For decades, businesses have been managed based on people, jobs and roles – how many people to employ, at what cost, doing what type of work. This approach to people and cost management has long been the basis of most workforce transformation and workforce planning activities, driving annual headcount plans and budgets.
However, while planning jobs and headcount remains essential, it is insufficient by itself to ensure large organisations can navigate the significant business and workforce decisions they now need to make; and to do so at the pace needed to compete effectively in the modern labour market.
Managing skills is critical to business survival and success
- 79% of CEOs are concerned about skill availability impacting innovation, cost, quality and growth (PwC, 1).
- 59% of company Boards rated talent acquisition, development and retention as a top 5 business challenge in 2020-21 (Gartner, 2)
- By 2022 42% of core skills required to perform existing jobs are expected to change (WEF, 3)
Even before the uncertainty created by Covid-19 there was a problem:
- 49% of HRDs struggled to plan for future talent needs (2), and
- 41% of HRDs had no plan for skills change (2).
HR teams know about the importance of planning and managing skills – but the stats above show that identifying which skills matter most, prioritising action, and tracking actions through to outcomes remains difficult.
A skills-based approach to workforce decisions can help link the business outcomes with the critical skills needed to create value. Without this link, plans may be too generic. Worse, they may focus too much on today’s skills at the expense of future value, leaving you behind competitors. A robust and systematic approach to skills-based planning is a critical tool for organisations who seek to differentiate.
WHY WORKFORCE PLANNING MUST CHANGE
There are several major trends that have been accelerated in 2020 which when combined mean that traditional approaches to making big workforce decisions are no longer fit for purpose:
- The workforce is increasingly non-human. The common definition of ‘workforce’ is long out of date. The dictionary definition of ‘people engaged in or available for work’ is over 80 years old. Today across all industries, work is done by a combination of humans and technology. Every leader needs to understand the relationship between people and technology in their area of work as the pace of change is huge with a forecast 44% annual growth rate in AI technology to 2025. (Tractica, 4)
- Workforce location is increasingly flexible. Location has often been the first question asked when recruiting but is now reducing in importance for employers as large groups of particularly white-collar employees seek greater flexibility. In the US, 72% of office workers would like to work remotely at least two days a week. (1) While remote working is an important factor itself, it also creates opportunities to evaluate whether jobs and skills need to be in a given city, country or continent at all. This multiplies the places you can look for critical skills.
- The employed workforce is decreasing. Permanent employment is increasingly not the first response when looking to secure the skills needed to get work done. Advances in digital platforms for crowdsourcing, freelancing and outsourcing have made accessing temporary skills easier. For example, the forecast growth rate in the Gig Economy is 123% by 2023 (Mastercard, 5) with business services a critical segment.
- Workforce diversity is increasing. By 2025 it is predicted that 75% of the global workforce will be Millennials (Inc.com,6) and they look for diversity in the businesses they join. As emphasis is placed on the importance of diversity in the workplace, so to are we seeing more dramatic shifts in gender equality and more inclusive talent programs. Diverse teams are more engaged, innovative and collaborative, ultimately leading to a more profitable business according to McKinsey (7). Their 2019 report found companies that embrace gender diversity on their executive teams were more competitive and 21% more likely to experience above-average profitability. They also had a 27% likelihood of outperforming their peers on longer term value creation.
The pace of these changes had led to previously reliable planning rules being ripped up overnight. Workforce decisions that would have before taken months of careful planning and consideration, like re-deploying teams, have been made in a fraction of the time.
Nearly all companies are now faced with a significant business model or workforce transformation change. The pressure is only increasing. Companies must be agile and adapt to stay ahead in a fast-changing world.
WHY SKILLS NOT ROLES ARE THE NEW CURRENCY OF WORKFORCE PLANNING
All roles are made up of collections of skills. And it is the skills, not the roles, that determine the possibility of automation; the restrictions of location; the ability to source; and the true diversity that can be achieved within and across teams.
Every leader now needs to know what skills are available, at what price point, in which locations and whether demand for and availability of these skills is increasing or decreasing. Only then can they decide if a traditional job is the right way forward and how it might compare to alternatives like engaging freelancers or automation.
