-in-Class companies are putting in place are all about identifying the gaps, integrating the planning processes, and aligning development and succession efforts. These strategies look out to the needs of the business first, and then back to fill in those needs with the right individuals. It's not necessarily about just replicating current top performers or figuring out what roles an individual is right for next. It's about understanding the vision for the future of the business and working back from that to understand what skills, how many people, and what competencies are required to get the organization there. It's not about creating a talent plan or career plans in a vacuum, it's about understanding where the business is going and enabling that vision. If the first rule of real estate is location, location, location, the first rule of workforce planning is business, business, business. Managing Gaps through Managing Competencies Identifying these gaps is the top strategy identified by Best-in-Class organizations for workforce planning, and competencies can play a large role in helping to define, assess, and then plan to bridge any gaps between what types of employees will be needed to drive the business forward in the future and the talent available today. Without a clear picture of what skills will be needed, organizations won't be able to develop those skills internally or shape hiring profiles to address these needs. Competency assessments were the number one enabler of workforce planning identified by Best-in- Class organizations, demonstrating the importance of assessing against an agreed-to definition of what success looks like now and in the future. In Aberdeen's December 2009 research on Competency Management the number one pressure pushing organizations to look at competency management was the need to take a longer-term view of talent. Organizations must walk this line between ensuring they have the talent to deliver on commitments today, while also looking to the future to make sure they understand what will be required by changing strategies and changing market conditions. That particular research also found that one of the main goals for organizational use of competencies was to ensure a linkage between the priorities of the business and the individuals being hired, promoted and developed (Figure 5).

10 Page 10 Figure 5: Most Important Uses of Competencies percent of respondents, n= Best-in-Class All Others Screening to find better candidates Evaluating promotion readiness of employees Identifying gaps betw een business demand and talent supply Rated on a scale of 1 to 5 where 5 = most important and 1 = not important No Business Plan without a Talent Plan Best-in-Class organizations are 58% more likely to define current workforce planning efforts as strategic - that is planning that looks out 18 months or longer to align business demand for specific skills, capabilities and job roles with the available supply of talent both internally and externally in the marketplace. Creating an organizational mindset around no business plan without a talent plan is key to ensuring that organizations can sustain success. Organizations achieving demonstrable business results from workforce planning efforts are working collaboratively between HR and the business to understand the needs and growth goals. Where this research found workforce planning execution to be collaborative between HR and line of business, impressive business results were also present (Figure 6). Collaborative workforce planning has been defined in this instance as the presence of all three of the following elements: HR and hiring managers collaborate to create workforce plans Executive-level buy-in or support for workforce planning Managers are held accountable for creating and maintaining workforce plans)

11 Page 11 Figure 6: Results of a Collaborative Workforce Planning Process 20% 19% Collaborative Not Collaborative 18% Percentage of Respondents, n=246 16% 14% 12% 10% 8% 6% 4% 4% 13% 7% 6% 3% 3% 2% 1% 0% Customer satisfaction Customer retention Change in profit per FTE Change in revenue per FTE Over half of the organizations (56%) with each of the aforementioned three capabilities in place achieved Best-in-Class designation. These capabilities highlight the importance of collaboration between HR and the business in workforce planning, and will be discussed in greater detail later in this report. Aberdeen Insights Strategy When implementing a workforce planning strategy, two of the most important questions that must be considered are how to structure and manage it. This research looked at the impact of three possibilities: A centralized approach where a center of excellence performs workforce planning for the rest of the organization A regional or functional approach where decisions are made in the business with support and guidance from a center of excellence A decentralized approach where individual managers are given workforce planning accountability In our analysis, organizations that utilized a regional or a decentralized, manager owned approach had the greatest impact on profit per full-time equivalent (Figure 7). continued

12 Page 12 Aberdeen Insights Strategy Companies achieving performance gains with either a regional or a decentralized, manager-owned workforce planning strategy are doing so because there is accountability for workforce planning throughout line of business management positions, a capability that is harder to achieve when the structure places ownership for workforce planning in the hands of a group that is separate from line of business management. Figure 7: Profit per FTE by Workforce Planning Structure 10% 9% Percentage of Respondents, n=246 8% 7% 6% 5% 4% 3% 2% 6% 5% 1% 0% 1% Fully Centralized Regional / Functional / Divisional Decentralized This is instrumental in differentiating between companies that simply have workforce plans, and those that have workforce plans that work. By having individuals who are directly responsible for company revenue taking on accountability for workforce planning, it ensures that all decision-making is done with the greater business context in mind. While some Best-in-Class companies (20%) use a fully centralized structure and are managed to achieve high levels of business performance, this may be because of increased senior management buy-in to workforce planning that allows for greater collaboration in workforce planning even when it's owned in a centralized body. If organizations have strong enough leadership and line of business buy-in to the importance of workforce planning, performance results can be achieved with any management structure. In the next chapter, we will see what the top performers are doing to achieve these gains.

