Workforce Planning

Workforce PlanningPresented by Senga Consulting Inc.

Participants will learn the…

Categories of HR forecasting. Rationale for attention to specialist, technical and executive

personnel in forecasting. Impact of environmental and organizational variables on HR

demand and supply. Various demand forecasting techniques. Methods of determining external and internal HR supply. Relationship between forecasting and succession planning.

Senga Consulting Inc. Copyright © 2009 | All Rights Reserved2

Senga Consulting Inc. Copyright © 2009 | All Rights Reserved

Workforce Planning

3

Workforce Planning

Business process for ensuring an organization has access to talent to ensure future success.

Access to talent includes considering all access sources. Talent: The skills, knowledge, predisposition and ability to

undertake required activities including decision making.


Getting Started

Obtain support from senior leaders. Communicate benefits and results to managers. Establish a workforce planning team of knowledgeable

employees from different functional areas and levels. Develop and implement a plan. Solicit continuous feedback for ongoing improvements.


Workforce Planning Steps


Step 1Supply Analysis Staffing levels Workforce skills Workforce demographics\ Employment trends

Step 2Demand Analysis Workforce skills needed Staffing patterns Anticipated workload changes

Step 3Gap Analysis Compare supply analysis with demand analysis Determine future gaps (shortages) and surpluses (excesses) Identify future changes in workforce demographics Identify areas in which management action will be needed

Step 4Strategy Development

Plano Recruitingo Successiono Employee development and retrainingo Organizational change

6

Workforce Planning Model


Strategic Direction Setting

Supply, Demand,

Discrepancies

Develop Action Plan

Implement

Action Plan

Monitor, Evaluate,

Revise

7

Environmental Scanning


Government Regulations

Cost and availability of capital

Labour availability

Competition

Supplier power

Customer expectations

Globalization

Technology

• Raw Materials• HR• Information• Financial resources• Equipment

INPUTS TRANSFORMATION

• Product/Services• Employee Behaviour• Profits/losses• Waste/Pollution

OUTPUTS

8

Techniques

Scanning – identify early signals of changes and trends. Monitoring – follow key indicators that affect the organization. Forecasting – after monitoring, project the impact on the

organization. Assessing – describe the impact of the monitored trend on the

organization, make a judgment of the probability of outcomes.


Forecasting Methods

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

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

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

Scenario Planning –creating future scenarios that differ radically from those created by extrapolation of present trends


Environmental Factors

Economic climate –the economy affects HR management Globalization – affects sovereignty, prosperity, jobs, wages, and

social legislation Political and legislative factors – influence organizations with

changes to laws and regulations Technological factors –new issues include online HR functions,

identity theft, e-learning, answering email on vacations Demographic factors –include age, gender, family status,

education, economic status, labour market Social and cultural factors


Exercise

What key environmental factors affect your organization’s ability to achieve its goals?


What are the HR implications?


The HR Forecasting Process

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Learning Topics

Categories of HR forecasting activity and their relationship to the HR planning process

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

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

Various stages in the process of determining net HR requirements


Forecasting Activity Categories


Transactional-based forecasting

Event-based forecasting

Process-based forecasting

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Human Resources Supply and Demand


Human Resources

Supply

Human Resources Demand

16

Key Personnel Analyses


Key Personnel

Specialist Technical

Professional

Employment Equity

Managers and Executives

Recruits

17

Designated Group

Receive the most discrimination within organizations


D

G

Aboriginal descent

People with disabilities

Visible minorities

Women

18

5 Stages of the Forecasting Process


Identify Goals

Identify demand

Assess Internal Supply

Determine Demand

Develop Strategies

Organizational Factors

Corporate mission, strategic goals Operational goals, production budgets HR policies Organizational structure, restructuring Worker KSAs, competencies, expectations HRMS level of development Organizational culture, climate, job satisfaction,

communications Job analysis


Environmental Factors

Economic situation Labour markets and unions Government laws and regulations Industry and product life cycles Technological changes Competitor labour usage Global market for skilled labour Demographic changes


