Strategic Workforce Planning (SWP)

Strategic Workforce Planning: Why Bother?

Strategic Workforce Planning (SWP)

The strongest and most viable companies use advanced technologies, are guided by fair principles, set well-thought-out goals, and employ highly motivated, competent people who practically identify themselves with the company. These are flexible companies that grow quickly and confidently. Yet success is unlikely if you simply copy someone else’s strategy. To adapt well to the rapidly changing conditions dictated by today’s market, a company must have clear goals, a vision of the future, its mission, and values aligned with customer interests, as well as strategic principles developed on that basis.

Many people wonder why, among commercial enterprises created under seemingly equal conditions, only a third survive. There are many reasons. Some fail to withstand competitive pressure; others fail to find their niche; still others do not manage to restructure and launch the next development cycle in time. The list could go on almost indefinitely.

The strongest and most viable companies use advanced technologies, are guided by fair principles, set well-thought-out goals, and employ highly motivated, competent people who practically identify themselves with the company. These are flexible companies developing quickly and confidently. Perhaps that is the model to emulate — the optimal pattern?

Of course, one can study the experience of a successful organization in great detail for a long time, but achieving success by copying someone else’s strategy is unlikely. More likely, it will lead to the opposite result, because identical conditions do not exist — no more than perfectly identical twins do.

To adapt well to the rapidly changing conditions dictated by the modern market, a company must have clear goals, a vision of the future, its mission, and values consistent with customers’ interests, along with strategic principles developed on that foundation.

It should be noted that goals can be articulated in two ways: for external observers and consumers of the company’s products on the one hand, and for its own employees on the other. All other elements need to be built in accordance with the strategic plan, taking into account every sphere of interaction between the organization and its people, and fitting organically into the company’s overall strategy — or rather, deriving from it. In fact, this means that the goals of workforce planning must be derived from the company’s goals. Consequently, the strategic plan for people management is an integral part of the organization’s strategic plan (see figure).

Thus, the backbone is the mission and goals, on the basis of which HR policy and HR strategy are developed — that is, the methods the HR function will use over the long term. HR policy here should be understood as the system of general provisions, ideas, principles, and requirements that determine all aspects of people management in the organization. Much depends on which type of HR policy the company adopts.

Passive type. Under this policy, senior leadership has no clear program of action regarding personnel, and HR work is reduced to documentation and record-keeping. Executive management operates by reacting to ad hoc situations as they arise, trying to resolve them by any means, often without understanding the causes or potential consequences. If the company wants a future, it should consider activating the entire personnel management process.

Reactive type. Senior leadership monitors negative reactions among individual employees and the workforce as a whole. The HR function often has tools to track situations when necessary and works to correct them. Development programs exist. In this case, more attention should be paid to medium-term planning.

Preventive type. The company plans its personnel needs — both qualitative and quantitative — over the short and medium term. Development programs exist. In companies with this type of HR policy, executive management analyzes the situation but is not always able to influence its development. Designing targeted HR programs can change the situation for the better.

Active type. The company not only forecasts problems but also has levers to influence them with various response options. The development of the situation is monitored and adjusted both internally and with respect to the external environment.

Even the best of the above options — the active type — can have numerous shortcomings and oversights that critically affect the process as a whole and lead to a dead end. Suppose a company seeks to pursue an active HR policy, trying to influence the situation. The HR department develops development plans and sets goals; however, without accurate analysis and a sound long-term forecast of the personnel situation, those plans will be built on sand. Such an active yet adventurist policy can lead to unfortunate consequences.

The goal of HR policy, as a rule, is to ensure an optimal balance between inflow and retention of employees, the quantitative and qualitative composition of the workforce, and the motivation and development of personnel in line with the enterprise’s needs, legal requirements, and labor-market conditions. Let us focus on the most essential components of HR policy.

Principles for building the people-management system. These may be rules, basic provisions, and norms that managers and HR specialists must follow. On their basis, the priorities and tasks of HR policy should subsequently be formed.

HR policy priorities and tasks. This is where procedures and actions to achieve goals are developed — the “HR technologies,” documented with forms and policies — taking into account both the current state and possible changes. The choice of acceptable tools and methods, and their alignment with the organization’s values, exert substantial influence. For example, under a passive HR policy, instead of large-scale hiring through agencies and mass media, HR managers may rely on employees’ referrals, students of corporate training institutions, and internal promotions. In an HR policy that cultivates a “one family” spirit, it is inadvisable to use strict psychological tests or “stress interviews” in selection. More attention is paid to interview procedures, group exercises, and simulations of production situations, etc.

General principles of pay and motivation. Here the organization outlines overarching principles of financial incentives, as well as the conditions and procedures for using the funds allocated for these purposes.

Basic requirements for personnel. These include general requirements for employees — education, qualifications, and work quality. Principles of communication, opportunities for growth, and requirements for developing certain abilities should also be defined, both for the present and for the future.

HR strategy, or people-management strategy, is the system of methods for implementing HR policy. It includes more specific tasks, the development of which constitutes strategic planning in HR.