13 Page 13 Chapter Two: Benchmarking Requirements for Success Workforce planning can be a key differentiator for companies that want to maintain a competitive position in today's marketplace, enabling them to plan for and manage a forward looking talent strategy. Case Study Memorial Health System Based in Springfield Illinois, Memorial Health System (MHS) owns and operates 3 hospitals, a mental health center and other affiliates with a total of over 5,800 employees. As a player in the health care field, MHS is facing the same challenges of finding highly skilled workers as many other hospitals and medical centers. But due to their forward looking workforce plans, they have been able to seize on opportunities created by the current economic conditions to build out their future workforce. Armed with the knowledge that many newly graduating students were faced with fewer job opportunities due to cutbacks in many healthcare facilities, and with the knowledge of their own growth goals, MHS changed the way it thought about cultivating its future workforce Jennie Collings, MHS Director of Workforce Planning and Development said, we previously had reactive approach, but with the opportunity that we were facing we determined that it was time to take a more holistic and future-oriented approach. A goal was established to use workforce planning to drive how they developed relationships with sources of their future workforce healthcare occupations schools that will be graduating their future employees. In order to accomplish this, though, they first had to understand what their needs would be. This was done by identifying and answering a series of important questions: What is the current state of our workforce from a demographic and skills standpoint? What does the forecast and budget for talent look like in the future? What types of skills will be required of our future hires? And what will be the consequences be for our organization if no action is taken? By answering these questions, MHS is taking an active role in helping to create their future workforce. They provide clinical faculty for nursing institutions; continue to find ways to expand opportunities for clinical experiences for students; they provide mentoring and tutoring work in local universities; and they partnered with other community organizations to secure grant funding to help support new faculty in surrounding schools, allowing them to serve a greater number of aspiring healthcare professionals. And as a result of all of this, they are creating a pool of potential employees that fit their future workforce needs, while simultaneously building their brand as an employer among them. continued Fast Facts 86% of Best-in-Class organizations have executive level buy-in for workforce planning efforts, and are 54% more likely than all others to do so 28% of Best-in-Class organizations hold the CEO or Board of Directors primarily accountable for workforce planning, versus 13% of all others

14 Page 14 Case Study Memorial Health System With some experience under their belt, MHS already has plans in place to further expand their workforce planning strategy, including creating an employee directory to quickly access employee skill sets and manage movement within the system s various locations. By looking out to assess their future needs, and finding ways to bridge the gaps between those needs and the skills of their current employees and those available in the talent marketplace, MHS is being proactive in the effort to ensure that their forward looking workforce needs will be met. Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of the appropriate tools and the effective deployment of those tools); and (5) performance management (the ability of the organization to measure its results to improve its business). These characteristics (identified in Table 3) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics. Table 3: The Competitive Framework Best-in-Class Average Laggards Process in place to identify high-performing and highpotential employees Process 77% 55% 37% Managers are held accountable for creating and maintaining workforce plans 62% 25% 16% Organization Executive-level buy-in or support for workforce planning 86% 57% 52% Results of workforce planning efforts are shared with CEO Knowledge 85% 54% 56% Line of business executives have visibility into HR data to enable strategic planning and decisions 57% 38% 27%

