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June 2014

TALENT TAKES CENTER STAGE AS A STRATEGIC PRIORITY


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After taking a back seat to cost cutting and regulations in recent years, talent has moved to the top of the corporate agenda. In a Conference Board 2014 survey of 1,020 CEOs worldwide, human capital ranked first among the most pressing business challenges, with customer relationships coming in second, innovation third, operational excellence fourth, and corporate brand and reputation fifth.

With a continued focus on cost containment and a keen desire for growth, effective workforce planning — ensuring that the right people are in the right jobs, at the right location, and at the right price — is emerging as a critical element of a successful talent strategy.

Once the domain of HR, today’s workforce planning has gained ground as an essential overarching business competency. Global organizations are now looking closely at the complex inflow and outflow of talent and at the availability of business-critical skills in fast-growth opportunity geographies. However, the ability to predict future workforce requirements is more complicated and challenging than ever.

Fomented by shifting demographics resulting mostly from an aging workforce, globalization, and technology, talent scarcity (in terms of quality, quantity, and location) is making a stealthy but strong comeback, with many organizations caught off guard and in need. In fact, despite a pool of 202 million people unemployed globally, 34% of employers around the world say they cannot fill available jobs.

Some companies may discover they have insufficient capacity and the inability to grow. Others will lose revenue from having to slow operations or put strategic initiatives on hold. And still more will find themselves throwing money at the problem, investing in the wrong people, or overspending in a desperate frenzy to catch up. Indeed, greater instability in the business environment actually increases, rather than decreases, the need for rigorous, numbers-driven talent strategies.

Enter workforce planning: an ongoing, robust capability that applies key data and analytics for prioritizing, developing, and funding the people practices that best support a company’s business objectives. Mercer advocates an organizational framework that adeptly moves companies from strategy to analysis to action and includes four key phases, some or all of which may make sense for a particular organization.

1. Gain strategic insights and identify critical talent

This look ahead calculates different possible scenarios of where the business will likely be in terms of growth and profitability and how that will vary over time by location and business line. It’s about analyzing internal and external demand drivers and then narrowing the workforce to its most critical talent — high-demand workers who cannot be readily replaced and have the greatest ability to produce long-term economic value for the organization.

2. Calculate supply and demand; measure the gap and risks

Workforce planning looks at both qualitative and quantitative aspects of the workforce and identifies gaps between current and future talent needs. The process looks at headcounts under the different scenarios of business growth, decline, and stability and also at the specific skills and capabilities needed, and then it works to reconcile the two. Because it is cost-prohibitive to perform a gap analysis across the entire workforce, the focus should be on critical workforces.

3. Model talent planning options

Once an organization has sized the gaps, it must evaluate options for closing them — whether to access external talent pools (buy or borrow) or tap internal pipelines (build). Building talent relies on detailed analyses of internal labor flows and appropriate training and development through designated career paths. Buying is faster and simpler, but it is more expensive, relies on external market availability, and involves greater risk if new hires don’t work out or leave..

4. Take actions

Finally, an organization must translate its workforce plan into solutions and ongoing business processes. Because talent needs are fluid, workforce planning is not a one-time exercise; the organization should update forecasts and plans annually as part of its regular business planning process. Specifically, it needs to identify the tools and models by which HR can best enable workforce planning, so that the overall enterprise and individual business lines can own and carry out their pieces in both the short and the long term.

Case study

Here’s how one organization used fact-based workforce planning analytics to help proactively align talent needs with business imperatives.

Situation

A health care group developed a business plan to meet the increasing needs of its surrounding communities but discovered the plan would require substantial increases in the number of therapists, technicians, and nurses — critical talent that had been projected to increase by mere single-digit rates. In order to make the right talent decisions, the organization needed to better understand the internal and external labor markets for these roles (see Figure 1).

Analysis

Looking externally, the health care group discovered that within the immediate area, it already employed 50% to 70% of the workforce for the three types of critical labor. Farther out from its ideal geographic scope, the organization found a solid supply of needed workers. However, the 40- to 60-minute commute posed many barriers, including a probable higher turnover rate and higher costs associated with attracting and retaining these workers. Looking internally, a labor market analysis revealed that career development was limited, as evidenced by lackluster lateral mobility and low rates of promotion, and that the majority of talent was hired from the outside.

Solution

The organization developed a talent plan that includes:

  • A fill-from-within strategy that focuses on developing talent in areas critical to strategic growth.
  • Recruiting strategies to better capture talent in both the core and the peripheral labor markets.
  • Turnover reduction in key skill areas.
  • A refocus of HR’s mission and structure, including investments in technology and support staff.
  • Development of an employment brand to help attract and retain employees.

Lessons

The health care group no longer had to respond reactively to changes in the employment landscape, chase market trends from behind, or make decisions on instinct or feel. The process also helped elevate HR, which now has the tools, information, and a respected voice at the table to help guide its management team.

To learn more about Mercer’s strategic workforce planning solutions, visit www.mercer.com/workforceplanning.

Contacts

Brian Levine (New York)
Partner, Talent
+1 212 345 4194
brian.levine@mercer.com
Ephraim Spehrer-Patrick (Sydney)
Principal, Talent
+61 2 8864 6800
ephraim.spehrer@mercer.com
Matthew Stevenson (Washington DC)
Principal, Workforce Analytics
and Planning Leader,
North America
+1 202 331 5291
matthew.stevenson@mercer.com

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