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Recession brings problems that make workforce planning a must

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Experience from previous recessions suggests the recovery of full employment lags a year or so behind economic recovery. Even when private-sector companies are once more successful, there may be a natural disinclination to recruit to previous levels until there is greater certainty about the economy. In addition, the recession is hitting the public sector later than the private sector, which means that public- sector organisations, especially in the NHS and local government, have yet to face the full consequences of funding cuts. Taken together, these two factors mean that the labour market is unlikely to return to the buoyant days of the early 2000s for some time yet.

From one perspective, a recession might suggest that there is no longer a need for workforce planning. Suddenly, there is no ‘war for talent'; good people with scarce skills are in plentiful supply, the public sector is no longer seeing its trainees depart to better-paid jobs once qualified, and any organisation that has retained its graduate programme has seen applications sky-rocket; they can take their pick from the most able. However, the recession also brings problems that require workforce planning attention. Labour turnover, already low in some organisations, has dropped dramatically, with few people wanting to risk a job move unless absolutely necessary or extremely safe. People staying put always presents difficulties: not only is there no injection of fresh blood, but promotion blockages can lead to frustration and disenchantment, and there is less scope for restructuring. Another issue is that even in recovering companies, and certainly in the public sector, financial and headcount constraints will impact on the ability to recruit; essentially this means that more will have to be done with fewer people. Maximising the use of the existing workforce has all sorts of implications for HR - training, performance management, relocations, selective retention initiatives in some areas and selective redundancies in others - and one of the most important is to ensure that workforce plans are in place for key employee groups, functions, and areas of work.

Conceptually, workforce planning is simple. It is all about looking into existing and future demand for different types of employee, matching this to the current workforce and to likely future supply, putting the two together and assessing the impact on training, recruitment and retention plans. A simple, often quoted definition, is that workforce planning involves ensuring that there are the right number of people, with the right skills, in the right place, at the right time. It involves a lot of different activities: understanding the strategic direction of the organisation, finding out about things, talking to people, understanding the existing workforce and the labour market, manipulating data, presenting analyses and their implications clearly to the organisation, and helping to translate workforce plans and forecasts into action plans.

However, because workforce planning is all about people, and because it takes a longer-term look (in some organisations, six months is long term; in others it might be 10 years or more), actually doing workforce planning in practice is much harder than it sounds. Priorities shift, managers get distracted, politicians change direction, and the economy does unexpected things. At a recent Institute for Employment Studies (IES) event, participants quoted all sorts of things that get in the way of effective workforce planning: lack of strategic direction, poor quality data, or data not in the right format, getting workforce planning on the senior management agenda, choosing where to put workforce planning energies, getting the organisation to think long term, and extracting sensible demand forecasts from managers.

To make an impact, it is best not to dissipate workforce planning energies too widely. Instead of trying to produce a comprehensive plan for the whole organisation, focus on key activities and employee groups. This does not mean ignoring the rest, as it is essential that workforce planners have a good understanding of the workforce as a whole, in order to identify ‘hot spots' and future sources of supply. However, helping the organisation to staff effectively its areas of highest risk (or greatest pain) is probably the most efficient way of using workforce planning resources.

Understanding workforce demand is notoriously difficult. Common problems include assuming the future will be the same as the past; failing to think through the implications of change, both internal and in the external environment; and not factoring in productivity improvement. The end result is that workforce forecasts look remarkably similar to the existing picture - even though managers, if pressed, often admit that their existing workforce profile is far from ideal.

Demand setting, if done at all, tends to use a variety of methods: financially derived (what the budget can afford, or labour unit costs), ratios (of full-time equivalents required for a certain level of activity), trend analysis (follow the direction of the trend), benchmarking (see what others are doing), and professional judgment are probably the most common. Sophisticated organisations may takes things further and use business process modelling, or even scenario setting.

In practice, demand setting will need to involve managers, who have a better understanding of their workforce and area of activity than a centrally-based workforce planner. However, involving managers has its own challenges. There are all sorts of reasons why managers may be reluctant to commit themselves to workforce forecasts - including fear of losing part of the budget, difficulties in thinking longer term, being too busy with day-to-day activities, and reluctance to admit that they need help with a difficult task. It is often useful to involve HR business partners in discussions with managers, and to try some mind-loosening exercises, such as a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, before getting into the nitty-gritty of workforce numbers. In practice, two or three meetings with a manager and perhaps his/her direct reports may be necessary before a workforce forecast is arrived at. Questions to ask are:

  Do workforce problems inhibit our ability to meet business goals?

  What items come up repeatedly in appraisals or personal development plans as weaknesses or development needs?

  Are there roles we can't do, or jobs we can't fill? What do internal candidates lack?

  Are there better ways of working? What might be inhibiting these?

  Where will the business be changing in nature? What are the workforce implications?

  Are there external changes (for example, legislation) that will affect the work we do and how we do it? Which employee groups will be affected?

Before spending too much time considering external sources of supply, it is worth remembering the obvious, but often neglected point: your future supply (at least for the next few years) is, for the most part, already with you. A significant proportion of your current workforce will still be with you in five years - maybe even in 10 years if your workforce is very stable. This means that establishing a really good understanding of the existing workforce is crucial. In particular, look at:

  age and length of service profiles

  employee turnover rates (often called wastage rates)

  resourcing patterns, such as key points of entry and exit, career structures, and the balance between external hires and internal promotion.

When thinking about new entrants (to replace leavers, or to staff expansions), it is important to consider whether the labour market is local, regional, national or international and whether there are skills shortages or surpluses in the labour market that could inform external recruitment versus ‘grow your own' decisions.

Many sources of information about the labour market are readily available. The Office for National Statistics (www.statistics.gov.uk) has information about employment/unemployment rates and the UK's demography, while the Department for Children, Families and Schools (www.dcsf.gov.uk/trends) has information about educational attainment and education providers. Council websites often contain a wealth of information about the local population and businesses, and JobCentre Plus can help with local vacancies and employment/unemployment rates. Sector skills councils are helpful for particular employee groups.

Dilys Robinson is principal research fellow at the Institute for Employment Studies

This article is part of a new report, The HR Agenda for 2010: Ten Top Trends as we come out of Recession. It was prepared by the Institute for Employment Studies, an independent centre for research and evidence-based consultancy.