· 10 min read · Features

Strategic workforce planning is just the business for the savvy HR director


Before launching startup company Incahoot.com six months ago, its CEO (and, by default, HRD), John Evans had a significantly larger headcount to oversee than the eight staff he currently employs. In his capacity as Thames Water’s global strategy development director, “it was more like 2,000”, he says. “But even there,” he adds, “size of organisation was no better protector against the same problem of workforce planning that I face at Incahoot. If anything, it was worse at Thames. In every company, large or small, taking on people seems to have become a much more difficult decision now.” It's a complex game of chess to get it right, and not enough are trying the right gambits.

Incahoot pools the buying power of its members to get cheaper mobile phone, broadband and home insurance, but for Evans, hiring is so tight, it is whether or not he can take on just one more member of staff that is the harsh reality of the economic situation.

That same economy is causing, some say, a crisis in workforce planning. So much uncertainty (see box 2, 'Mixed economic message', at the end of this feature) is provoking a planning paralysis, suggests the CIPD's June 2011 Talent Planning Survey. Nearly 50% of companies have no formal workforce planning at all, the survey shows. And 82%, up from 59% last year, have had their recruitment budgets reduced, while 20% of firms are saying they can only plan a year (at most) in advance.

"Economic uncertainty means planning timelines have shortened from years to just a matter of months at a time," says Dilys Robinson, principal research fellow, Institute of Employment Studies. "Focus has shifted more to survival rather than strategy, and with conflicting reports about the recovery, planning is in a difficult place reputationally within businesses. Yes, companies accept they have probably lost talented people by cutting headcount rather than by assessing their skills; and there are shortages at all levels now, but it's the FD that is still calling the shots."

According to Tom Hadley, head of policy and professional services, Recruitment and Employment Confederation: "Financial directors are much more cautious about hiring, because it's suddenly a much bigger decision". This is something that doesn't help HRDs when they have to convince FDs about securing talent pipelines and having capability in place ready for when (if?) recovery occurs.

"The problem," Hadley explains, "is that FDs are erring on the side of having fewer – rather than just enough or more – staff than needed, because they would prefer this than have unused, ie expensive, spare capacity.

"At the root of the planning problem," he concludes, "is that it typically builds in having extra resource, which – despite the well-known mantra of this being good for when the upturn happens – is simply not popular right now."

Robinson says: "It makes sense to have more than you need, but HRDs have not often proved they are ready to respond quickly enough, even when they do need to hire." She adds: "It is only when other managers trust the HR function that planning, in what still feels like recessionary times, still works."

It has been noted organisations have got used to working with fewer staff, and that this has now become the 'new- normal' number which organisations think they need - something which skews how much headcount bosses think they need. Moreover, shortfalls that still exist are being offered to interims or freelancers, as an alternative to permanent recruitment. Some 29% of firms say they are using contractors this way this year, up 6% on last year, according to the CIPD.

But short of becoming an economist overnight, what can the HRD really do? "It is tough," admits Evans. "We plan to be at about 12 staff by the end of the year, then 35 a year after that and, if all goes well, 500 in five years. But I'm lucky – I am also the boss, so I don't have to persuade anyone else of the need to invest in people."

But despite the buck stopping with him, Evans is cautious. "Our planning is still based on trigger points: we'll do some marketing, prove it works, and we'll take a few more people on, and so on. There's an expectation teams will expand, and we never feel like we have spare resource. We still need the business first before we take on more people."

Evans admits he hires according to workload, rather than headcount per se; so he will always see what extra workload people can absorb before committing to hiring someone new. He confesses the strategy makes it even less likely other HRDs in the same position can convince CEOs to hire in anticipation. "The other problem," he continues, "is there is always the suspicion you can restructure your processes better, rather than take on more headcount. I think we'll get to that stage when we hit 30-40 people. We'll be asking, 'are people maximising their time efficiently?'"

Poundland is one major company that is applying an organisational development model, which includes a minimum staffing ratio the firm will not go below. This has driven successful growth of the business, even in tough economic times (see Box 1 at end of this feature).