All elements of the strategic plan are interrelated and often serve double or even triple functions, even though they may be placed in different sections. For example, career planning can and should be present simultaneously in motivation, in appraisal, in shaping the recruitment system, in plans to improve the organizational and staffing structure, in corporate culture, and in succession planning. The strategic HR plan highlights the following important sections.

Building the System for Replenishing and Managing Human Resources

This section of the plan may include:

·                   Forecasting the necessary headcount and qualitative composition of employees (study of the organization’s internal needs);

·                   Monitoring the labor market and wages;

·                   Building a database of potential candidates and studying competitors’ workforce as a potential source of hires;

·                   Regulating search and attraction channels (mass media, Internet, recruiting agencies, personal contacts);

·                   Creating a mechanism for continuous talent inflow (student internships, etc.);

·                   Onboarding of newly hired employees (a special procedure for introducing a new employee to the role to remove problems that arise at the start. The procedure may include formally assigning an experienced mentor to the newcomer, producing quick-reference booklets with the company’s basic principles and rules, and issuing them at the time of hire);

·                   Career planning (defining the direction and approximate time frames for a career, taking into account the interests and capabilities of the company and the employee; career stages should be continually tracked and adjusted);

·                   Succession planning and talent pool (developing a system for moving personnel up the career ladder; matrices for filling vacancies over the long term; rules for deputizing and role coverage; drafting regulatory documents governing the process; organizing secondments and temporary assignments).

Developing Plans and Programs for Motivation and Incentives

Motivation is a key element of people management. It is best to develop a “Regulation on Employee Motivation” that consolidates criteria and principles for enhancing motivation and incentives. The regulation may include provisions on monetary and non-monetary motivation, both short-term and long-term. It may also include career planning, and monitoring employees’ personal aspirations, problems, desires, and expectations. The motivation and retention of especially valuable and high-potential specialists can be highlighted in a separate subsection.

Forming and Developing Corporate Culture

In essence, corporate culture is one of the cornerstones on which the HR system is built. The nature of the culture shapes relationships within the team and operations processes. It is hard to imagine a neutral corporate culture — it typically benefits the company or harms it. A typical culture from the socialist era, preserved to some extent in many current, primarily state-run, structures, was based on the principle: “the state pretends to pay us, we pretend to work.” The norm was to go to work and receive a salary, not to earn it. Eradicating this principle in organizations steeped in formalism and indifference to work is very difficult. Any innovation there meets fierce resistance and sabotage. The situation is entirely different when the necessary principles are laid down at the initial formation of the team.

First, it is very important to assess the existing corporate culture, identify specific positive and negative aspects, and consider options for correcting them. To this end, one should develop methods for uncovering and highlighting individual features and traditions, and consider the possibility and necessity of introducing and cementing new useful traditions, developing them, and elevating them to the level of rules of behavior — “laws” of the company unique to it. A component of this section should be plans and programs aimed at team cohesion and building a united team.

Improving the Organizational and Staffing Structure

The importance of organizational and staffing structure for an organization can be compared to the importance of the circulatory or nervous system for the human body. How rationally the structure is designed and functions determines the responsiveness and effectiveness of each unit and of the company as a whole.

This section may include:

·                   Procedures for monitoring how the organization operates with the existing structure and analyzing it;

·                   Monitoring the processes of interdepartmental interaction, the flow and effectiveness of executing directives;

·                   A mechanism for tracking duplications in the management system;

·                   Development of regulatory documents to ensure clarity and timeliness in receiving and fulfilling orders and instructions, and personal accountability for accomplishing assigned tasks;

·                   Principles for adjusting the organizational and staffing structure if it is found not to meet the company’s development needs;

·                   Development of options to optimize the structure, taking into account further development or planned changes (downsizing, re-profiling, etc.).

Evaluation and Appraisal

These two concepts are often conflated, though that is not quite correct. Appraisal includes not only evaluation but also incentives; the collection and analysis of data for further HR planning; the identification of tension points; helping an employee clarify problem areas and overcome them; and determining directions for further development. It is advisable to develop a system for periodic evaluation and analysis of individual units, and a system of employee appraisal. It is also possible to provide for an evaluation system in the periods between formal appraisals. It is very important to build the appraisal process on fair, motivating principles that help both employees and their managers improve professionalism, mastery, and productivity.

People Development: Training and Retraining

People development is understood as the improvement of personal characteristics that support the fulfillment of professional tasks, and may include training, retraining, upskilling, and acquiring adjacent specialties and additional skills required on the job.

This section of the plan should provide for:

·                   Studying the organization’s internal training needs (preparing a staff training plan);

·                   Monitoring the market for training (universities, courses, trainings);

·                   Identifying internal opportunities for learning and for creating a corporate center for professional development, knowledge acquisition, and adjacent specialties;

·                   Developing and distributing continuously updated internal guides and an instruction system;

·                   Training in professional skills, personal growth, and team building;

·                   Fundamental preparation of managers in higher education institutions;

·                   Analyzing the results of training — both for each employee and for the overall process — and preparing recommendations to adjust the plan.

