Scenario planning in the business and HR paradigm: what you need to know
Table of contents
- What is scenario planning?
- Scenario planning examples
- How does scenario planning integrate with HR?
- Onward to the future
Would you like to make a business plan for the next five years that’s based on data? Then take seven minutes to read about scenario planning.
Forecasts of possible changes, trends, and events are usually based on social, political, economic, environmental, and technological assumptions. But changes may well derail any basic assumptions and trends, leaving your employees reacting to change rather than leading it.
To understand what trends will strongly impact your organization and make effective decisions, you need to use scenario planning. In this post, you will discover scenario planning examples, techniques, and practices.
First, let’s go over the basics and figure out what scenario planning is.
What is scenario planning?
Scenario planning is a way of formulating strategic hypotheses about existing drivers and their uncertainties. The US military came up with the concept of scenario planning, and it’s been used in training to guide research efforts for more than 20 years.
Gradually, businesses started adopting scenario planning. After all, it allowed them to identify ranges of potential outcomes, estimate impacts, evaluate responses, and manage both positive and negative opportunities.
Source: BSC Designer
Types of scenario planning
Scenario planning allows leaders to respond quickly and decisively. When a situation has been thought out in advance and managers have documentation about what they should do in the given situations, no one has to scramble during a crisis.
Scenario planning also gives executives and HR managers a framework for more effective non-emergency decision-making, providing insights into plans, budgets, and forecasts while painting a clearer picture of key business growth drivers and the potential impact of future events. Here are four types of scenario planning you can use in your company:
- Quantitative scenario planning is used for developing annual business forecasts. Quantitative models assume that you and your managers know the key variables and how they interact.
- Operational scenario planning examines the immediate impact of an event and foresees short-term strategic consequences.
- Normative scenario planning describes a desired or achievable end state. It’s less objective compared to other types of planning and more goal-oriented.
- Strategic scenario planning is less about the company or industry and more about the environment in which products and services are consumed.
Scenario planning examples
There are many examples of scenario planning. We review those relevant to HR.
The main idea is to have a competency model for each scenario. Sometimes, the model will include changes in the work organization. For example, many companies prefer to be adaptive to their workforce and encourage internal mobility. Thus, they move from a job focus to a role focus.
This change in focus usually requires a different competency model, with more competencies and skills related to the ability to change roles or perform multiple roles. Here are four scenario planning examples that worked in talent management:
- Getting ready for quick decisions. Shell used scenario planning in response to the 1973 oil shock. They had a plan in place that they could execute if the scenario came to pass. As a result, there was a rapid growth in downsizing the workforce.
- Building resilience or adaptation and effectiveness. Another classic scenario planning move is to create a scenario-resilient organization. For example, healthcare, education, grocery, public works, transportation, and some manufacturing entities focused on protecting workers during COVID-19. They implemented precautions that physically isolated workers from each other and took measures such as health checks.
- Shaping the future. A classic example of this scenario planning is the Mont Fleur scenario, developed in South Africa at the end of apartheid. Disparate groups of stakeholders, some violently (literally) opposed to one another, came together to find a way towards a better future and to avoid the worst outcomes.
- Designing new workforce architectures. CMS used strategic planning to model the effect of business and workforce changes on service line profitability. By analyzing data, the company identified gaps based on future workforce demand and developed talent management measures to efficiently.
How does scenario planning integrate with HR?
Scenario planning for HR and business allows managers to anticipate possible future outcomes and proactively develop strategies to address them.
“HR needs to use this business opportunity to show that these things matter.” – Carla Patton, PHR, director of HR at RAPP
Here are several scenario planning examples that can give a unique perspective to HR managers and contribute to successful scenario plans.
Alleviate scenario planning for HR
HR should participate in business and scenario planning meetings to understand the business’s challenges and how strategic talent management can help solve them.
Every plan for every business scenario depends on an efficient and prepared future workforce. Therefore, HR should take the lead in proactively developing a workforce strategy that can withstand any possible scenario. Because people connect all aspects of the business, HR is in a great position to bring key stakeholders together and help plan meeting scenarios.
Learn from the past to plan
We don’t know for sure what will happen in the next three to five years, but we can analyze past information to make predictions. HR managers should collaborate with other business leaders to develop scenario plans and review internal and external data to develop specific goals.
“As HR professionals, it’s critical to do this brainstorming to make sure we have the right staff, the right skills, and even the right training and resources to help us in the future.” – Robin Throckmorton, founder and president of the SPHR
Because HR touches every level of business operations, HR managers have access to company-wide data. Get past data from your HR processes to establish a baseline and gauge the success of past plans. For example, performance appraisal and pre-hire assessment data can help you identify gaps in your current workforce that could impact future scenarios.
Practice with scenario planning implementation
Organizations can prepare for contingencies through advanced training.
For example, in extreme economic instability and volatility, companies may hesitate to commit to large numbers of full-time workers and prefer to use contract workers. You can start preparing such infrastructure as gig economy by bringing employees, contractors, or temps into the same team or department.
Most scenarios also involve the increased use of automation and artificial intelligence technologies. As artificial intelligence and automation will become even more critical to work in the future, you can start building the infrastructure for them now. Try incorporating automation into different teams and roles within the company to identify the skills your workforce will need to work alongside this technology, allowing you to scale automation and AI seamlessly.
Review your plans regularly
Scenario plans typically last three to five years but should be reviewed annually by your management team. When the pandemic started, many companies didn’t expect it to last for so long and probably expected to go back to everyday life in one year. However, this assumption left them in limbo, unable to fully embrace remote or hybrid work in the long term.
The COVID-19 pandemic underscores the need for regular scenario planning. However, we should also emphasize that scenario planning isn’t only for bad days; it’s also critical when things are going well.
Business continuity planning for any scenario allows you to act quickly and decisively when the time comes.
Stay present and active in scenario planning
Integrating business scenario planning with HR helps business leaders become more aware of the business’s external forces. Developing and implementing scenario plans can help you better understand your business strategy and priorities.
Include scenario planning in your executive team’s regular meetings.
Make sure your HR team has everything needed to redefine what normal means for your company. And remember: They can only do so by anticipating the future. Therefore, scenario planning is critical to your business and to HR’s ability to steer your organization towards a brighter future.
Onward to the future
HR faces many challenges, and there is no correct answer for everyone. Organizations should understand the factors that affect their industry and create scenarios that help them anticipate change, challenge assumptions, and avoid surprises. Here’s where a strategic workforce planning tool can help.
smartPlan is a powerful digital modeling app that enables you to design and plan the future of your workforce.
What is smartPlan for?
With smartPlan, you can identify and analyze future workforce risks. For example, Merk analyzed global labor market skills with smartPlan. As a result, the company translated business goals into a new way of working, addressed skills gaps, and created new workforce implementation plans. You also can take advantage of scenario planning tools in your company. Contact our team to find out how smartPlan can solve your HR challenges.