HR’s almost nonexistent workforce planning has created our most costly business impact this century. And those billions in business damages have been created primarily over the last decade. We have had a constant mismatch between a company’s talent needs and its workforce capabilities.
The primary reason for this talent mismatch is that over the last decade, HR has made developing and utilizing an effective workforce plan its absolute lowest priority. As a result, I call HR’s most costly omission during this century “The untimely death of workforce planning.”
This is a think piece – it is designed to nudge leaders into estimating the costs of weak workforce planning.
How Weak Workforce Planning Has Cost Corporations Billions
How did HR create billions in business damage? Well, it is because, over the last decade, there has been an almost constant mismatch between a corporation’s talent needs and workforce capabilities. And that talent mismatch has occurred in almost all industries. But especially in airlines, supply chain, nursing, hospitality, and retail.
The losses were caused because corporations couldn’t meet the required up-and-down changes in their talent needs due to today’s constant and quickly shifting business cycles. And that meant that customers had to be turned away, and the development of high-margin products had to be significantly curtailed.
Those added billions in incurred costs happened in four primary “mismatch” areas. First, there is weak forecasting covering the return of customer demand and the recruiting and retention issues we are currently facing. Next, a lack of planning resulted in having too many employees. Or when corporations didn’t release surplus employees fast enough. Finally, when companies had many employees with the wrong skill sets.
Unfortunately, these multiple talent mismatch areas will continue in the immediate future. Under our VUCA volatile environment, business cycles will continue to be more volatile and shift much more frequently.
Focus On The Numerous Costly Business Impacts That Result From Weak Workforce Planning (WP)
I have found that corporate executives immediately demand a highly effective data-driven workforce planning function. That is, once executives and managers realize the many negative business impacts (and what they cost in dollars).
The 20+ problems caused by weak workforce planning are listed below, separated into two categories: business problems and HR problems.
Category #1 – The Top 10 Strategic Negative Business Impacts
This category covers the most strategic of all workforce planning problems. And the most damaging strategic planning problems are listed first under this category.
- You won’t be able to meet customer demand – if your workforce plan’s recruiting, retention, development, internal movement, employee release, and forecasting elements are not fully capable and integrated. Your corporate revenue will be reduced because you cannot offer all of the services and products that your customers demand. And that will directly lower corporate revenue.
- You won’t adequately smooth out business cycles – the primary goal of most workforce plans is to act proactively so that your organization smooths out the talent effects created when you enter a new business cycle. If you don’t adequately predict or prepare your talent inventory so that it can easily adapt to new business cycles. You will encounter numerous periods where you will have a surplus, a shortage, or employees with the wrong skills that don’t match the current business cycle.
- Your workforce won’t be agile or adaptive – the one constant factor in a VUCA world is the need to adapt and constantly “pivot” to meet changing needs. However, unless your workforce plan includes flexibility components like a contingent workforce, outsourcing, releasing surplus workers, and robotics. It is unlikely that your workforce will be able to expand and contract as fast as your business needs change.
- Your workforce won’t maximize productivity or innovation – without an effective workforce planning effort that focuses on and measures workforce productivity. The productivity of your workforce (as measured by revenue per employee) will be less than optimal. In addition, your most valuable employee output, innovation, will also be severely curtailed.
- Managers won’t be prepared for the future – unfortunately, most HR functions are focused on today’s problems. In a rapidly changing VUCA world, decision-makers will need to plan for the future. However, without accurate forecasts of the upcoming labor supply and demand and timely warnings about upcoming talent problems and opportunities. Most managers simply won’t be prepared in time to meet both upcoming and future talent needs.
- You will face many workforce surprises that could have been prevented – effective workforce plans identify likely “talent surprises” (both positive and negative). They can identify and mitigate those surprises before they grow and get out of hand. Without a “smoke detector process” in your workforce plan, you simply won’t have time to prevent serious workforce problems.