Developing a Public Relations Concept: Internal and External PR

Creating and maintaining the company’s external and internal image is one of the purposes of this section, which is closely connected with the information and motivation blocks of the strategic plan. Provisions here might include, for example, creating a corporate newspaper or newsletter, bulletin boards, an active website, and interviews and publications in the media on HR policy issues.

Internal PR can be invaluable when fundamental changes affect employees’ interests. External PR promotes the organization in the labor market and, as a result, increases the inflow of highly qualified specialists and reduces staff turnover. Working for such an organization becomes prestigious, which is itself a motivator.

Creating Internal Communications

When such systems are absent at the lower levels of the company — especially in large organizations — an information deficit arises, which is filled by uncontrolled rumors and speculation that breed resentment and hostility toward management. In this case, informal leaders may emerge who use the information vacuum to manipulate for their own purposes, which do not coincide with the organization’s interests.

Developing mechanisms for employee feedback, information exchange, and regulation of internal information flows is a way to avoid such problems.

This section should provide for individual conversations and general meetings, and for organizing “speak-up” points that allow any employee (possibly anonymously) to express an opinion or proposal on a matter of interest and receive a qualified response — while enabling leadership to learn about employees’ problems and respond quickly to emerging situations. In the intranet — the corporate computer network — one can set up an information page or an electronic noticeboard for orders and announcements.

Building Intellectual Capital and Fostering Innovation

It is not at all necessary to bring in employees with academic degrees. It is better to develop a system that stimulates each employee’s creative activity and creates conditions that encourage generating new ideas and improvement proposals — always for the mutual benefit of the employee and the enterprise. These may range from suggestions for minor improvements to operations processes, implemented on an operational basis, to more significant developments patented in the company’s name and bringing substantial — if not immediate — profit.

Monitoring the State of Human Capital and Market Analysis

Here, indicators of the state of human capital are defined, a program of continuous diagnostics is developed, and mechanisms are created for specific measures to develop and apply employees’ knowledge, skills, and abilities.

It is very important to use accurate, validated procedures for diagnostics and analysis. At times it makes sense to engage consulting and recruiting agencies that provide such services.

In addition to the sections listed, many more useful sections can be added to the plan — or it can be reduced to a minimum. It all depends on need. The key is to keep it reasonable and rational.

Today, most entrepreneurs know their long-term goals and break them down into intermediate ones, with fallback options developed for various contingencies. Having carefully calculated and weighed the pros and cons at the crucial first stage, many then relax and give priority to tactical tasks. The more progressive of them do create something akin to a strategic plan — but often only in their own minds. And it’s good if even close associates are at least somewhat aware of those plans.

Many prefer to keep the strategic plan secret so that competitors cannot use it to their advantage or harm the company. In that case, no one except the head knows the ultimate goals, the intermediate stages, the direction of movement, or — still less — the strategic principles. In such companies, crises, unforeseen situations, and sudden failures occur more often. Employees lack initiative and falter in extreme situations. Consultants in organizational development on small enterprises have found that only 10% of employees can clearly articulate the goals of their own work; and of those, only half express them in ways that correspond to the leader’s view.

One must remember: no matter how remarkable a company’s strategy is, it will not bring significant benefit until employees understand it and learn to apply it in their work.

Entrepreneurs, recalling the often formal and ineffective “scientific organization of labor” (NOT) of Soviet times, sometimes perceive modern HR management in the same way — as if teachers are theoreticians who have never seen “real” operations. That’s a pity, because NOT is not a sham but a technology quite appropriate for developing strategic principles, provided each company’s specifics are taken into account and formalism is avoided.

The experience of Western companies is not always directly applicable to our conditions; however, it is there that we still find examples of effective use of strategic principles in human resource management — Wal-Mart, L.L.Bean, eBay, Vanguard, Southwest Airlines. The leadership of these companies formulated a clear core principle that reflects the essence of their business strategy.

Wal-Mart’s corporate culture reflects the life experience, views, and principles of its founder, Sam Walton. The chief value in this culture is the person. The CEO continues the policy of everyday experimentation and change. The encouragement of continuous improvement and participation in profit sharing promotes employees’ sense of personal involvement. This culture is readily embraced by the company’s regular customers. The company’s mission and values are embodied in symbols, legends, and slogans, and communicated through them to others. With their help, the company attracts investors who believe in its principles, hires employees who share them, and finds customers who see those principles reflected in the company’s results. On these principles the HR strategy is built.

Of course, defining the essence of strategy and embodying it in a resonant metaphor is no easy matter. This is the quintessence — a unique, unrepeatable element that gives an indisputable competitive advantage. Not many public companies can boast such principles, much less make them public.

Do not treat the strategic plan as something static. It is above all a working tool that embodies the full potential of the firm — from the CEO to the rank-and-file employee. Its goals and objectives should be communicated at least to every manager and may be reviewed and improved as needed.

Viktor Birkus 
September 6, 2007