15 Page 15 Technology Performance Best-in-Class Average Laggards Workforce planning technology currently in use: 57% Competencybased assessments 55% Graphical data display tools 48% Skills-based assessments 28% Workforce planning software 24% Scenario planning / modeling software Capabilities and Enablers 36% Competencybased assessments 27% Graphical data display tools 38% Skills-based assessments 11% Workforce planning software 10% Scenario planning / modeling software 34% Competencybased assessments 29% Graphical data display tools 41% Skills-based assessments 16% Workforce planning software 13% Scenario planning / modeling software Results and related decisions of workforce planning are reviewed at least quarterly 55% 20% 10% Organizations that are achieving the most impressive results from workforce planning efforts are those that truly view it as collaboration between HR and the business, and are making it a part of the overall business process. The capabilities and enablers that we see being most prevalent among Best-in-Class organizations speak to how organizations are ensuring they have the processes and tools in place to facilitate this collaboration. As noted in Chapter One, organizations with a combination of key enablers that speak to this mindset - collaboration between HR and hiring managers to create workforce plans, executive-level buy-in or support for workforce planning, and accountability among managers for executing workforce plans - are able to demonstrate a greater impact on key metrics than those that do not have all of these capabilities in place. This section of the report will look in more depth at these and other key characteristics that are driving organizational performance. "We have been able to make a clear statement to our gen y employees that we are making an effort to provide a career path for them and focus on their development." ~ Jane Juergens, VP of HR & Talent Management, American Municipal Power, Inc. Process Throughout this report the theme of workforce planning as a business process has stood out as being essential. From a process perspective, Bestin-Class organizations are nearly two times more likely than all other organizations to hold managers accountable for creating and maintaining workforce plans. This is critical, because workforce plans are truly meant to help leaders manage the business and mitigate the workforce-dependent risks of future scenarios. When managers are not only involved, but also

16 Page 16 held accountable for creating and maintaining workforce plans, they truly take ownership and make workforce planning a part of how they manage their business. In support of this accountability and ownership, it's not surprising that at 45% adoption, Best-in-Class organizations are more than twice as likely as all other companies to have a well-defined process in place to aggregate employee data with other organizational data. HR organizations that can add value by making data accessible and usable for the business support this notion of workforce planning as a true overall business planning process. And as noted later in this chapter, the most utilized enabler for workforce planning is graphical data display tools, or dashboards, that help turn data into usable information for the business. All of these contribute to the execution of the action cited by 42% of Best-in-Class companies as one of the top two strategies for addressing workforce planning needs, integrating workforce planning with business planning and financial planning cycles. Organization The capability that was most cited by Best-in-Class companies in any category was the need for executive level buy-in or support for workforce planning, and it is indeed a key point to achieving workforce planning success. To gain this support, it may be necessary to pilot workforce planning within a sector or division. Since the business must ultimately trust and use the information provided by workforce planning, it will prove very difficult if they are not bought in to the concept. This research also showed that Best-in-Class organizations were much more likely to have senior executives and even the board of directors holding ultimate ownership of workforce planning efforts (Figure 8). And Best-in-Class companies are more likely to share ownership across HR and the c-suite, while all other companies are more likely to isolate workforce planning within HR. "Workforce planning was being done in our organization on an ad-hoc basis. We felt it was important to develop a more formal and consistent approach in order to address future demographic concerns such as a retirement vulnerable workforce and changing skill requirements." ~ Manager of HR, Full-service Communications Provider Figure 8: Ownership of Workforce Planning Efforts 50% Best in Class All Others Percentage of Respondents, n=246 40% 30% 20% 10% 30% 42% 16% 16% 11% 12% 12% 2% 0% HR / Talent Management leadership (SVP HR, CHRO) CEO / President COO / Head of Operations Board of Directors

17 Page 17 In addition to this most-cited capability, the most differentiated capability (i.e. the one that was more likely to be cited by Best-in-Class than all others by the widest margin) was to have the workforce planning strategy integrated with the company's strategic plan. The vast majority, 88%, of Best-in-Class organizations indicate they utilize the company strategic plan as one of the inputs into the workforce planning process. This is important to support not only integration, but another capability citied by 57% of Bestin-Class companies - screening high-potential employees continually against a competency framework that reflects the organization's evolving business needs. Best-in-Class companies are more than twice as likely as all others to use this forward looking data to screen employees against, ensuring that the organization can address not only current talent needs, but the evolving needs of the future. Knowledge Management Knowledge management capabilities are all about how information and knowledge is shared across the organization. For workforce planning, the ability to share and surface data so it's usable for planning purposes and enables better decision-making is a key point of differentiation among top performers. To this point, 57% of Best-in-Class companies indicate they provide visibility into HR data to enable strategic planning and decisions versus only 27% of Laggards. The insight at the end of this chapter highlights the variety of data sources that are integrated into workforce planning at Best-in-Class companies. Not only is it important to understand the sources of information flowing into the workforce planning process, but it is just as important to know what information is coming out of it. Table 4 shows the type of information that is surfaced as part of the workforce planning process at Best-in-Class organizations. Table 4: Workforce Planning Outputs Best-in- Class All Others Develop profiles for ideal candidates and new job roles based on forward looking business strategy 64% 52% Identify ready and willing successors for key roles 64% 46% Estimate the percentage of the workforce that will be retiring in each calendar year 60% 53% Identify flight risks (individuals who may be thinking of leaving the organization) 48% 25% Estimate the costs of replacing key individuals within the organization 40% 33% Better information that business leaders can act on to impact retention, succession and talent acquisition, as well as shape the future skills and