Time Horizons

3. Medium-run – 2 - 5 years

4. Long-run– 5 or more years


1. Current – up to 1 year

2. Short-run – 1 - 2 years

Ascertain HR Supply


Internal SupplyOrganizational

workforce who can be retrained,

promoted, transferred, fill

future requirements

External SupplyEmployees

receiving training, working for

competitors, members of professional

associations, in transition or unemployed

Determine NET HR Requirements

External supply requirements = replacement + change supply components

Change supply = hiring to increase (or decrease) the overall staffing level

Replacement supply = hiring to replace all normal losses

External supply = current workforce # x (replacement % per year + change % per year)


Example

External supply = current workforce x (replacement % per yr + change % per yr)


Deficit =

1000 x (4% per year (0.04) + -7% per year (-0.03)

40 + -70 = -30Need to reduce by 30 employees

Surplus =

1000 x (4 % per year (0.04) + 2 % per year (0.02)

40 + 20 = 60Need for 60 employees

Your Turn

External supply = current workforce x (replacement % per yr + change % per yr)


Deficit =

10,000 x (6% per year (0.06) + -8% per year (-0.08)

+ = Need to reduce by employees

Surplus =

10,000 x (3.5 % per year (0.035) + 3 % per year (0.03)

+ = Need to hire employees

HR Surplus/Deficit

Internal workforce supply exceeds the organization’s requirement or demand for personnel

Demand exceeds the current resources available in the organization's workforce



HR Demand

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Learning Topics

Demand forecasting Linkages between labour demand forecasting and the supply Various demand forecasting techniques


HR Demand

Projected human resources requirement


Trend Analysis

Historical relationship between a business index (e.g., sales, contracts, units sold etc.) and the number of employees required to achieve that index (labour demand)


Effective Trend Analysis

Five steps to conducting an effective index/trend analysis:1. Select the appropriate business index2. Track the index over time3. Track the total number of employees over time4. Calculate the average ratio of the business index to the total

number of employees5. E.g. employee requirement ratio - the relationship between

the business index and the demand for labour6. Calculate the Forecasted Demand for Labour


Employee Requirement Ratio

Year Sales ($000) # of Employees Ratio (Sales/EE)

2007 $3,000 123 24.39

2008 3,200 155 20.65

2009 3,300 170 19.41

2010 3,400 165 20.61

2011 3,560 180 19.78

2012 3,600 189 19.05

2013 3,800 190 20.00

2014 4,000 199 20.10


Current Year

Steps for Delphi Technique


Define and refine the issue or question

Identify the experts, terms, and time horizon

Orient the experts

Issue the first-round questionnaire

Issue the first-round summary and second-round questionnaire

Continue issuing questionnaires

Sequential surveys with feedback on opinions in previous rounds

Steps for the Nominal Group Technique


Define and Refine the Issue or Question and the Relevant Time Horizon

Select the Experts

Issue the HR Demand Statement to the Experts

Apply Expert Knowledge, State Assumptions, and Prepare an Estimate

Meet Face-to-Face

Discuss the Demand Estimates and Assumptions

Vote Secretly to Determine the Expert Demand Assessment

Long-run forecasting technique utilizing expert assessments

HR Budgets

Quantitative, operational or 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 department


HR Budgets: Staffing Table

Staff Demand Requirements Sales ($ Millions)

Executive Positions $1-10 >$10-25 >$25-50 >$50-75

President 1 1 1 1

Vice Presidents 1 1 2 3

Directors 3 3 4 5

Management Positions

HR 3 4 7 10

Financial 3 5 7 11

Operations 2 2 4 6

Marketing 1 2 2 3

Sales 2 2 3 4


Scenario Forecasts

Projections of future demand for human resources based on differing assumptions about future events.


