Workforce Planning PDF

289 27 Workforce planning Introduction have spared themselves embarrassing Organizations need to know how many people and marketplace failures if they had first what sort of...

289 27 Workforce planning Introduction have spared themselves embarrassing Organizations need to know how many people and marketplace failures if they had first what sort of people they need to meet present and future business requirements. As noted by Peter Reilly recognized that the human resource (2015: 1): ‘Workforce planning is in essence a simple implications of their strategic plans were concept: it is about matching the organization’s de- mand for labour with the supply of labour over time.’ unrealizable. The purpose of this chapter is to describe how Quinn Mills (1985: 105) workforce planning operates, bearing in mind that it is not as straightforward as it was presented when the notion of ‘manpower planning’ became popular in the 1960s and ’70s. Workforce planning, or human Workforce planning defined resource planning as it used to be called, may be well established in the HRM vocabulary but it does not The process of workforce planning is to establish an seem to be embedded as a key HR ­activity. organization’s people requirements so that plans The chapter starts with a definition of workforce can be made to satisfy them. The following defini- planning and continues with a discussion of its aims tion was produced by the CIPD. and the issues involved, including its link with busi- ness planning. The final section of the chapter ­describes the processes used, namely scenario plan- ning, demand and supply forecasting and a­ction ­planning. Source review Workforce planning is a process of analysing the current workforce, determining future workforce needs, identifying the gap between the present Wo rd s of wi sdom and the future, and implementing solutions so that Companies that have the people in place to an organization can accomplish its mission, goals, meet their performance objectives are well and strategic plan. It’s about getting the right number of people with the right skills employed in equipped to implement their business plans the right place at the right time, at the right cost successfully. If, however, the right people and on the right contract to deliver an are unavailable… the plans themselves may organization’s short- and long-term objectives. CIPD (2018) require revision. Many companies would 290 Part 6 | People Resourcing Workforce planning may be conducted as an overall in larger organizations: 20 per cent of organizations approach to establishing and satisfying people re- planned for less than one year, 41 per cent for one quirements covering all major employee categories to two years and only 2 per cent for more than five and skills. However, it frequently concentrates on years. The research established that the top five key categories of staff, for example, doctors, nurses planning activities were: and other health workers in the National Health 1 succession planning – 62 per cent; Service, skilled operatives in a manufacturing com- pany, sales staff in a retail store or drivers in a trans- 2 flexible working – 53 per cent; port company. 3 demand/supply forecasting – 53 per cent; Rothwell (1995: 194) distinguished between HR 4 skills audit/gap analysis – 49 per cent; planning in the hard sense – ‘to serve as an indicator 5 talent management – 42 per cent. of the likely match or mismatch of the supply and demand for the right number of people with appro- priate skills’ – and HR planning in the soft sense – ‘to alert the organization to the implications of business strategy for people development, culture and atti- Pau se for th ou gh t tudes as well as numbers and skills’. The CIPD The proportion of organizations that go in (2010a: 4) made a similar distinction between ‘hard’ and ‘soft’ workforce planning. As the report on their for workforce planning is not very high. research commented: Why might this be the case? Hard workforce planning is about numbers. In the past this often revolved around using past trends to predict the future, matching supply and demand for labour with the result that plans were often out of date before the ink was dry. Now there is more The link between workforce emphasis on management information that can help understand cause and effect of certain phenomena. and business planning Soft workplace planning focuses on general issues Workforce planning is an integral part of business relating to the supply of and demand for people and planning. The strategic planning process defines how they are deployed. projected changes in the types of activities carried The precursor to workforce planning – manpower out by the organization and the scale of those ac- planning as conceived in the 1960s – was almost en- tivities. It identifies the core competences that the tirely about numbers in the shape of quantitative de- organization needs to achieve its goals and there- mand and supply forecasts. It was the failure in many fore its skill and behavioural requirements. organizations to produce accurate forecasts and Workforce planning interprets these plans in therefore prepare meaningful plans that led to its de- terms of people requirements. But it may influence cline if not fall. Workforce planning today covers a the business strategy by drawing