The need for having greater insight into the skills base in different departments plays into the hands of HR providers who think they can do it for them. They argue workforce planning is first of all about talent management. "We think the HRD needs to move more into the chief operating officer space," argues Matt Crosby, head of Hay Group UK's 'Building Effective Organisations' practice. "In the post- recession bubble companies are still trading in, the need for this COO solution has become more urgent, because there has been a mismatch between the business and the human planning side. Companies are having to decide whether they are going to be operational or transformational, but to do this, they have to understand that the 'more from less' mentality needs addressing and that companies must at least ensure the right people are with the right jobs."

Hay Group has its own product, Spectrum, which helps HRDs assess their capability through gap analysis and see if they have the right amount of 'stretch' potential. "Apart from positioning planning as something far more definitively linked to organisational outcomes, it puts attention on companies' quality of data – which is still a huge issue – and is particularly important to address in clustering global teams/skill sets," adds Hay Group's head of job evaluation practice, Serena Jones. "Having a plan isn't a crystal ball, but it is a view of what strategies HRDs ought to take. It removes the distraction that the uncertain economy brings, by making the planning process more scenarios-based," she says.

Demand for planning products has shot up precisely as the economy has grown more uncertain.

Vincent Belliveau, MD of learning and talent management provider CornerstoneOnDemand, says the number of users for its platform has grown from 300,000 to five million in the past four years. Research company Bursin & Associates reports companies using planning software have 44% higher growth revenue and 26% higher revenue per employee.

Belliveau says the payback is more than just this: "Resource planning positively impacts on staff engagement. Staff who know their careers are being managed respond better to demands placed on them. The career ladder is being replaced by the 'career lattice'." He adds: "Planning enables companies to offer staff possibilities of where they can take their career. It is no surprise that those firms that use planning tools also have 27% lower staff turnover, which helps the planning process more, as HRDs can account for less attrition."

Workforce planning was born out of succession planning, but succession planning concerned itself with the top. Experts say workforce planning must embrace an organisation-wide view and, to its credit, it is moving in one interesting direction. "There aren't tools that give a true, 360-degree view of the workplace," says Trevor Ward, VP, EMEA operations, of work management company, AtTask. "What new tools are beginning to do, however, is to present the concept of work differently: as something that is task-driven, simply splitting up to the right people with the right skills, and seeing what's left."

It sounds simple, but is a million miles from how most companies are structured. Ward explains: "Organisational objectives are typically sub-divided by department, and then by managers, who disseminate work further. In the real world, though, tasks aren't always easily categorised like this – they don't go to the right people with the right skills. It means they take longer, giving a skewed picture of resourcing needs." He adds: "At the same time, the concept of work itself is becoming more portfolio-style. We believe organising needs to marry these two trends together. Thinking about work as 'tasks' is the root to planning. HRDs can then start to have better conversations about resource, because they can see how dispersing work to experts in the organisation affects capability in real time. It is only when you task-manage, or task-predict, that planners can see hiring need."

Some companies are starting to test this out. Software company Sage is one such early adopter through its 160-strong IT department. Its mission statement is to double its customer base in the next five years but with almost the same staffing levels, so planning has become mission-critical.

Sage's IT function is suited to this sort of administration of work, as any problems from staff are emailed as 'jobs' in a queue that get assigned to people. IT projects are also packaged in timeframes, with delivery dates. But, as Jason Follin, Sage's IS programme office manager – and the person in charge of the pilot – explains, beyond logging calls, he lacked knowledge of what resourcing he needed: "We didn't have controls or structures about how we would or could meet demand. We are now in the process of defining what 'demand' is," Follin says. "In the past, anyone could put a request for, say, a website, but we had no assessment of it that we could use to meet this."

The 'road-mapping' tasks approach means Follin can now see what projects exist and who is working on which. After a 'time-based' evaluation of staff, Sage now knows each IT employee has 50% capacity left to do 'projects' (ie anything other than routine, business-as-usual work), and work can be assigned to those only with the right skills, or who aren't already assigned up to their 50% limit. "This has great forecasting potential, as we can map our skills and project time work against projects in the pipeline. We are already seeing we don't have certain skills for another six months, when these people have finished existing projects, but it enables us to decide whether we de-prioritise an existing project, or need to hire new people for it."