- You will miss out on many external talent opportunities – and alerts on talent problems without a plan component that actively seeks out external talent opportunities. You will miss out on many of the talent opportunities that suddenly become available when your talent competitors face a major business downturn, including a rapid stock drop, the loss of the CEO, or as a result of a recent merger, restructuring, or layoffs.
- Your WP won’t give you a competitive advantage – because one of the primary goals of the workforce plan is to provide your organization with a continuous competitive advantage over competitive firms in all areas of talent. If you don’t continually compare your workforce planning results to those of your competitors. There is a real chance that you will fall and stay behind them.
- Managers won’t be able to conduct scenario planning – one of the strongest features of workforce planning is the ability for managers to “test out” what are known as “if-then scenarios.” Unfortunately, most current workforce plans don’t currently have this capability. So that will mean that most new workforce actions will have to be initiated without pretesting.
- Without data, managers will frequently make inaccurate workforce decisions – Unfortunately, most workforce plans are full of rough guesses. When instead, in our highly volatile business world. Instead, a robust, data-driven workforce planning effort powered at least in part by machine learning is needed. Because without adequate data, managers have historically been forced to make decisions based on hunches and intuition. Unfortunately, these intuitive workforce decisions are measurably less accurate than those fully supported by data.
Category #2 – The top 10 HR functional areas that will be most impacted by weak workforce planning (WP)
In addition to the strategic impacts of weak workforce planning, most functional areas within HR will face their own workforce planning issues. Most impactful functional issues are listed first.
- Recruiting | Talent Acquisition gaps and bad timing will reduce workforce capabilities – corporate growth and productivity will dramatically be slowed if you can’t recruit enough employees into your critical jobs. Or if your new hires don’t have the “future skills” that will be required to develop and produce the company’s emerging products and services. The recruiting function will be significantly less effective if you don’t time your hiring, which mostly occurs during periods where there is a surplus in the talent marketplace. Additionally, your recruiting function must be able to ramp up or reduce your recruiting capability quickly to have more time to sell reluctant candidates effectively.
- Employer brand | A weakened external employer brand image will hurt long-term recruiting – in addition to the above short-term impacts on recruiting. Some additional long-term negative recruiting impacts will occur if your weak planning negatively damages your external brand image. For example, if candidates determine that your company’s workforce management effort is ineffective. Expect those negative impressions to be posted on company comments sites like glassdoor.com. And unfortunately, those negative comments will hurt the long-term success of your recruiting.
- Low retention | Turnover will quickly reduce the capabilities of your workforce – if your workforce plan doesn’t accurately predict future turnover rates, replacements won’t be available when needed. And if your “which employees are at risk of leaving” element of your plan is weak. You simply won’t have enough time to stop preventable turnover among your top priority “A” talent. This element is especially important in today’s world of record-high turnover.
- Redeployment | Slow internal movement will mean that many employees will be in the wrong job – even when you have the right number of employees. As job requirements and employee skills are continually changing, a significant percentage of your employees that were “in the right job” when hired. May now be in the wrong job or team due to your painfully slow and inaccurate internal movement processes.
- Diversity | Creating a diverse workforce requires a long-term data-driven process – because of the intense competition for diverse talent. You must have a data-driven long-term recruiting and retention approach to have any chance of succeeding. Unfortunately, developing a diversity talent pipeline and putting together an accurate “gap analysis” is rare in workforce planning and diversity teams..
- Development | Gaps in employee development will reduce productivity and leadership capabilities – in a rapidly changing world. Effective plans ensure continuous upskilling and development of your current workers. So, if your employee development program is not designed to upgrade the skills of your current workers to meet future needs, in that case, your productivity and innovation will be severely reduced now and in the future. And if your plan doesn’t also have effective leadership development, retention, and acquisition components. You won’t likely have the leadership bench strength you will need in the future.