18 Page 18 competency profiles of the organization, is just one result of top-performing workforce planning efforts. Technology Workforce planning is a process, and does not necessarily require the use of technology tools. However, Aberdeen's research indicates that organizations with at least a partially automated workforce planning process are more than 1.5 times as likely to be Best-in-Class. In contrast, all others are more than twice as likely as Best-in-Class to describe their workforce planning process as entirely manual (Figure 9). Figure 9: Manual vs. Automated Workforce Planning 80% 76% Best in Class All Others 70% Percentage of Respondents, n=246 60% 50% 40% 30% 20% 10% 47% 24% 52% 0% At least partially automated Manual and spreadsheet intensive It's also important to note the value of several software enablers, including workforce planning software, scenario planning software, and predictive analytics software. Best-in-Class companies are more than twice as likely as all others to utilize workforce planning software and / or scenario planning software than all others, and nearly four times as likely to utilize predictive analytics software. Technology plays a key role here because of the time involved with manually modeling, playing out, and aggregating the impact of multiple scenarios. Using technology to truly explore multiple scenarios, understanding most likely outcomes, and managing organizational risk are all important capabilities for organizations that want to continue to improve workforce planning efforts. In addition, competency assessments made a strong showing as an enabling technology for workforce planning. This may be because having a clear set of competencies to evaluate existing and future employees against ensures that the right talent is being hired and developed for the organizations. But organizations should ensure that the competencies they are assessing against are not based solely on what top performance looks like today.

19 Page 19 Competencies should also look to the future needs of where the business is going to facilitate workforce planning. Performance Management As with any process, it is important to not only have execution excellence when it comes to performing workforce planning, but to also measure the results of the process. Over half of Best-in-Class organizations (55%) review the results and decisions enabled by workforce planning at least quarterly. Only 20% of Industry Average and 10% of Laggards indicate the same. But it is also interesting to note that 41% of these top performers not only review the results among management teams or within the workforce planning team, but they also share them with the rest of the organization at least quarterly. Only 13% of Industry Average and Laggard organizations do so, which is another demonstration of how Best-in-Class companies are truly integrating the act of workforce planning, as well as its results, with the dayto-day work of the business. "Our workforce planning strategy has enabled communication to higher management of the long-term outcomes of short-term workforce policy decisions." ~ Director of Human Resources, Defense Organization

20 Page 20 Aberdeen Insights Technology Aberdeen's September 2009 study, Intelligent HCM: Workforce Analytics Drive Profit and Performance, found that Best-in-Class organizations are leveraging the ability to integrate human capital and other organizational data in order to create a comprehensive picture of the current state and a deep understanding of future business plans and requirements, while achieving substantial gains in profitability and employee performance. Findings from this study also support the need to integrate data from across the business to support workforce planning. Best-in-Class companies are far more likely to integrate data from a variety of talent processes into their workforce planning efforts (Figure 10). Figure 10: Workforce Planning Integrates Data from Talent Processes 60% Best in Class 54% 54% 54% 53% All Others Percentage of Respondents, n=246 50% 40% 30% 20% 10% 35% 32% 19% 31% 44% 24% 0% Talent acquisition / recruiting Labor budgeting Succession planning Employee performance management Competency and assessments continued

21 Page 21 Aberdeen Insights Technology And top performing organizations are also integrating data from other parts of the business, including operations, IT, finance and customer data (Figure 11). The importance of this integration is reflected in the data presented in Chapter One of this report - where 42% of the Best-in-Class indicated that a top-two strategic action to support workforce planning is integrating workforce planning with business and financial planning cycles. Being able to share data across talent processes is fundamental to integrating workforce planning with business planning, and makes it far more likely that workforce plans will be realistic and actionable for the business. Figure 11: Workforce Planning Integrates Data from the Business Percentage of Respondents, n=246 80% 70% 60% 50% 40% 30% 20% 10% 71% 42% 64% 36% 55% 22% Best in Class 50% All Others 28% 0% Operations Finance IT Strategic planning office When workforce data is combined with other organizational data in order to create workforce plans that speak to the challenges and risks the organization is facing, companies are able to achieve far stronger results from workforce plans.

