Workforce Planning

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Workforce PlanningPresented bySenga Consulting Inc.

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Participants will learnthe…Categories of HR forecasting.

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Rationale for attentionto specialist, technical and executive personnel in forecasting.

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Impact of environmentaland organizational variables on HR demand and supply.

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Various demand forecastingtechniques.

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Methods of determiningexternal and internal HR supply.

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Relationship between forecastingand succession planning.2Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Senga Consulting Inc.Copyright © 2009 | All Rights ReservedWorkforce Planning3

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Workforce PlanningBusiness processfor ensuring an organization has access to talent to ensure future success.

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Access to talentincludes considering all access sources.

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Talent: The skills,knowledge, predisposition and ability to undertake required activities including decision making.4Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Getting StartedObtain supportfrom senior leaders.

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Communicate benefits andresults to managers.

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Establish a workforceplanning team of knowledgeable employees from different functional areas and levels.

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Develop and implementa plan.

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Solicit continuous feedbackfor ongoing improvements. 5Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Workforce Planning StepsStep1Supply AnalysisStaffing levels

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Workforce skills

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Workforce demographics\

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Employment trendsStep 2DemandAnalysisWorkforce skills needed

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Staffing patterns

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Anticipated workload changesStep3Gap AnalysisCompare supply analysis with demand analysis

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Determine future gaps(shortages) and surpluses (excesses)

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Identify future changesin workforce demographics

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Identify areas inwhich management action will be neededStep 4Strategy Development Plan

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Recruiting

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Succession

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Employee development andretraining

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Organizational change6Senga ConsultingInc. Copyright © 2009 | All Rights Reserved

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Workforce Planning Model7SengaConsulting Inc. Copyright © 2009 | All Rights Reserved

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Environmental ScanningCost andavailability of capitalGovernment RegulationsLabour availabilityCompetitionTechnologySupplier powerGlobalizationCustomer expectations8Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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TechniquesScanning – identifyearly signals of changes and trends.

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Monitoring – followkey indicators that affect the organization.

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Forecasting – aftermonitoring, project the impact on the organization.

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Assessing – describethe impact of the monitored trend on the organization, make a judgment of the probability of outcomes.9Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Forecasting MethodsTrend Analysis– a quantitative approach to forecast future personnel needs based on extrapolating information from historical changes.

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Delphi Technique –forecastsand judgments of a group of experts are solicited and summarized to determine the future of employment.

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Impact Analysis –trendsare analyzed by a panel of experts who then predict the probability of future events.

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Scenario Planning –creatingfuture scenarios that differ radically from those created by extrapolation of present trends10Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Environmental FactorsEconomic climate–the economy affects HR management

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Globalization – affectssovereignty, prosperity, jobs, wages, and social legislation

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Political and legislativefactors – influence organizations with changes to laws and regulations

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Technological factors –newissues include online HR functions, identity theft, e-learning, answering email on vacations

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Demographic factors –includeage, gender, family status, education, economic status, labour market

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Social and culturalfactors11Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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ExerciseWhat key environmentalfactors affect your organization’s ability to achieve its goals?

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What are theHR implications?12Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Senga Consulting Inc.Copyright © 2009 | All Rights ReservedThe HR Forecasting Process13

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Learning TopicsCategories ofHR forecasting activity and their relationship to the HR planning process

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Rationale for attentionto specialist, technical, and executive personnel groups in the HR forecasting process

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Impact of environmentaland organizational variables on the accuracy and time period of estimates derived from future estimates of HR demand and supply

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Various stages inthe process of determining net HR requirements14Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Forecasting Activity Categories15SengaConsulting Inc. Copyright © 2009 | All Rights Reserved

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Human Resources Supplyand Demand16Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Key Personnel Analyses17SengaConsulting Inc. Copyright © 2009 | All Rights Reserved

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Designated GroupReceive themost discrimination within organizations18Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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5 Stages ofthe Forecasting Process19Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Organizational FactorsCorporate mission,strategic goals

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Operational goals, productionbudgets

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HR policies

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Organizational structure, restructuring

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Worker KSAs, competencies,expectations

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HRMS level ofdevelopment

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Organizational culture, climate,job satisfaction, communications

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Job analysis20Senga ConsultingInc. Copyright © 2009 | All Rights Reserved