- Global | A global WP effort will be necessary to lead your industry – with the current prominence of remote work and globalization. Your workforce plan must be truly global. Because without that global reach, the positive impacts of strategic workforce planning will likely be limited to your home country. Then, firms with a more global planning effort will quickly pass you in each of the talent areas.
- Assessment | Current talent will not be accurately assessed – if your workforce plan doesn’t include an effective component for assessing the capabilities of your current employees. You may suddenly find that many of your employees simply won’t be prepared for the upcoming changes in your organization’s work. And that lack of an accurate and updated assessment will likely slow employee development and internal movement.
- Employee alternatives | Without all-inclusive workforce planning, employee alternatives won’t get adequate consideration – as technology develops and improves. Your workforce plan must consider getting any new work done without using permanent employees. The alternative work options that must be considered each time include robotics and software programs. Also, expanding the use of contingent workers and outsourcing to vendors under the Shamrock contingency model.
- Metrics | A lack of result metrics will restrict the continuous improvement of your WP plan – unfortunately, most workforce planning efforts have no metrics covering the business impacts resulting from the plan. And without those business results metrics (like the percentage of projects delayed because of talent issues). There is little chance that your workforce plan will continually improve as fast as it needs to in our rapidly changing environment. In addition, the workforce planning team will need the capability to produce predictive metrics that will alert managers about upcoming talent issues and opportunities. And the best plans will also produce prescriptive metrics that reveal what actions need to be taken to improve your results in that area.
If you want to learn more about how to plan for the upcoming economic downturn, click here.
The Best Example Of Workforce Planning’s Failure Is Now Occurring In The Airline Industry
The most prominent example of the negative business impacts of ineffective workforce planning is occurring right now in the US airline industry. Currently, airlines can’t schedule enough flights to meet the sudden record customer demand due to a severe shortage of pilots and flight crew. And today’s revenue loss and brand damage are occurring because a few years ago, at the beginning of the covid pandemic, the dramatic drop in the demand for seats caused airlines to lay off a significant percentage of their workforces. But their workforce plan failed to include two other important capabilities.
First, their plans failed in timing because their plans didn’t accurately predict when the next business cycle would require more planes and a rapid increase in talent. And second, their plans didn’t allow for the rapid return of their ex-employees. Because of its bleak future, many service personnel moved on to other industries. But also, because under strict FAA regulations, returnees must have their skills and training updated before returning to work.
|If you can only do one thing – you won’t be able to gain the necessary resources to build a strong workforce planning effort until you convince your executives of the high ROI of workforce planning. So, start that business case development by working with your COO and the CFO to estimate and quantify the dollar value of each of the major negative consequences caused by weak workforce planning. And then use that dollar amount to increase your executive’s support quickly and dramatically upgrade your forecasting and planning process.|
Unfortunately, I have found that when they exist, most corporate HR workforce planning efforts are really little more than straight-line headcount projections (and even those are hardly ever followed).
And after more than two decades of research and a book focused on workforce planning problems and best practices. HR mostly pays lip service to planning and forecasting for four basic reasons.
First, in our fast-changing VUCA world, predicting the future is highly problematic. Second, a successful planning process requires HR professionals who excel in statistics (unfortunately rare even today). Third, precise forecasting is really easy to get wrong and is highly embarrassing to HR when it is inaccurate. And finally, executives and managers are not often convinced that following the plan will result in improved team performance. In addition, many HR professionals realize that because most workforce planning occurs in relative isolation. Its leaders seldom have a clear path to promotion.
I find that there are three start-up steps for developing an effective workforce plan. The first step is hiring a proven forecasting expert from other business functions with a proven track record in forecasting and planning. Next, learn quickly by benchmarking other business forecasting functions already way ahead of HR in strategic planning. Like those in strategic planning, product development, and finance. To avoid copying already existing HR workforce plans that are likely to be highly flawed. Finally, develop a compelling and pretested business case for selling cynical executives by working with the CFO and COO to identify and quantify the benefits of getting workforce planning right in dollars.
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