22 Page 22 Chapter Three: Required Actions Whether a company is trying to move its performance in workforce planning from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements: Laggard Steps to Success Formalize efforts, start small if needed, and prove the value of workforce planning to the business. Organizations that have formalized workforce planning efforts, even if it's only in some parts of the organization, saw a 7% year-over-year decrease in turnover among key talent and a 4% year-over-year increase in profit per full time equivalent, as compared to 4% and 1% respectively among organizations with informal or ad hoc workforce planning efforts. Despite this, only 22% of Laggard organizations have a formal workforce planning strategy in any part of the business. Because workforce planning is most effective when it's a collaborative process between HR and the business, if the business isn't on board then those leading workforce planning must work to get them there. Even if planning efforts aren't covering the entire organization yet, formalizing efforts on workforce planning, and pulling it into the light from the pockets where it may be residing within the organization can start to yield positive proof of concept points. Focus on making workforce planning a collaborative process. Only 27% of Laggard organizations currently indicate that HR and hiring managers collaborate to create workforce plans, as compared to 63% of Best-in-Class companies. If ownership for workforce plans isn't instilled in the business from the start, maintaining and executing on the results of these plans will be much more difficult. As discussed in Chapter One, organizations where the business is held accountable for creating workforce plans yet is supported through either a center of excellence or other entity that provides workforce planning skills, are more likely to create an impact on key business performance metrics. Provide visibility into HR data for the business. Twenty-nine percent (29%) of Laggard organizations indicate they utilize graphical data display tools to share information with the organization. This capability was the number two most frequently cited enabler by Best-in-Class organizations. In addition, whether through tools like dashboards, or any other means, Best-in-Class companies are more than twice as likely to have this capability in place. If the business is to create accurate plans, it needs visibility into both the current workforce as well as external HR data to guide decision making and help manage workforce related risk for the company. Industry Average Steps to Success Integrate workforce planning strategy with the company's strategic plan. Only 30% of Industry Average organizations have Fast Facts 71% of the Best-in-Class integrate a workforce planning strategy with the company's strategic planning process

23 Page 23 this capability in place, compared to 71% of the Best-in-Class. When workforce plans are a part of organizational plans, organizations can begin to manage the workforce related risks to the business by addressing skill or headcount shortages. Industry Average organizations are also less likely to be able to understand the impact of workforce events on the business, such as the cost of replacing key talent, or the flight risk of key employees. Only one quarter of Industry Average companies indicate their workforce planning process helps them understand potential employee flight risks, whereas nearly half (48%) of Best-in-Class companies indicate this ability. The loss of key talent can have a huge impact on the attainment of strategic goals, so the ability to integrate this data with business plans is a critical step to success. Aggregate employee data with other organizational data. Industry Average organizations are about half as likely as Best-in-Class organizations to integrate data from operations (71% versus 37%), IT (55% versus 23%) and finance (64% versus 34%) into workforce planning processes as Best-in-Class. Those that do integrate these three sources of data are twice as likely to achieve Best-in-Class performance. It is necessary to have a full picture of the current and future state in order to create accurate and actionable plans. Communicate results of workforce planning more widely. Just over half of Industry Average companies indicate that workforce plans are shared with the CEO, and only 20% indicate the results of workforce plans are shared with management at least quarterly. Workforce plans are not a "once and done" exercise. It's important that they live and evolve as the organization does, and that they are refreshed as conditions change, or early indicators show that certain scenarios may be becoming more or less likely. Only when plans are revisited, and the results are communicated, will they be of full value to the business. Best-in-Class Steps to Success Plan for an uncertain future through scenarios and predictive analytics. While only 24% and 19% of Best-in-Class organizations currently indicate they use scenario planning and predictive analytics tools, this usage far surpasses any other group. And 45% of these top performing companies also plan to add the capability to model talent data for strategic planning purposes. Creating workforce plans that address not just the most hoped-for or most likely futures, but that can adapt to possible changes and identify early warning signs of those scenarios playing out offer organizations more actionable information and better manage organizational risk. "Demand from customers and changing industry environment placed a premium in positioning our workforce to meet our business strategies." ~ Manager of Human Resources, Private Defense Contractor Inventory competencies in a searchable format. Assessing individuals against competencies is a top capability for all organizations. But being able to search for competencies residing in the organization by individual - whether they are currently being used in a role or not - is something that less than half (41%) of Best-