Optimistic

Normal

Pessimistic

Sal

es

TimeNow T + 2 YearsT + 1 Year T + 3 Years

Regression Analysis

Presupposes a linear relationship between independent (casual) variables and dependent (target) variable, e.g., HR demand

Linearity is the relationship between the independent and dependent variables


Regression Analysis


Y –

Dep

ende

nt V

aria

ble

X – Independent Variable

Y = dependent variable (HR demand)A = constant (Y intercept)B = slope of linear relationship between X and YX = independent variable (e.g. level of sales)

A

B

Regression Prediction


𝐵= σ𝑋𝑌− 𝑁ሺ𝑋തሻ(𝑌ത)σ(𝑋2) − 𝑁(𝑋ത)2

Y = 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)

Where

ExerciseData


XSales

($ Millions)2.03.54.56.07.0

Y# of Marketing Personnel

2032425566

5 Sets of observations

Exercise Step 1Calculate XY, X2, average X and average Y


XSales

($ Millions)2.02.53.55.06.5

19.5

Y# of

Employees2528303854

175

XY

5070

105190351

766

X2

4.006.25

12.2525.0042.25

89.75

Average X = 19.5/5 = 3.9 Average Y = 175/5 = 35

N = 5

Exercise Step 2Calculate the value of B (slope of the linear relationship between X and Y)


XY5070

105190351

766

X2

4.006.25

12.2525.0042.25

89.75

Average X = 3.9

𝐵= σ𝑋𝑌− 𝑁ሺ𝑋തሻ(𝑌ത)σ(𝑋2) − 𝑁(𝑋ത)2

𝐵= 766− 5ሺ3.9ሻ(35)89.75− 5(3.9)2 𝐵= 766− 68389.75− 76.05 𝐵= 6.09

N = 5 Average Y = 35

Exercise Step 3Calculate A (constant or intercept)


IFY = A + BXThen𝐴= 𝑌ത− 𝐵𝑋ത

ANDA = 35 – (6.09)(3.9)A = 11.23

Average X = 3.9 Average Y = 35 B = 6.09

Exercise Step 4Determine the regression prediction equation


Y = 11.23 + (6.09)(X)

A = 11.23

X = Dependent Variable

B = 6.09

Whew! 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.

Y = A + BX

Exercise Step 5Calculate predicted HR demand (Y) by inserting values for X


Predict the HR demand for personnel at $8 million and $10 million.

Y= 11.23 + (6.09)(X)

A = 11.23

X = Sales ($M)

B = 6.09

Y = A + BX

Y = 11.23 + (6.09)(10)

Y = 72.1872/73 Staff required

A = 11.23

X = 10

B = 6.09

Y = A + BX

Y = 11.23 + (6.09)(8)

Y = 59.9960 Staff required

A = 11.23

X = 8

B = 6.09

Y = A + BX

$10 million$8 million


Ascertaining HR Supply

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Learning Topics

Relationship between demand / supply forecasting Relationship between forecasting and replacement management Methods of determining external and internal supply of

employees such as: Skills and management inventories, Replacement analysis, Markov models, Linear programming, Movement analysis, Vacancy/renewal


Human Resources Supply

Source of workers to meet demand acquired internally or externally.


Skills Inventory

Record held on employee except management or professionals1. Personal information2. Education, training and skill competencies, licensing etc.3. Work history4. Performance appraisals5. Career information6. Hobbies, interests, volunteerism, community involvement


Management Inventory

Record for managerial, professional, or technical personnel that includes all elements in the skills inventory with the addition of information on specialized duties, responsibilities, and accountabilities.

1. History of management or professional jobs held2. A record of management or professional training courses3. Key accountabilities for the current job4. Assessment centre and appraisal data5. Professional and industry association memberships


Replacement Management

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

Process of finding employee for key managerial positions

1. Long-term successiona) Training and work experience to enable individuals to assume higher-

level job appointments in the future

2. Short-term emergency replacementa) Individuals who have quit, been terminated due to performance

problems, have died, and so on


Replacement Analysis

Improve effectively filling vacancies


VP SalesJ . O b rey (A 2)

B . A n d rew s (B 3)D . Je ffe rs (C 1)

VP OperationsA . C ha n g (A 2)E . S in g h (B 1)K . P e te rs (C 3)

VP M arketingT . S he rm a n (A 1)

U . L a u (C 1)H Y u e n (D 2)

PresidentJa ck N e w la ndS . L an d a r (A 1)K . C h ow (A 2)