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Environmental FactorsEconomic situation

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Labour markets andunions

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Government laws andregulations

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Industry and productlife cycles

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Technological changes

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Competitor labour usage

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Global market forskilled labour

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Demographic changes21Senga ConsultingInc. Copyright © 2009 | All Rights Reserved

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Time HorizonsMedium-run– 2- 5 yearsLong-run– 5 or more yearsCurrent – up to 1 yearShort-run – 1 - 2 years22Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Ascertain HR Supply23SengaConsulting Inc. Copyright © 2009 | All Rights Reserved

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Determine NET HRRequirementsExternal supply requirements =replacement + change supply componentsChange supply =hiring to increase (or decrease) the overall staffing levelReplacement supply =hiring to replace all normal lossesExternal supply =current workforce # x (replacement % per year + change % per year)24Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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ExampleExternal supply =current workforce x (replacement % per yr + change % per yr)Surplus =1000 x (4 % per year (0.04) + 2 % per year (0.02) 40 + 20 = 60 Need for 60 employeesDeficit = 1000 x (4% per year (0.04) + -7% per year (-0.03) 40 + -70 = -30 Need to reduce by 30 employees25Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Your TurnExternal supply= current workforce x (replacement % per yr + change % per yr)Surplus =10,000 x (3.5 % per year (0.035) + 3 % per year (0.03) + = Need to hire employeesDeficit = 10,000 x (6% per year (0.06) + -8% per year (-0.08) + = Need to reduce by employees26Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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HR Surplus/DeficitInternal workforcesupply exceeds the organization’s requirement or demand for personnel

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Demand exceeds thecurrent resources available in the organization's workforce27Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Senga Consulting Inc.Copyright © 2009 | All Rights ReservedHR Demand28

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Learning TopicsDemand forecasting

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Linkages between labourdemand forecasting and the supply

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Various demand forecastingtechniques29Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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HR DemandProjected humanresources requirement30Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Trend AnalysisHistorical relationshipbetween a business index (e.g., sales, contracts, units sold etc.) and the number of employees required to achieve that index (labour demand)31Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Effective Trend AnalysisFivesteps to conducting an effective index/trend analysis:Select the appropriate business indexTrack the index over timeTrack the total number of employees over timeCalculate the average ratio of the business index to the total number of employeesE.g. employee requirement ratio - the relationship between the business index and the demand for labourCalculate the Forecasted Demand for Labour32Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Employee Requirement RatioCurrentYear33Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Steps for DelphiTechniqueSequential surveys with feedback on opinions in previous rounds34Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Steps for theNominal Group TechniqueLong-run forecasting technique utilizing expert assessments35Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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HR BudgetsQuantitative, operationalor short-run demand estimates that contain the number and types of personnel required by the organization as a whole and for each subunit, division, or department36Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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HR Budgets: Staffing Table37Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Scenario ForecastsProjections offuture demand for human resources based on differing assumptions about future events.OptimisticSalesNormalPessimisticNowT + 2 YearsT + 1 YearT + 3 YearsTime38Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Regression AnalysisPresupposes alinear relationship between independent (casual) variables and dependent (target) variable, e.g., HR demand