attention to the wider range of activities such as succession planning, ways in which people could be developed and de- smart working, flexible working and talent planning, ployed more effectively to further the achievement and is not such a numbers game. of business goals. It will also address issues concern- ing the supply of suitable people that might affect the achievement of business objectives. Incidence of workforce planning Reasons for workforce The CIPD Annual Survey of Resourcing and Talent Planning (2010b) found that 61 per cent of organi- planning zations conducted workforce planning, although it Research conducted by the Institute for Employment was most common in the public services sector and Studies (Reilly, 1999) established that there were  Chapter 27 | Workforce Planning 291 three main reasons why organizations engaged in This problem will not be so acute in a stable workforce planning: marketplace, with largely passive (and static) cus- tomers, and with scope for long-term forecasting. 1 Planning for substantive reasons, that is, to But these are rare conditions today, even in the pub- have a practical effect by optimizing the use lic sector where workplace planning has thrived for of resources and/or making them more a long time. flexible, acquiring and nurturing skills that It can be said that workforce planning is more take time to develop, identifying potential art than science. Perhaps the accuracy of demand problems and minimizing the chances of and supply forecasts is less important than the over- making a bad decision. all understanding of what the organization needs in 2 Planning because of the process benefits, the way of people, which can be generated by a sys- which involves understanding the present in tematic approach to planning. order to confront the future, challenging assumptions and liberating thinking, making explicit decisions that can later be challenged, standing back and providing an overview and ensuring that long-term thinking is not Pau se for th ou gh t driven out by short-term focus. Do you agree that workforce planning is 3 Planning for organizational reasons, which more art than science? Can it be made more involves communicating plans so as to obtain support/adherence to them, linking scientific and if so how? HR plans to business plans so as to influence them, (re)gaining corporate control over operating units and coordinating and integrating organizational decision making and actions. Systematic workforce Workforce planning issues planning A flow chart of the process of workforce planning is The main difficulties faced by those involved in shown in Figure 27.1. This identifies the main plan- quantitative (hard) workforce planning are the im- ning activities described below. Although these are pact of change and trying to predict the future. referred to as separate areas, they are interrelated Many organizations therefore adopt a short-term and can overlap. For example, demand forecasts approach and deal with deficits or surpluses of peo- may be prepared on the basis of assumptions about ple as they arise. This problem is compounded by the productivity of employees. But a forecast of the what Rothwell (1995) referred to as the shifting ka- supply of suitable people will also have to consider leidoscope of policy priorities and strategies within productivity trends and how they might affect the organizations. It sounds like a good idea to adopt supply. an integrated approach to workforce and business The business plan provides the basis for the planning but it won’t work well if business plans workforce plan insofar as it sets out what the or- are volatile, vague, misleading or non-existent, as ganization intends to do in terms of activities and they easily can be. Beardwell (2007: 62) commented the scale of those activities. that HR plans should be treated as ‘tentative, flexi- ble, and reviewed and modified on a regular basis’. Cappelli (2009: 10) noted that: ‘The competitive Forecast activity levels environment for businesses is so changeable, and firms adjust their own strategies and practices so Forecasts of future activity levels flow from the frequently that these estimates [of the demand for business plan, which will have implications for the talent] are rarely accurate and they get much worse demand for people. Activity level forecasts will the farther out one goes.’ also be affected by external factors, for example 292 Part 6 | People Resourcing F I G U R E 27.1 Workforce planning flow chart Business plan Forecast of activity levels Scenario planning Analysis Data collection Demand forecast Supply forecast Forecast of future requirements Action planning Recruitment Retention Succession Talent Flexible working Learning and development Downsizing Implement Monitor and evaluate  Chapter 27 | Workforce Planning 293 ­ emographic and political policy trends, especially d manufacturing plan, giving the numbers and types in the public sector. Data will need to be collected of products to be made in each period. From this and analysed for this purpose. information the number of hours to be worked by each skill category to make the quota for each pe- riod would be computed. Scenario planning Details are required of any organizational and work plans that would result in increased or de- Scenario planning involves an assessment of changes