ReadinessA Ready nowB Ready in 1 yearC Ready in 2 yearsD Not suitable for this job

Performance1 Outstanding2 Above average3 Average/good4 Below Average5 Unacceptable

Ripple Effects

Caused when one promotion or transfer in the organization causes several other movements as a series of people are promoted to fill the openings


Markov Model

Produces a series of matrices that detail the various patterns of movement to and from the various jobs in the organization

Determines the likelihood that an individual will display movement behaviours


Sample Markov Matrix*

Year 2010

Year 2009 Senior Analyst

Analyst Clerk Exit

Job A (n = 3) 1(0.25) 1(0.25) 1(0.50)

Job B (n = 5) 1(0.10) 3(0.75) 1(0.15)

Job C (n = 8) 1(0.05) 6(0.90) 1(0.05)

Supply (n = 16) 2 5 6 3


*Adapted from Strategic Human Resources Planning, Belcourt and McBey, Nelson, 2010.

Markov Analysis Conclusions

Number of people who move between job levels annually Number of external hires needed Movement patterns and expected duration in specified jobs

associated with patterns of career progression Number and percentage of starters at a particular job who

target a future job within a specified time


Linear Programming

Mathematical procedure used for project analysis in engineering and business applications

Determine the optimal supply mix to minimize costs or other constraints.


Movement Patterns

1. Remain in current job2. Promotion to higher job classification 3. Lateral move4. Exit from a job (e.g., termination, layoff, voluntary exit)5. Demotion


Movement Analysis

Analyze people supply and the ripple effect that promotions or job losses have on the movements of others in the organization


Exercise*

5% increase for levels 6-9 1 additional level 4 6 additional level 5 Historical annual loss rates

Retirementso 2 positions level 5o 15% levels 6-9Turnovero 10% levels 5 and 6o 15% level 7o 20% level 8o 25% level 9

Positions are start of yearo 1 – level 4o 6 – level 5o 20 – level 6o 32 – level 7o 40 – level 8o 50 – level 9

Senga Consulting Inc. Copyright © 2009 | All Rights Reserved62*Adapted from Strategic Human Resources Planning,

Belcourt and McBey, Nelson, 2010.

Exercise


Start at the top with the most senior positions since most movement in organizations is up due to promotions and replacements.

Level Positions at Start of Period Staff Changes Staff Losses Positions to be Filled

4 1 1 0 1

5 6 6 3 9

6 20 1 5 6

7 32 2 10 12

8 40 2 14 16

9 50 3 21 24

149 15 53 68

Vacancies Total Ripple Movement

1 = 1

9 + 1 = 10

6 + 1 + 9 = 16

12 + 1 + 9 + 6 = 28

16 + 1 + 9 + 6 + 12 = 44

24 + 1 + 9 + 6 + 12 + 16 = 68

68 5 36 18 24 16 167

Exercise


Movement analysis has identified this year’s need to fill 68 vacancies.167 moves will be required because of promotion from within.

Vacancy Model

Analyzes people flow throughout the organization at each functional or compensation level


Use the following information to calculate next year’s supply forecast.

HR loss during the year

Level 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 % internal

Level 88 0 100Level 87 10 90Level 86 20 80Level 85 30 70Level 84 55 45Level 83 100 0

Exercise*


Salary Level

Positions at Start of Year

Annual Losses Promotions to Level

Level Outflows External Hiring

1 1 1 1 1 0

2 4 1 2 2 0

3 18 3 4 5 1

4 45 9 9 13 4

5 88 22 14 31 17

6 156 78 0 92 92

Total 314 114 30 144 114

*Adapted from Strategic Human Resources Planning, Belcourt and McBey, Nelson, 2010.