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Linearity is therelationship between the independent and dependent variables39Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Regression AnalysisY =dependent variable (HR demand)A = constant (Y intercept)B = slope of linear relationship between X and YX = independent variable (e.g. level of sales)BY – Dependent VariableAX – Independent Variable40Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Regression PredictionY =A + BXY = dependent variable (HR demand)A = constant (Y intercept)B = slope of linear relationship between X and YX = independent variable (e.g. level of sales)Where41Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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ExerciseDataXSales($ Millions)2.03.54.56.07.0Y# ofMarketing Personnel20324255665 Sets of observations42Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise Step 1CalculateXY, X2, average X and average YXSales($ Millions)2.02.53.55.06.519.5Y# of Employees2528303854175XY5070105190351766X24.006.2512.2525.0042.2589.75Average X = 19.5/5 = 3.9 Average Y = 175/5 = 35N = 543Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise Step 2Calculatethe value of B (slope of the linear relationship between X and Y)XY5070105190351766X24.006.2512.2525.0042.2589.75Average X = 3.9N = 5Average Y = 3544Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise Step 3CalculateA (constant or intercept)Average X = 3.9Average Y = 35B = 6.09IFY = A + BXThenANDA = 35 – (6.09)(3.9)A = 11.2345Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise Step 4Determinethe regression prediction equationY = A + BXWhew! So what?Independent causal variable X(e.g., sales) AND Dependent variable Y(e.g., predicted # of personnel)Even if sales are zero the value for A is 11.23 (round to 11.0) or 11 persons. For every increase unit ($1 Million) sales (X) there is a predicted increase of 6.09 staff (Y) associated with that change.A = 11.23B = 6.09X = Dependent VariableY = 11.23 + (6.09)(X)46Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise Step 5Calculatepredicted HR demand (Y) by inserting values for XPredict the HR demand for personnel at $8 million and $10 million.Y = A + BXY = A + BXY = A + BX$10 million$8 millionA = 11.23A = 11.23A = 11.23B = 6.09B = 6.09B = 6.09X = Sales ($M)X = 8X = 10Y= 11.23 + (6.09)(X)Y = 11.23 + (6.09)(8)Y = 59.9960 Staff requiredY = 11.23 + (6.09)(10)Y = 72.1872/73 Staff required47Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Senga Consulting Inc.Copyright © 2009 | All Rights ReservedAscertaining HR Supply48

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Learning TopicsRelationship betweendemand / supply forecasting

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Relationship between forecastingand replacement management

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Methods of determiningexternal and internal supply of employees such as:

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Skills and managementinventories,

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Replacement analysis,

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Markov models,

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Linear programming,

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Movement analysis,

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Vacancy/renewal49Senga Consulting Inc.Copyright © 2009 | All Rights Reserved

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Human Resources SupplySourceof workers to meet demand acquired internally or externally.50Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Skills InventoryRecord heldon employee except management or professionalsPersonal informationEducation, training and skill competencies, licensing etc.Work historyPerformance appraisalsCareer informationHobbies, interests, volunteerism, community involvement51Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Management InventoryRecord formanagerial, professional, or technical personnel that includes all elements in the skills inventory with the addition of information on specialized duties, responsibilities, and accountabilities.History of management or professional jobs heldA record of management or professional training coursesKey accountabilities for the current jobAssessment centre and appraisal dataProfessional and industry association memberships52Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Replacement Management Processof ensuring that pools of skilled employees are trained and available to meet the strategic objectives of the organization

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Process of findingemployee for key managerial positionsLong-term successionTraining and work experience to enable individuals to assume higher-level job appointments in the futureShort-term emergency replacementIndividuals who have quit, been terminated due to performance problems, have died, and so on53Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Replacement AnalysisImprove effectivelyfilling vacanciesPerformance1Outstanding2Above average3Average/good4Below Average5 UnacceptableReadinessAReady nowBReady in 1 yearCReady in 2 yearsDNot suitable for this job54Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Ripple EffectsCaused whenone promotion or transfer in the organization causes several other movements as a series of people are promoted to fill the openings55Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Markov ModelProduces aseries of matrices that detail the various patterns of movement to and from the various jobs in the organization

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Determines the likelihoodthat an individual will display movement behaviours56Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Sample Markov Matrix**Adaptedfrom Strategic Human Resources Planning, Belcourt and McBey, Nelson, 2010.57Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Markov Analysis ConclusionsNumberof people who move between job levels annually

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Number of externalhires needed

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Movement patterns andexpected duration in specified jobs associated with patterns of career progression

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Number and percentageof starters at a particular job who target a future job within a specified time58Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Linear ProgrammingMathematical procedureused for project analysis in engineering and business applications

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Determine the optimalsupply mix to minimize costs or other constraints.59Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Movement PatternsRemain incurrent jobPromotion to higher job classification Lateral moveExit from a job (e.g., termination, layoff, voluntary exit)Demotion60Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Movement AnalysisAnalyze peoplesupply and the ripple effect that promotions or job losses have on the movements of others in the organization61Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise*5% increase forlevels 6-9

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1 additional level4

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6 additional level5

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Historical annual lossratesRetirements2 positions level 5

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15% levels 6-9Turnover10%levels 5 and 6

