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Workforce Planning…Succession Planning

Great NHL hockey star Wayne Gretzky often said, “Good hockey players skate to where the puck is while great hockey players skate to where the puck is going.” The same can be said of great organizations: You have to know where you’re headed to be successful, and when it comes to your people, it’s called workforce planning.

Any strategic business plan deals with resource requirements, and, just as financial requirements need to be addressed, a well-crafted strategic plan needs to ensure that the appropriate people with the right skills are available to accomplish plan goals and objectives. Smart organizations include HR in the organization’s strategic planning process so that there is an easy transition from strategic planning to workforce planning. If you aren’t included in your organization’s strategic planning process, consider talking with your CEO or other key players in your organization to inform them of the value you bring to the strategic planning process. After all, the best strategic plan will be ineffective without the right people in the right places with the right skills to carry it out—or, as Jim Collins put it so well in Good to Great, “having the right people on the bus.”¹

If you are not successful in being included in the strategic planning process, you will need access to the plan to be able to do a workforce or HR plan that links to the strategic plan.

An increasing number of savvy organizations are seeing the value of a well-crafted workforce plan. The growing interest is being sparked by several factors, including talent shortages, an aging workforce facing retirement, and increased productivity that requires different skill sets. As more organizations include workforce planning in their business processes, the need for strong business analytics has emerged. Several companies provide technology solutions to help collect the required data. Some provide stand-alone analytic tools, including Kronos Inc., Vertrics, and Visier.

Workforce planning is the process an organization uses to analyze its current workforce in light of what is projected over the length of the strategic plan. Is the organization in growth mode, and, if so, what skills are needed to meet the demands of an expanded business and where will the new jobs be located? Is the organization going to need to downsize or outsource positions? If so, can any of the affected employees be trained to take on new responsibilities? These are just some of many issues included in a workforce plan. Workforce planning requires leadership, a clear vision, mission and strategic objectives, and the involvement of a significant number of participants including leaders and managers. It is an inclusive process that draws together finance, operations, human resources, marketing, and other key functions.

Workforce planning focuses on developing information that can help an organization make good decisions for both the short and long term with the realization that plans, no matter how well thought out, may need to be revised to meet the changing business climate. Therefore, plans need to be evaluated often and revised as needed.

In order to be successful, any workforce plan must be carefully grounded in the culture in which it will be utilized. In other words, there is no “cookie-cutter” approach to workforce planning; each one is unique.

A well-crafted workforce plan also provides managers with a better understanding of the strengths and weaknesses of their people. Workforce planning requires all participants to open their minds to the limitations and the possibilities and to consider issues around succession management (see “Succession Management as a Workforce Planning Tool,” beginning on page 28).

Workforce planning allows the organization to build a longer-term context for short-term decision-making in an attempt to predict the future. It includes an inventory of all current and future positions, and focuses attention on positions that are key to the organization’s success and/or positions that are hard to fill and, therefore, will take more time to recruit.

Some people see workforce planning as only a staffing tool for anticipating hiring needs, but it can also be a critical tool for determining employee development and succession needs. Successful organizations conduct regular and thorough workforce plans so that staffing needs can be measured, employee development needs can be assessed, and contingent workforce options can be utilized to create a fully functional workforce that is able to meet the organization’s business requirements.

A strategic plan charts the future with broad mission-related targets and milestones; a workforce plan translates strategic thinking into concrete actions in the areas of workforce staffing and training needs. When an organization successfully aligns human resources activities with organization strategies, activities fit strategically and reinforce each other. This strategic fit produces consistency and ensures that HR-related activities will reinforce the organization’s business strategy.

HR functions impacted by the strategic plan include:

    Staffing.

    Compensation.

    Retention.

    Succession management.

    Employee development.

    Management development.

Step-by-Step Process to Develop a Workforce Plan

Step 1: Analyze Current Workforce

This step looks at the current workforce—its skills and demographic makeup, including race, gender, and age. Age may be a particularly important factor to consider if the organization has a significant number of people moving toward retirement age who will need to be replaced. During this process, you will need to understand the skill sets of your current workforce. A current workforce or supply analysis also involves making projections of attrition (due to resignations, retirements, internal transfers, promotions, and involuntary terminations) over the planning period so that attrition is taken into consideration while looking at what the future needs will be in terms of the number of employees and the specific skills needed in order to achieve success.

    See Chapter 30 (Ending the Employment Relationship) for information on tracking attrition.

When the current workforce analysis is complete, you will have a good understanding of your current workforce and its strengths and weaknesses.

Depending on the size of your organization, you may want to limit the number of levels you include in the current workforce analysis. Here are some ideas of what you might want to include in your current workforce analysis:

    List current employees and their skills/abilities/strengths.

    Look at who might retire or leave the organization and what gaps that creates.