Sage knows where resource conflict exists, but it can keep abreast of where stretch tasks overflow into strain and distress. "The plan is to move this to the whole of the business, as two-thirds of our work is technology/task related," Follin says. "One scenario has already allowed us to have planning conversations with greater accuracy. For instance, a big project exists where we said we could complete it in one year if we threw resource at it, but four if we did it as a series of lower priority tasks, dovetailing with people's availability. We have plumped for the four-year option."

It may seem like it is taking the slow train, but at least Sage has made a decision based on data and information about what resources it has and what it thinks it needs. That surely will keep it nimble and able to respond to the upturn if and when it occurs.



The £1 bargain store, Poundland, was one of the winners of the economic downturn. It opened 57 stores last year and 34 the year before (many out of the carcasses of the doomed Woolworths brand). Last year, it posted a whopping 81.5% rise in profits, a 29% rise in turnover and helped create 2,000 new jobs. HRD Mark Powell – who, ironically, was formerly at Woolworths – admits: "We're not in the same knife-edge state as many retailers." He says workforce planning for him is still a mixture of making aggressive store-opening timetables, taking a view on indicators to growth, but then acting very decisively on these.

"We plan to open 60 more stores in the coming 12 months, but we had already identified up to 1,000 potential sites," Powell says. "Our decisions about which ones get the green light are based around identifying areas that fit our profile customers – 70% of shoppers are mums and of a demographic who love a bargain."

According to Powell, Poundland stores can have up to 20-25 members of staff – a mixture of permanent and part-time employees. He says his biggest problem is not 'how many people?', but what quality they are, to sustain the period of growth: "We have tended to take a lot of Jobcentre Plus candidates, but we want our people to more closely reflect our customers. We think that if we improve this, the 40% attrition at colleague level will also improve. It will allow us to plan better for new stores if we are not having to re-recruit to stand still."

This is in contrast to his time at Woolworths, Powell says, where "we did err on the side of caution when it came to expansion. We under-recruited permanents and relied more on contractors flexing up, in essence, stores we ran too lean, and they didn't match customer expectations."

Powell says he operates a typical cost-to-sales ratio to find the right number of staff for stores, and that continued staffing is linked to turnover costs [about 7.5% of sales are invested in wages]. "We always prefer to staff up to these ratios, and not cut corners, because in the end it won't work if customers don't see the number of people they expect in-store."



HRDs will not find it easy picking through contradictory data on the state of the economy and the UK's spending power in the past year:

10 July Retailers have issued 26 profit warnings already this year, more than the whole of 2010

8 July The UK's multiple retailers have closed 20 stores a day between January and May this year, according to PwC

4 July Growth: the financial services sector grew in the three months to June, but at a slower pace than in the past three quarters, according to the CBI/PwC Financial Services Survey

2 July Number of long-term jobless rockets: 18% of all jobseekers have been looking for work for more than one year – a rise of 8%, according to totaljobs.com

1 July Insolvencies fall from 0.16% to 0.10% for large businesses, according to Experian

30 June Consumer confidence falls four points to minus 25, according to Gfk NOP

Late June-Early July A string of retailers collapses, including Moben Kitchens, Thorntons, Jane Norman and Habitat

22 June 57% of London firms are hiring 'as normal' and 65% say they expect to expand, according to a CBI/KPMG survey

21 June CBI/Harvey Nash Employment Trends Survey says private sector jobs are "picking up", with 29% of employers (employing more than three million people) planning to increase permanent recruitment in the next six months

15 June UK unemployment falls by 88,000, to 2.43 million, says ONS

28 April Retail Employment Monitor finds the number of full-time jobs in the retail sector increased by just 0.5% in Q1 2011 – the slowest growth since 2009.

13 April Largest month-on-month gain in new vacancies advertised – up 12%, according to totaljobs.com

11 April IMF cuts economic growth forecast for 2011 to 1.75%

6 April Industrial production falls 1.2%

5 April REC finds job market is growing, but at a lower rate than in February

23 March Chancellor cuts 2011 growth forecast to 1.7%

25 January UK economy suffers shock 0.5% contraction

19 January 2011 Work Foundation predicts jobs recovery will halt this year, as total employment falls by 69,000 and the number of economically inactive people rises by 111,000

5 December 2010 British Chambers of Commerce downgrades UK growth forecast from 2.2% to 1.9%