creased demands for employees. Examples are set- in the business and its environment which are likely ting up a new regional organization, creating a new to affect the organization. The aim is to produce a sales department, decentralizing a head office func- picture of where the organization might be heading tion to the regions, plans for new methods of work- and to predict the possible situations that may have ing, additional outsourcing, increasing productivity to be dealt with in the future. and reducing employment costs. The demand fore- casting methods for estimating the numbers of peo- Data collection ple required are described below. The information used in workforce planning can be collected under the following headings: Managerial judgement The most typical method of forecasting used is Qualitative internal data: business managerial judgement. This simply requires manag- information on product/market ers to sit down, think about their future workloads, developments, proposed work system and and decide how many people they need. It may be organizational changes; HR information on quite unscientific and misleading. people (skills, performance, etc). Forecasting might be done on a ‘bottom-up’ Quantitative internal data: workforce data basis with line managers submitting proposals for on turnover, absence, demographics, skills agreement by senior management. Alternatively, a audits, etc. ‘top-down’ approach can be used, in which com- Qualitative external data: PESTLE analysis pany and departmental forecasts are prepared by covering the following factors: political, top management, possibly acting on advice from economic, social, technological, legal and the HR department. These forecasts are reviewed environmental. and agreed with departmental managers. A less di- rective approach is for top management to prepare Quantitative external data: labour market – planning guidelines for departmental managers, set- demographics, skills availability. ting out the planning assumptions and the targets they should try to meet. Perhaps the best way of using managerial judge- Analysis ment is to adopt both the ‘bottom-up’ and ‘top- The analysis stage brings all the information to- down’ approaches. Guidelines for departmental gether from the business plan, the activity forecast, managers should be prepared, indicating broad com- scenarios and internal and external data to provide pany assumptions about future activity levels that the basis for demand and supply forecasts. will affect their departments. Targets are also set where necessary. Armed with these guidelines, de- partmental managers prepare their forecasts to a Demand forecasting laid-down format. They are encouraged to seek help Demand forecasting is the process of estimating the at this stage from the personnel or work study de- future numbers of people required and the likely partments. Meanwhile, the HR department, in con- skills and competences they will need. The basis of junction as necessary with planning and work study the forecast is the annual budget and longer-term departments, prepares a company forecast. The two business plan, translated into activity levels for each sets of forecasts can then be reviewed by a human function and department. In a manufacturing com- resource planning committee consisting of functional pany the sales budget would be translated into a heads. This committee reconciles with d ­ epartmental 294 Part 6 | People Resourcing managers any discrepancies between the two fore- potential losses to existing resources through casts and submits the final amended forecast to top attrition (employee turnover); management for approval. This is sometimes called potential changes to existing resources the ‘right-angle method.’ through internal promotions; changes to the organization structure, new Ratio-trend analysis methods of working (including flexible Ratio-trend analysis is carried out by analysing ex- working), more part-time working and isting ratios between an activity level and the num- different working hours; ber of employees working on that activity. The ratio effect of increases in productivity; is applied to forecast activity levels to determine an sources of supply from within the adjusted number of people required. Account can be organization – existing employees and the taken of possible improvements in productivity that outputs of talent management or training would affect the ratio. The analysis may be extended programmes. to cover employees connected to but not directly in- volved in the activity – the indirect workers who The external supply analysis examines the local and provide support to the direct workers responsible national labour markets to assess implications for for carrying out the activity. The existing ratio of the availability of future people requirements. It directs to indirects would be applied to the forecast will also take account of environmental changes as number of directs needed to deal with the new activ- revealed by scenario planning. ity levels to forecast the number of indirects needed. Work study techniques Forecast of future requirements Work study techniques are used in association with To forecast future requirements it is necessary to activity level forecasts to calculate how long opera- analyse the demand and supply forecasts to identify tions should take and the number of people re- any deficits or surpluses. The analysis can be made quired. For direct workers they can be combined with the help of spreadsheets. The basic data can be with ratio-trend analysis to calculate the number of set out as follows: indirect workers needed. 