    Review historic turnover (attrition) data.

    Are there any poor performers who need to be retrained or be terminated?

    How will the current workforce impact (positively or negatively) achieving stated goals and objectives as outlined in your strategic plan?

Step 2: Determine What Knowledge/Skills and Abilities Will Be Required to Achieve Business Objectives for the Next Year

The strategic plan may have outlined new products or services to be added. Consider what changes are anticipated over the next (insert the number of years in the plan) years related to:

    Mission and vision.

    Budget and economic forecasts.

    Competitive factors in your line of business.

    Labor force trends.

    Pending or existing government regulations.

    Innovations in technology.

    Outsourcing options.

    Strategic partner options.

    Potential mergers and/or acquisitions.

    New products.

    Expanding to new locations.

Consider:

    What are the key business goals and objectives for the next year?

    What are the key success factors for achieving these goals and objectives?

    What are the key work activities associated with these success factors, goals, and objectives?

    Are more employees needed to achieve the stated goals and objectives?

    What skills are needed to deliver these goals and objectives?

    Is the organization growing or downsizing?

    How is the business changing in relationship to:

    Competition?

    New projects that will require new skills?

    New locations (domestic or global)?

    Number of new projects or deliverables?

Step 3: Do a Gap Analysis

Determine the gaps that exist between what you have and what you need. Answer these questions:

    Can current employees be trained to take on new responsibilities? If not, how will you deal with them (transfer to other departments, demote, terminate)?

    Do you need to hire from the outside?

    If you need to hire, when does new staff need to be on board and trained?

    Is your organization doing what it needs to do to retain key employees?

    Is the organizational structure what it should be to accomplish the goals and objectives?

You now have a plan that should tell you when and how you need to add people or skills to meet your organization’s strategic objectives.

Step 4: Implement the Workforce Plan

No plan is ever successful without an implementation phase to translate the actions into a workable schedule that includes well-defined objectives, specific and measurable workforce goals, and time tables and milestones. It involves dedicating time, energy, and resources to address the critical gaps or surpluses that exist within the organization, as related to the critical business issues identified in the strategic planning process.

A successful workforce plan requires the commitment and leadership of everyone in the organization, especially top management. Senior-level managers should lead the planning process, assure that workforce plans are aligned with the strategic direction of the business, and hold subordinate mangers accountable for carrying on the workforce plan.

During the implementation phase, the plan should be continually measured for its success in meeting both efficiency and effectiveness measurements. Look at the following:

    Do workload and/or workforce gaps still exist? And, if so, what should be corrected?

    Are the assumptions used to develop the plan still valid?

    Has organizational effectiveness increased?

    Do adequate staffing levels exist?

Successful workforce plans, like strategic plans, cannot be static; they must be constantly evaluated and adjusted as needed.

Checklist for Evaluating a Workforce Plan

    Is the plan based on the organization’s strategic plan, and have you considered the mission, vision, and values?

    Was the plan evaluated on its impact on the current workforce, and will a proper diversity mix result from any proposed actions?

    Have you determined the number and skill set of employees who will be needed to address upcoming challenges?

    Was a gap analysis conducted to assess what is needed versus what you now have?

    Have strategies been identified to address the gaps between the projected supply and demand of required skills and available staff?

    Is there an action plan complete with responsible parties, due dates, and resources needed?

    Has the plan been communicated to appropriate stakeholders?

    Does the plan have the support of the organization’s leadership?

    Is there a strategy to update the plan?

Succession Management as a Workforce Planning Tool

Another aspect of effective workforce planning is succession planning. Succession planning is used by organizations to identify and prepare employees who have the potential skills and abilities to move into key positions when the incumbent leaves the job. Having a succession plan generally ensures a smooth continuation of business when positions become vacant because of promotion, resignation, or transfer within the organization.

You’ve probably heard or read about the many highly visible examples of what happens when organizations don’t have a succession plan. What happens when a senior executive is killed in a plane crash, or is indicted on a fraud charge, or has a serious illness and must step down? Who takes the place of that executive, and how quickly can that person be the leader the organization requires at that difficult time and into the future? This is why having a succession plan is critical to any organization’s success.

It’s not easy to get organizations to tackle the issue of succession planning. Some executives don’t want to face the difficult discussions that must take place in the process; however, it is extremely important that this process takes place. In reality, the future of the business depends on it!

Most succession plans have historically focused only on high-level positions, but in recent years, more attention has been given to selecting successors for positions throughout the organization. This makes sense in the highly aggressive talent competition most organizations find themselves in. You have to know who your key players are at any level—and what positions you can’t go long without having filled. These positions may be in sales, marketing, IT, or other places within the organization.

Multiple options exist to do succession planning, including highly sophisticated software models that collect data from performance reviews, employee development plans, courses taken, skills inventories, and recommendations for future development. Succession plans can also be done in an Excel spreadsheet or on paper. The method is not what’s important; having one is the issue!

