Workforce Planning makes for smarter RIFs

jason.corsello@knowledgeinfusion.com — Tue, 23 Dec 2008 20:50:22 GMT

Editor's Note: The following is a guest post from Nicholas Garbis, Senior Consultant of Member Services at Infohrm.

The economic slide has organizations in a race to shed costs in advance of 2009, including some major reductions in force (RIFs). I have been caught wondering about the handling of these RIFs and how they fit with concepts of strategic workforce planning (SWFP).

Background / Level-setting on Strategic Workforce Planning (SWFP)
Strategic workforce planning (SWFP) is a process where scenarios are created based on the 3-5 year (or longer) business strategy, translated into a workforce “demand” (quantity by role/level/skillset/competency), and compared to a forecasted workforce “supply” (based on rates of termination/retirement and current skills/competencies). The difference in the demand and the supply is the “gap”. It is calculated for each future year and specific plans are created to address the gap: most common being efforts to find the new talent while slowing the reduction in the current “supply”. Occasionally, the SWFP results in a need to modify business strategy to bring the workforce “demand” into the realm of the achievable (e.g., not enough internal/external talent to staff a proposed expansion)

SWFP is a process that is more akin to financial planning than any other HR processes – which is why it is often most successful when it is done the business units (not from central HR). At higher levels of sophistication, SWFP includes financial modeling on the various costs of the various strategies for closing the gaps.

It is not applied everywhere. SWFP is most often done on a limited number of roles within an organization. Criteria for applying SWFP to a role (e.g., engineers, actuaries, nurses, etc.) might be those roles with a high cost-to-hire, roles with a long learning curve, or those roles that are “pivotal” to the business (where a vacancy is disproportionately disruptive to the operations/profitability of the business).

NOTE: “Roles” are not people, they are groups of jobs or job codes….if the names of individuals are in your plan, it is probably a succession plan or destination plan. Both of these are highly valuable, but they are not strategic workforce planning.

Strategic Workforce Planning and RIFs
Where strategic workforce planning is in place, RIFs are what one would expect them to be: a crisis situation that requires immediate adjustment to a strategic plan. This is not different than the way business strategy is changed to reflect the sudden appearance of an unexpected situation (e.g., new competition, change in material/land costs, sudden economic downturn).

Right now, the current economic conditions are leading to reduction in business revenue forecasts, and there is a scramble to deliver expense reductions. In a knowledge/service economy, labor expense is one of the largest expense items that an organization can impact in short time period. However, in a knowledge/service economy, the workforce (the labor expense) is the key catalyst of value creation.

Without SWFP in place, I question the ability for an organization to execute a RIF effectively. It can be like clear-cutting in a forest – executed rapidly with lots of collateral damage, and limited attention paid to future business sustainability.

RIFs Gone Wrong
The worst RIFs I hear about are the ones where everyone who wants to leave is able to take a package and go. Absolute worst is when more people leave than what was desired/forecasted. This “peanut butter” approach – spreading the RIF evenly across the organization and/or roles – is like a retailer closing store locations based on the first letter of the city they are located in. It just doesn’t make good business sense.

RIFs have even become a way of doing business – shedding 5% or 10% of the workforce every few years even as they grow as a business. To my eyes, this “RIF-saw” approach indicates that an organization is sorely lacking in human capital management disciplines including basic headcount management (no bloating), performance management (managing out low performers along the way), and strategic workforce planning (aligning HC strategies with business strategies).

Strategic Workforce Planning Enables Smarter RIFs within Critical Roles
If an organization has done SWFP for a specific set of roles, they will have a context in which to process and understand the sudden change in business revenue and the resulting reduction in workforce “demand”. The response to get out the “RIF-saw” will be tempered by a strategic perspective – the current state of the critical roles (i.e., are they in oversupply or undersupply), how various revised business scenarios change the workforce “demand” and revise the levels of oversupply/undersupply.

NOTE: It also makes sense to revisit the “supply” side assumptions, as termination and retirement forecasts should reflect new conditions in the labor and financial markets.

If there is an oversupply, do the RIF and do it right. Keep the best talent, and apply reductions from the bottom performers up. Communicate it well and make some investment in preserving your employment brand along the way. Develop a way to stay in touch with the re-hireable folks impacted by the RIF.

If there is still undersupply in a critical role, a RIF within this role could send the business off track for years – possibly resulting in bankruptcy as one electronics retailer recently demonstrated. In this case, look for other reductions and efficiencies in the workforce. Cut the low performers that are unlikely to make a turn-around and consider reductions in pay (rather than headcount) for some of the low/medium performers in these roles. The RIF should be aimed elsewhere, away from a critical role that is in a state of undersupply even when the scenarios are adjusted.

Please Print, Complete, Sign and Fax

neil.jensen@knowledgeinfusion.com — Fri, 15 Aug 2008 23:00:09 GMT

Please print, complete, sign and fax...

I heard these same words three times this week and all in very different settings. The words were clear as day and were inserted into the conversation like it wasn't a big deal. In all three cases, the person saying them simply put it out there like it didn't mean anything. They said, "To make a data change in the HRIS system, you need to find the job action form on the HR intranet, print it, complete all the required information, sign it, and fax it to HR." In each case, this statement was followed by a lengthy description of all the things that were wrong with the HR data including incorrect or stale reporting relationships, incorrect organization structures, outdated personal demographic information, etc. When we got to the topic of reporting, the tale of woe continued with stories that described the inability to report even basic data and extreme efforts to piece together even basic metrics and analytics.

While working with enterprise clients, I am continually amazed when I hear the statement above especially because employee and manager self-service (or direct access as we call it at KI) is not a new concept. This technology has been around for a long time and is the cornerstone to successful HR service delivery. Enabling users to perform their own transactions and access their own data is a foundational item that makes strategic HR possible. Without clean data and solid processes to keep it that way, strategic HR just can't happen. Without it, employee data will continue to be corrupt and HR will be stuck chasing down paperwork and going through human heroics to report something as basic as head count.

As you plan your HR Service Delivery or HR Transformation projects, be sure to start with the foundation and make sure that the employee data is clean and you have technology enabled solutions in place to help manage it. Putting these transactions in the hands of the people that are closest to the data is a sure fire way to take a big step forward in making HR more strategic. It takes the HR Generalist out of the role of chasing down paperwork and will offer them the time to focus on more strategic activities like workforce planning and workforce development. It also removes a lot of the human heroics necesary to report data and offers reporting teams the time to analyze data and develop KPIs and not just piece together Excel spreadsheets. Consider employee and manager self-service as the price of admission to strategic HR.

Consultant's Corner

Workforce Planning makes for smarter RIFs

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