Understanding skills is now essential to help companies act with agility and stay ahead. This means:
- Moving beyond forecasting headcount and cost. From a planning perspective, great decisions about who to employ, where people work and how work gets done cannot be made looking at people, jobs and roles alone. This often leads to generic plans that lack substance and specificity, and which may deliver the right headcount and budget, but leave you short against your competitors who have prioritised critical skills. We believe this dependence on traditional forecasting is one of the main reasons for 49% of HRDs struggling with future talent needs; the solutions just are not designed to solve this problem.
- Building a joined-up, holistic view. Leaders need a holistic view which adds substance to plans, but often leaders only have part of the story. They might have data on how jobs can be automated or augmented, but no visibility of how this changes the skills required to deliver the work effectively. They might know how much to pay for a job, but not what skills you acquire if you pay 10% more or less. The data now exists to answer these questions, and it is at the level of skill where the tangible insights exist and inform workforce investments for the future.
- Focusing on key business outcomes. Whether kicking off a workforce transformation, organisation design or business planning cycle, we recommend starting with the business goals you seek to achieve then go directly to which skills you need to excel at to deliver them. Consider your broader technical, process and people capabilities in parallel. Armed with priority skills you can analyse your people decisions in a new way, using internal data to assess your current strength, and using external labour market data to benchmark your position against competitors and leading organisations.
- Using skills as your common currency. Understanding skills is the foundation of many critical jobs but is not often a clear and defined accountability. For example, recruiters needs to know what to target, and learning designers need to know where to focus development efforts. These jobs and more require a common language to using skills to make workforce decisions. Embedding a scalable and structured approach through skills-based planning joins-up decisions within HR, and across the business, helping drive toward the skills that will deliver business value.
Obviously your next step depends on your starting point – but hopefully these tips are useful:
- Identify the key skills most critical to delivering your business priorities – Gather views from different roles, grades and functions, not just senior management. Ask for and capture rationale/justification. Structure your data gathering but keep it light touch, using survey tools, interviews and focus groups. Us this to provide a starting point to review existing investments or prioritise new ones. Not all skills are equally important. Distinguish and prioritise the core skills needed to do the job, and the emerging and differentiating skills that will make a competitive difference.
- Estimate the skills you have today – Resist the temptation to build a skills taxonomy unique to your business first, as these take significant effort and can be quickly out of date. Instead, leverage externally available data on jobs and skills to provide a starting point. You can use this to estimate the skills you have today based on typical profiles.
- Bring internal and external data together – Start with data you can easily access, put different data sets side by side and try to assemble a holistic view. Bring together the best available data on jobs and skills from your HR, Finance and Operational systems. Don’t worry about perfect data. It is the enemy of progress.
- Use scenarios to think through alternatives – You can gain new insight and value by asking better questions. A scenario-led approach is a great way to do this, encouraging creativity by asking ‘What if?’ questions like: “What if we re-deploy all of our sales team from traditional to digital channels?” or “What if we outsourced that instead?”.
Agile, evidenced, iterative decision-making is key to sustained success.
It is the inherent and available skills within a company, and how they are utilised that keep businesses moving forward in challenging times. Increasingly, the success of the business relies on the ability for senior leaders and HR to collaborate to make better informed decisions in workforce transformation, planning and organisation shaping.
As a first step, ask good questions and open a dialogue between your leadership and HR teams about what needs to change. Wherever possible, use data and insight to explore options, justify choices and plan the best course of action.
What are the key questions you should be asking?
Questions for your Leadership Team
- What are the unique, distinctive capabilities or skills you need to deliver the future business goals?
- What is your rationale as to their significance?
- Where are lacking skills and capabilities and what is the impact of those gaps on performance?
- Do you have the tools and insights you need to make effective decisions on how best to secure these skills?
Questions for your HR Team
- What are the alternatives to hiring for key skills on a permanent basis?
- What opportunities do you have to access skills if location is no longer such a constraint?
- What is the most cost-effective way to build each skill set in the long-term?
- Do you have the tools and insights you need to advise business leadership on options and choices?
For more information on Simply analytical tools, how Simply creates value from data on skills, and how to approach Strategic Workforce Planning, visit www.simplygetresults.com
(1). PwC, 2020 & 2019
(2) Gartner, 2020 & 2019
(3) World Economic Forum, 2020
(4) Tractica, 2020
(5) MasterCard, 2019
(6) Inc.com, 2020
(7) McKinsey, 2019, 2020