Not only does a succession plan help to facilitate a smooth transition, it can also be a retention tool for high performers who are slotted for higher-level positions by allowing them to know the organization values their skills and abilities and has plans for them if they stay with the organization.

Many organizations struggle with whether or not to tell an employee that he or she is slotted for a higher-level job in the succession plan. We’ve seen arguments on both sides; however, we believe the case for telling people is stronger than not telling them—and it may keep a superstar on board!

The downside of telling people where they stand in the succession plan is that you may lose someone who is unhappy about not being in line for the CEO’s position or other high-level positions. We think that’s a risk worth taking because this is most likely an employee who isn’t clear about his or her strengths and weaknesses and would probably leave the organization no matter what.

Succession Planning Tips

    Train high-potential employees and provide them with coaching.

    See Chapter 23 (Best Approaches to Developing Employees) and Chapter 24 (Coaching as a Development Strategy).

    Reward managers for developing their employees.

    Provide more than one way to succeed in your organization. Take the management track or remain an individual contributor; each adds value.

    Allow employees to move laterally—not just up in the organization—to gain valuable experiences.

Although executive support is a key to any program’s success, it is vital to have that support for succession management. It seems like such a no-brainer that organizations should know who would fill key positions should the incumbent leave for any reason, but it is amazing how few organizations take the time to put a succession management system in place.

Organizations that create an effective succession management process:

    Quickly anticipate and fill succession gaps.

    Identify employees with high potential and actively plan their careers to develop “bench strength.”

    Align their workforce planning with their business strategy so that as the organization grows and the strategy evolves, changes can be made quickly to recruiting and employee development practices.

Succession management is a comprehensive process that starts by identifying possible successors and a development plan for each person, and goes below the executive level to as deep into the organization as possible. The goal of an effective succession management system is to have a pipeline of highly developed leaders all across the organization who are prepared (or are preparing) to fill vacancies as they arise. It makes sense to make succession management an ongoing planning process whereby periodic discussions are held to assess talent and to determine development plans for those identified as high performers with the ability to move up the organization.

Succession management can be made too complicated by elaborate forms and processes. It can be as simple as a spreadsheet where you list your key players and who would replace them in case they leave for any reason. Then the process dominates the discussion rather than the focus being on the potential of employees under discussion. The most effective succession processes are flexible, open, inclusive, and owned by top management with HR support.

If an organization has a board of directors, the board may take on the responsibility for succession planning for top executives. John Berry of PriceWaterhouseCoopers (PwC) Center for Board Governance suggests four key actions that a board can take in order to ensure qualified candidates are available when needed:

    Monitor career development plans for leading candidates.

    Help mitigate the effects of a “horse race” (when there are two or more candidates competing for the same position).

    Get to know the leading candidates.

    Ensure that job criteria are continually updated.

Barry said, “Boards need to consider whether candidates are being effectively evaluated and coached and rotated to various positions within the company. Candidates should be given developmental assignments and attend educational programs to enhance necessary skills.”³

Consider the story of the 2009 transition at Xerox when Anne Mulcahy was replaced by Ursula Burns as CEO, as reported in the Harvard Business Review in October 2010.⁴

Ms. Mulcahy tells how she identified Ms. Burns early in her career as someone with great potential. During the lead-up to Anne Mulcahy’s stepping down, Ursula Burns was being prepared, behind the scenes, for taking on the role. Though this wasn’t an easy process, the two women focused on issues that included the fact that it wasn’t going to be easy for Ms. Mulcahy to step down and give up the power. However, they agreed that no matter what, they would put the company first.

Before the announcement was made, Ursula Burns was gaining valuable experience with the Board of Directors and she was also maturing as a leader.

One of the lessons learned, according to Ms. Mulcahy, is that leaders and boards need to start the succession planning discussions as early as possible so that people are prepared and the organization is ready to absorb the changes related to new leadership.

An integrated process that links succession planning with leadership development can provide a competitive advantage to forward thinking organizations. Incorporating succession management into the organization’s culture helps to build strong leaders and can also be a recruitment and retention advantage. By providing an opportunity for employees to learn and grow, you are feeding a very significant need that most people have. Succession management is a huge investment in building a successful organization—one that can be sustained over time.

Discussion Questions

1.    What role does HR play in the development of the organization’s strategic plan?

2.    What are some of the benefits of doing a workforce plan?

3.    Name three to four HR functions impacted by a workforce plan.

4.    List the steps to create a workforce plan.

5.    Why is management support critical to successfully implementing a workforce plan?

6.    How does succession management support the workforce planning process?

7.    What are some of the issues created when an organization doesn’t have a succession plan in place?

8.    How can boards of directors participate in succession management?