24 Page 24 in-class companies have in place. When looking to plan for the workforce of the future, organizations need to understand how to use what they have. And this becomes even more important in global companies, where the sources of talent may be dispersed and leaders may not have as much visibility into the capabilities of the existing workforce. The ability to find ways to shift the culture and adapt to changing customer needs with existing staff is especially important when hiring may be slow. View workforce planning as a tool to manage organizational change. It has been mentioned throughout this report, but one of the ways that organizations can truly help provide business value through workforce planning is by helping leaders see how it can help them manage and adapt to change. By creating a mindset where no business plan is implemented without a corresponding talent plan that addresses the volume, skills, locations and competencies of the staff required to carry it out, organizations create a valuable differentiating capability. If the company can master the tools that allow them to adapt the workforce to meet the changing demands of the business and its customers, it is a powerful force indeed. Aberdeen Insights Summary No matter where you start, bringing the benefits of workforce planning into the organization is a key to unlocking organizational success today, and planning for that success to continue into the future. By aligning job roles and the individuals filling them with the goals of the organization companies will see gains in productivity and performance. In a time when everyone has an eye on cost, and in which most companies have worked very hard to get to headcount efficiency, the only way to move the dial on performance is through alignment. Organizations are working hard to understand what it will take to execute on their business plans. But having the ability to better understand how the business can adapt should the future outlook change, and being able to better bridge the gap between future vision and the workforce of today are key benefits to workforce planning. In organizations small and large, it's virtually guaranteed that someone somewhere is thinking about these questions in relation to the company's strategic plans for the future. Calling those efforts out, providing tools, adopting processes, allowing visibility, and measuring the results will help organizations take full advantage of these benefits of workforce planning efforts. As we emerge from a year when looking out much further than the coming weeks or months were considered long-term, organizations are realizing that real workforce planning needs to take a longer view. Organizations that want to look to the future and ensure their success must create plans to bridge the gap between their business ambitions and the skills and talents of the existing workforce.

25 Page 25 Appendix A: Research Methodology Between December 2009 and January 2010, Aberdeen examined the use, the experiences, and the intentions of more than 220 enterprises pertaining to workforce planning. Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on workforce planning strategies, experiences, and results. Responding enterprises included the following: Job title: The research sample included respondents with the following job titles: C-level / President (11%); EVP / VP / Partner (12%); Director (19%); Manager (33%); Consultant (14%); and other (11%). Department / function: The research sample included respondents from the following departments or functions: Human Resources / Talent Management (54%); Sales / Marketing (9%); Corporate Management (9%); Information Technology (5%); Operations (5%); and Other (19%). Industry: The research sample included respondents from the following industries: education (4%); financial services (6%); government / public sector (15%); health care / pharmaceuticals (7%); IT / consulting services (8%); telecommunications (4%); software (4%); utilities (5%); and other (46%). Geography: The majority of respondents (68%) were from North America. Remaining respondents were from the Asia-Pacific region (14%); Europe (13%); the Middle-East / Africa (2%); and South/Central America and the Caribbean (2%). Company size: Thirty percent (30%) of respondents were from large enterprises (annual revenues above US $1 billion); 34% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 36% of respondents were from small businesses (annual revenues of $50 million or less). Headcount: Sixty-one percent (61%) of respondents were from large enterprises (headcount greater than 1,000 employees); 20% were from midsize enterprises (headcount between 101 and 1,000 employees); and 20% of respondents were from small businesses (headcount between 1 and 100 employees). Study Focus Responding executives completed an online survey that included questions designed to determine the following: The degree to which workforce planning is deployed in their operations and the financial implications of the technology The structure and effectiveness of existing workforce planning implementations Current and planned use of workforce planning software to aid operational and promotional activities The benefits, if any, that have been derived from workforce planning initiatives The study aimed to identify emerging best practices for workforce planning, and to provide a framework by which readers could assess their own management capabilities and workforce planning effectiveness.