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15% level 7

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20% level 8

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25% level 9

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Positions are startof year

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1 – level4

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6 – level5

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20 – level6

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32 – level7

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40 – level8

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50 – level9*Adapted from Strategic Human Resources Planning, Belcourt and McBey, Nelson, 2010.62Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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ExerciseStart at thetop with the most senior positions since most movement in organizations is up due to promotions and replacements.63Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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ExerciseMovement analysis hasidentified this year’s need to fill 68 vacancies.167 moves will be required because of promotion from within.64Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Vacancy ModelAnalyzes peopleflow throughout the organization at each functional or compensation levelUse the following information to calculate next year’s supply forecast.HR loss during the yearLevel 88 (president = 100%Level 87 (vice presidents) = 15%Level 86 (directors) = 17%Level 85 (managers) = 20%Level 84 (senior analysts) = 25%Level 83 (analysts) = 50%Replacement Policy (% external / % internal) % external % internalLevel 88 0 100Level 87 10 90Level 86 20 80Level 85 30 70Level 84 55 45Level 83 100 065Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Exercise*Start at thetop and work your way down*Adapted from Strategic Human Resources Planning, Belcourt and McBey, Nelson, 2010.66Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Supply and RetentionProgramsMonitor and control absenteeism and turnover

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Retention programs arevital to keeping experienced, high-performers67Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Costs of ReplacingEmployeesHard CostsAdvertisements

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Headhunter, recruiting fees

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Interview training

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Travel costs

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Admin expenses

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Costs of lostproduction

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Bonuses

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Increased salaries

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Cost to replacea fully proficient employee - 70-200% annual salarySoft CostsLost business and customer contacts

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Decreased productivity due to training and learning curve gaps

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Orientation and trainingtime

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Decline in teammorale and productivity

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Retention ProgramsOffering effectivecommunication programs

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Facilitating an enjoyableand collegial work atmosphere

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Designing meaningful jobs

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Formulating and administeringperformance and compensation systems that reward better performers

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Offering more flexibleand attractive work arrangements) -- flextime, telecommuting, cafeteria-style benefits plans

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Learning TopicsEvolution ofsuccession management

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Steps in thesuccession management process

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Compare job andcompetency approaches

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Identifying high potentialtalent

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Management development methods

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Measuring success ofmanagement succession

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Importance of SuccessionManagementProcess of ensuring that a pool of skilled employees ready to achieve the strategic objectives of the organization72Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Evolution of SuccessionManagementProcess of finding replacement employees for key managerial positions

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Replacement planning hasevolved into succession management by:

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Broadening the focus

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Expanding the timehorizon

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Creating a talentpool

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Reasons for SuccessionManagementProvide opportunities for high-potentialsIdentify replacement needsIncrease the talent pool of promotable employeesContribute to implementing strategic business plansHelp individuals realize their career plansTap the potential for intellectual capitalEncourage the advancement of diverse groupsCope with the effects of voluntary separation programsDecide which workers can be terminatedCope with the effects of downsizingReduce headcount to essential strategically important jobs only74Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

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Step 1Align SuccessionPlans with StrategyOrganizations must start with the business plan

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Job and CompetencyApproachesJob Based Approach –Focus on duties, skills, job experience, and responsibilities required to perform the job

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Not adequate sincejobs change rapidlyCompetency-Based ApproachFocus on measurable attributes

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Differentiate successful employeesfrom non successful

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Hard and softskills

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Step 3Identify High-PotentialEmployeesSeveral approaches to identify managerial talent, including:Temporary replacements

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Replacement charts

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Strategic replacement

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Management Development MethodsPromotions

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Job Rotations

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Special Assignments

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Formal Training andDevelopment

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Management Development MethodsPromotions

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Job Rotations

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Special Assignments

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Formal Training andDevelopment

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Step 5Monitor SuccessionManagementCorporations with strong succession management programs are higher performers in revenue growth, profitability and market share

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Succession Management MetricsIncrease engagement scores

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Increase positive perceptionsof development opportunities

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High potentials’ perceptionsof the succession management process

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Higher participation indevelopmental activities

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HR Metrics –Lag MeasuresIncreased ave # of candidates

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Reduced ave #of positions with no identified successors

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Increased % ofmanagers with replacement plans

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Increased % ofkey positions filled according to plans

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Increased ratio ofinternal to external hires

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Increased retention ratesof key talent

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Increased % ofpositive job evaluations

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Workforce Planning