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Effects of Poor Workforce Planning on Business

October 2, 2015

Talent shortfalls have serious implications for business results, and poor workforce planning is a major cause that organizations are struggling to address, according to a new Visier-sponsored report titled “Tackling Talent Strategically: Winning with Workforce Planning,” released by Harvard Business Review Analytic Services (HBR-AS).

Workforce planning is ultimately about ensuring you have the talent needed to deliver on your business goals. The majority of leaders (73 percent) have experienced talent shortfalls leading to missed business objectives as a result of poor workforce planning (the process through which companies align their workforce supply with their business needs), reveals the report, which is based on a survey of 323 corporate executives.

Companies already have plenty of useful workforce data distributed across business functions. Ideally, they would leverage this data, connect and analyze it to understand the current state of their workforce, and use it to inform discussions about the talent needed to meet business objectives.

Advanced workforce planning includes understanding costs and hiring trends and attrition, and the economic and business factors that drive them, and using this information to model scenarios to determine which are optimal for achieving your objectives.

“Executives recognize that workforce planning is necessary to secure both the right talent, and the right amount of it, to meet business goals, but our research shows they clearly have a long way to go in making this a reality,” says Alex Clemente, managing director of Harvard Business Review Analytic Services.

Moving Beyond Finance-Driven Headcount Planning

In PwC’s most recent Annual Global CEO Survey, over 70 percent of CEOs identified the “availability of key skills” as one of the top three threats to their companies — an eight-year high for that question.

Workforce Planning is Stuck on the Basics

Although business leaders know talent shortfalls prevent their companies from achieving their business goals, the HBR-AS survey reveals that they have not aligned their workforce planning process to manage the issue:

–Almost half (44 percent) of respondents consider their workforce plans to be driven by finance and to not take talent availability considerations into account.

–Although 72 percent would like to be able to model and compare staffing strategies across locations, teams, seniority, skills and other factors to develop better workforce plans, fewer than one-fourth (22 percent) are able to do so now.

See: Four emerging trends in strategic workforce planning

To improve planning, 57 percent of respondents say they need data on what positions/talent are required to meet business objectives, and 57 percent say they need data on what is happening with talent acquisition and attrition. Companies already have this type of information distributed across business functions and in multiple Human Resource Management systems.

“For many organizations, workforce planning is a finance-driven process focused primarily on managing headcount within the cost budget. But the budgets created by finance are disconnected from the actual talent needed to execute the business objectives,” says John Schwarz, Co-Founder and CEO of Visier.

Most companies still approach workforce planning as an annual exercise in which personnel spending is managed as a cost without considering the skills or talent needed to meet business objectives. HR and business units have little insight into whether the number of employees they have, or their capabilities, are sufficient to achieve revenue and other goals.

Schwarz added: “Consequently, the important decisions related to recruitment, retention, compensation, and productivity are constrained by budgets that do not reflect the people reality. It is urgent that businesses invest to bridge this critical and potentially fatal gap with a workforce intelligence solution.”

“Companies seem to wait until they have a big change in strategy, or an acquisition, or a restructuring before they do any workforce planning,” observes Karen O’Leonard, director of global client solutions at consultancy Towers Watson and former vice president of analytics at Bersin by Deloitte. To execute the workforce planning process, you need people from the business units, finance, and HR to make decisions collectively.

Also read: HRBoss Releases ‘2015 APAC Workforce Planning Trends & Practices’

Image credit: LinkedIn.com

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