1 Current number employed 700 2 Annual level of turnover 10 per cent Forecasting skill and competency 3 Expected losses during year 70 requirements 4 Balance at end year 630 Forecasting skill and competency requirements is 5 Number required at end year 750 largely a matter of managerial judgement. This judgement should, however, be exercised on the 6 Number to be obtained (5 – 4) = 120 basis of an analysis of the impact of projected prod- during year uct/market developments and the introduction of The data on the number of employees required may new technology such as artificial intelligence appli- be modified by reference to the impact of any pro- cations, information technology and computerized ductivity plans, organizational changes, new meth- manufacturing. ods of working or revision of role responsibilities. Supply forecasting Action planning Supply forecasting measures the number of people Action plans to satisfy future requirements are de- likely to be available from within and outside the rived from the broad resourcing strategies and the organization. The internal supply analysis covers more detailed analysis of demand and supply fac- the following areas: tors. However, the plans often have to be short term existing number of people employed by and flexible because of the difficulty of making firm occupation, skill and potential; predictions about workforce requirements in times  Chapter 27 | Workforce Planning 295 of rapid change. The planning activities start with Implementation the identification of internal resources available now or that could be made available through learn- The implementation of the action plans will provide ing and development programmes. They continue a challenge. A flexible approach involving quick with plans for recruitment and retention, succession responses is needed to cope with unforeseeable ­ and talent management, the reduction of employee changes in people requirements. turnover and absenteeism, flexible working, out- sourcing, productivity improvement and the revi- sion of role responsibilities. Monitoring and evaluation Learning and development programmes may be Because of unpredictable events, the implementa- prepared to provide for future skill requirements. tion of action plans does not always run smoothly. It Regrettably, but sometimes inevitably, plans for is necessary to monitor progress carefully, evaluate downsizing may be necessary, but these can aim to the effects and, as required, amend the action plan. avoid compulsory redundancies by such means as recruitment freezes. Consideration has to be given to the likelihood of the demand requirements being met by the use of Approach to workforce the existing mix of employees. If this is problematic, planning alternative approaches will have to be explored. This may involve deploying different types of work- Peter Reilly (2015) suggested that the real problem ers or changing working arrangements. A core of with workforce planning is its execution. key workers may be maintained while on the pe- Organizations get the concept but find it hard to riphery more use may be made of part-time or home put into practice. He believes that HR should keep workers. Some businesses could employee ‘gig’ workforce planning as simple as possible, concen- workers – freelancers or people on short-term con- trating on the essential data needed for the task. HR tracts – or workers on zero-hours contracts. More should identify important business problems (such work could be sub-contracted or outsourced and as expansion, downsizing or relocation) and work increasing use made of management consultants. backwards from there as to what it is necessary to This more flexible ‘core/periphery’ approach char- know to plan the resource implications. The focus acterizes what has been described as the ‘flexible’ of workforce planning should be on key employ- firm (see Chapter 32). ment groups determined by their labour market scarcity and impact on organizational performance. CASE STUDIES Buckinghamshire County Council Business need drove the workforce planning project at The council therefore decided to align strategy and Buckinghamshire County Council. This recognized that workforce planning in social care for children and fami- current workforce planning practices would not meet the lies. The workforce plan was developed with the input of challenge of the Care Standards Act 2000, or of future service a team of representatives from social care for children delivery. One of the main issues in working with children and and families. It was recognized that workforce planning families was recruiting and retaining qualified social workers. was essential to anticipate future areas of skills shor­ There were insufficient numbers of social workers in post. tages. This council is now in a position to anticipate skills Turnover levels among established and new employees shortages and has dealt with them innovatively and were high. ­immediately. 