Start at the top and work your way down

Supply and Retention Programs

Monitor and control absenteeism and turnover Retention programs are vital to keeping experienced,

high-performers


Costs of Replacing Employees

Hard Costs Advertisements Headhunter, recruiting fees Interview training Travel costs Admin expenses Costs of lost production Bonuses Increased salaries Cost to replace a fully proficient

employee - 70-200% annual salary

Soft Costs Lost business and customer

contacts Decreased productivity due to

training and learning curve gaps Orientation and training time Decline in team morale and

productivity Increased turnover due to the

“follow-me” effect


Retention Programs

Offering effective communication programs Facilitating an enjoyable and collegial work atmosphere Designing meaningful jobs Formulating and administering performance and

compensation systems that reward better performers Offering more flexible and attractive work arrangements) --

flextime, telecommuting, cafeteria-style benefits plans Mentoring and developing intellectual capital



Succession Management

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Learning Topics

Evolution of succession management Steps in the succession management process Compare job and competency approaches Identifying high potential talent Management development methods Measuring success of management succession Limitation of succession management


Importance of Succession Management

Process of ensuring that a pool of skilled employees ready to achieve the strategic objectives of the organization


Evolution of Succession Management

Process of finding replacement employees for key managerial positions

Replacement planning has evolved into succession management by: Broadening the focus Expanding the time horizon Creating a talent pool Improving the evaluation system


Reasons for Succession Management

1. Provide opportunities for high-potentials2. Identify replacement needs3. Increase the talent pool of promotable employees4. Contribute to implementing strategic business plans5. Help individuals realize their career plans6. Tap the potential for intellectual capital7. Encourage the advancement of diverse groups8. Cope with the effects of voluntary separation programs9. Decide which workers can be terminated10. Cope with the effects of downsizing11. Reduce headcount to essential strategically important jobs only


Succession Management Process

1

•Align Succession Management Plans with Strategy

2

•Identify the Skills and Competencies Needed to Meet Strategic Objectives

3

•Identify High-Potential Employees

4

•Provide Developmental Opportunities and Experiences

5

•Monitor Succession Management


Step 1Align Succession Plans with Strategy

Organizations must start with the business plan Using environmental scanning, managers try to predict where

the organization will be in three to five to ten years


Step 2Identify the Skills and Competencies

1. Job-Based Approach

2. Competency-Based Approach


Job and Competency Approaches

Job Based Approach – Focus on duties, skills, job

experience, and responsibilities required to perform the job

Not adequate since jobs change rapidly

Competency-Based Approach Focus on measurable attributes Differentiate successful employees

from non successful Hard and soft skills Produce more flexible individuals


Types of Competencies

1. Core competencies

2. Role or specific competencies

3. Unique or distinctive competencies


Step 3Identify High-Potential Employees

Several approaches to identify managerial talent, including: Temporary replacements Replacement charts Strategic replacement Talent management culture


Management Development Methods

Promotions Job Rotations Special Assignments Formal Training and Development Mentoring and Coaching


Leadership Development Activities*

Use% Very Effective

% Moderate or Extensive Use

Special projects within job responsibility 77 69

Special projects outside of job responsibility 46 55

Expatriate assignments 26 54

Coaching with internal coaches/mentors 48 45

Formal workshops 85 42

Coaching with external coaches/mentors 28 42

Articles/books 65 27

Tests, assessments or other measures of skills 52 26

Computer based learning 38 16


* From Strategic Human Resource Planning, Belcourt and McBey, Nelson, 2010.

Management Development Methods

Promotions Job Rotations Special Assignments Formal Training and Development Mentoring and Coaching


Step 5 Monitor Succession Management

Corporations with strong succession management programs are higher performers in revenue growth, profitability and market share

HR metrics can be used to help monitor succession management


Succession Management Metrics

Increase engagement scores Increase positive perceptions of development opportunities High potentials’ perceptions of the succession management

process Higher participation in developmental activities Greater number involved in the mentoring process


HR Metrics – Lag Measures

Increased ave # of candidates

Reduced ave # of positions with no identified successors

Increased % of managers with replacement plans

Increased % of key positions filled according to plans

Increased ratio of internal to external hires

Increased retention rates of key talent

Increased % of positive job evaluations

Increased # of manager as talent developers


Contact Information

Wayne Rawcliffe

Senga Consulting Inc.

604.909.3840

205, 1275 West 6th Avenue

Vancouver, BC V6H 1A6

[email protected]

www.senga.ca


Workforce Planning

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