As we enter the era of the gig economy and hybrid workplaces, the value of advanced strategic workforce planning (SWP) is becoming more critical than ever.
The more we develop, the more new skills we get. And finding candidates for long-term roles is more expensive than ever. Thus, strategic workforce planning can benefit your organization, impacting employee retention and talent identification, enabling skills gap analysis, and supporting your budget.
Let’s explore what values strategic workforce planning brings and how companies can save money with its help. But first, we’ll start with the challenges of implementing SWP in companies.
What are the challenges of strategic workforce planning?
Over the past three decades, globalization and technologies that include work automation tools have changed industries and the job market around the globe by creating new positions and demanding new skills. Back in 2017, McKinsey Global Institute released a report on the impact of digitalization on the US economy, predicting that the rate of displacement of skills caused by technology would double over the next decade. According to McKinsey, over 30% of American workers will have to change jobs or significantly improve their skills by 2030, meaning significant changes for companies as well. What are the common challenges organizations already face today?
1. Lack of support from leaders. The widespread disinterest of management in strategic approaches often stops them from implementing SWP. Missing board and top management decisions disable and don’t motivate business for people analytics projects.
2. Old-fashioned company culture. An unwillingness to embrace digital processes, an outdated mindset, structures and habits, lengthy integration processes, and slow willingness to change the hierarchies of a large company stop the development of the workforce and complicate the SWP implementation.
3. Missing data. Opponents of SWP say that collecting and verifying skills data is time-consuming and that such information quickly becomes obsolete. They claim that the downsides typically outweigh the benefits. However, SWP is time-consuming only if you don’t automate it. Insufficient investment in data analysis and modeling skills also don’t help the situation.
4. Missing skills and approaches to analyzing data. Companies struggle with implementing strategic workforce planning because HR departments traditionally are not used to working with data: they don’t have experience with it, don’t know how to automate it, and don’t have the right skills to work with it. However, there is a suitable tool for every need.
5. Budget limits across the board. Workforce costs are one of the biggest expenses for most businesses. However, setting the budget equally for each team isn’t the right strategy, as it assumes the entire organization has the same efficiency, productivity, and importance.
Impact of strategic workforce planning on the business
Strategic workforce planning is one of the key components of effective HR management, and it’s essential for the future of work. eQ8 has defined three main areas that SWP influences.
Year after year, Deloitte polls show that gaining the right talent is a top priority for corporate CFOs, and not without reason; strategic workforce planning affects an organization’s ability to thrive in the marketplace.
However, employers often focus on learning and developing skills that were relevant yesterday rather than skills that will be relevant tomorrow. According to EY, of the $12 billion invested by Australian companies in L&D, about a third ($4 billion) was lost because of inappropriate skills being learned.
SWP offers solutions for that: You will know what job roles and skills you have in your company, what your workforce demand and supply can look like in the future, and what workforce gaps you need to close with proper workforce planning. In addition, advanced workforce planning data allows companies to continuously re-evaluate the skills landscape.
Speaking of numbers, strategic workforce planning can save up to $6 million for every 100 employees. Businesses that implement a workforce management solution could save 6–10% in just 12 months by increasing ROI by 60% and reducing absenteeism by 40% (an opportunity for big savings). Where do such significant savings come from?
- Increased administrative efficiency
- Improved compliance
- Better customer satisfaction
- Improved employee productivity
- Reduced absenteeism
- Valid business insights.
Technology is also changing the way organizations work and bringing changes to the workforce. The risk of digital transformation has become problem number one for directors, CEOs, and senior executives. They say that a whopping 70% of DT’s initiatives aren’t meeting their goals. It was estimated that $900 billion went to waste on DTs. HBR has identified solutions to this problem, from defining your business strategy (where SWP is a crucial factor in this) through scenario and coordination to attracting insiders (again, attracting the internal workforce) and reducing the fear of being replaced.
For example, Amazon tried to prevent skills changes and spent $700 million to retrain its employees to adapt them to new technological changes. In doing so, the company claimed retraining as the most critical factor in transformation while eliminating the lack of talent.
Here’s another example. According to My HR Future and Insight 222, a company that tried to transform its customer experience with some ingenious technology reduced the workforce, eliminating the need for many basic transactions and processes. But as a result, customers didn’t move as fast as planned because there were no adequate customer change management employees. This led to:
- Increased processing/waiting times
- Increase in waste and customer complaints
- Lower net promoter score (NPS)
This mistake could be fixed by implementing strategic workforce planning and adjusting specialists’ work with automation.
Several respondents in the Strategic Workforce Planning Report by Mercer, Oracle, and orgvue have commented that strategic workforce planning can be helpful in discussions with work unions and councils. It provides evidence in support of initiatives to avoid redundancies. HR can also push you to talk about what else a company can do and identify potential new business opportunities by deploying people in new ways.
For example, Microsoft has moved HR approaches from know it all to learn it all, including through open learning days, informal social learning opportunities, in-career training data, and new platforms and products for its partner network. According to Kevin Oakes, CEO and co-founder of the Institute for Corporate Productivity, these SWP changes provided by Satya Nadella vaulted Microsoft to become the most valuable company in the world.
Strategic workforce planning adds value to the business and changes the role of HR in the organization. It supports business and proves the financial benefits of analytics by helping people make better decisions about the workforce. SWP empowers HRDs and executives with data, insights, and performance metrics to set up and reach realistic goals. Based on data from strategic HR plans, HR professionals can move the business forward and ensure they continually improve performance and achieve new goals.
Strategic workforce planning is no longer just a nice thing, but a necessary factor for organizational success. In today’s ever-changing workplace, it’s crucial to implement a strategic HR plan to stay afloat.
In our new guide, we show in detail what SWP practices you can use to save money for your company. To give more clarity, we also provide examples of companies that have succeeded. Download the guide for more strategic workforce planning insights.