296 Part 6 | People Resourcing The workforce plan looked at short- and long-term plan- activities that may span the next five years. Workforce ning. Short-term planning covered immediate action on planning allowed for an assessment of skills and an explo- recruitment and promotion. Long-term planning covered ration of the levels employees need to work at. Plymouth Primary Care Trust The trust set up a multidisciplinary team drawn from the supply, under­take a gap analysis and subsequent action workforce planning and development department, finance planning, and carry out implementation and a review of and public health teams within the organization to introduce the plans. workforce planning across the whole organization. The It was found that while some managers were skilled in trust’s 230 managers and budget holders were then invited workforce planning, the majority needed support to link to- to an awareness programme to introduce the Six Steps gether the financial, workforce and planning elements of Workforce Planning Methodology developed by the NHS the process. The outcomes were: Workforce Projects Team (2009). The steps are: trust-wide workforce planning, using electronic staff 1 Define the plan. record and planning tools; 2 Map service change. workforce planning is now part of day-to-day trust 3 Define the required workforce. business; 4 Understand workforce availability. detailed workforce plans across clinical and non- clinical directorates; 5 Plan to deliver the required workforce. increased awareness of financial position, age 6 Implement, monitor and refresh. profiles, and workforce risk assessment; Managers were informed that, using this framework, the development of a more efficient workforce by they would be required to produce plans over a one- reviewing skill mix and succession planning; year, two-year and five-year timescale. The guide was integration of workforce planning into the corporate app­lied by asking each manager to define their workforce management programme. plan, outline forces for change, assess demand, assess Siemens (UK) Workforce planning at Siemens (UK), the engineering and The workforce planning process starts with a review of technology services company, involves obtaining answers the current workforce derived from SAP data [SAP is a to three fundamental questions: What do we have? What business software system] and onto this is overlaid the do we want? How do we fill the gap? likely attrition. Future requirements are identified by means At the highest level, the corporate people strategy gives of a dialogue between HR business partners and business the context for workforce planning, the key objective of unit managers. This enables the skills in each job family to which is to ensure that Siemens has the right level of capa- be matched to business initiatives and provides the basis bility to execute business strategy. In essence, the process for the workforce forecast. of workforce planning is one in which the business strate- gy converges with the people strategy.  Chapter 27 | Workforce Planning 297 Key learning points Workforce planning defined planning is important because it encourages employers to develop clear and explicit links between their business The following definition of workplace planning was and HR plans and to integrate the two more effectively. produced by the CIPD (2010a: 4): ‘Workforce planning is a core process of human resource management that Workforce planning issues is shaped by the organizational strategy and ensures the right number of people with the right skills, in the The main difficulties faced by those involved in right place at the right time to deliver short- and workforce planning are the impact of change and long-term organizational objectives.’ predicting the future. Incidence of workforce planning Approaches to workforce planning The CIPD (2010a) research revealed that workforce Business planning. planning in one form or another is taking place in many Forecast activity levels. organizations. Scenario planning. Link to business planning Data collection. Workforce planning is an integral part of business Analysis. planning. Demand forecasting. The rationale for workforce planning Supply forecasting. Workforce planning provides a basis for a systematic Forecast of future requirements. approach to assessing the number and type of people Action planning. needed and, having taken into account information on the supply of labour and environmental scanning, for the Implementation. preparation of recruitment, retention, management Monitoring and evaluation. succession and talent management plans. Workforce References Beardwell, J (2007) Human resource planning, in CIPD (2010b) Annual Survey of Resourcing and (eds) J Beardwell and T Claydon, Human Talent Planning, London, CIPD Resource Management: A contemporary approach, Quinn Mills, D (1985) Planning with people in mind, 5th edn, Essex, Pearson, pp 189–224 Harvard Business Review, July–August, Cappelli, P (2009) A supply chain approach to pp 97–105 workforce planning, Organizational Dynamics, 38 Reilly, P (1999) The Human Resource Planning (1), pp 8–15 Audit, Cambridge, Cambridge Strategy CIPD (2018) Workforce Planning Fact Sheet, London, Publications CIPD Reilly, P (2015) Workforce Planning: A framework CIPD (2010a) Workforce Planning: Right people, for thinking about your own approach [online] right time, right skills, London, CIPD http://www.employment-studies.co.uk/system/files/