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Duke's Newest Power Tool

June 1, 1996
Related Topics: Basic Skills Training, Workforce Planning, Featured Article
In the old days, workforce planning was simple. You had one business—perhaps a country store on the Kansas prairie. You had one shift: all day. You had two people: one stocked the shelves and dealt with customers and another kept the books. If somebody got sick, your brother helped out. Or a schoolkid filled in temporarily. It was easy. Or so it seemed.

Then came modern business. And scheduling wasn't quite so simple anymore. You had multiple shifts. You had customers internationally. And you had so many business units you practically lost count from one day to the next. Making sure you had the right people doing the right things at the right time was challenging enough, without planning what competencies and skills you needed in the future. It was like a constantly moving target, and you never quite knew if your company had what it needed, when it needed it.

Well, HR professionals, guess what? You're not in Kansas anymore (at least not in "The Wizard of Oz" sense). And you're not going to get your company moving in the right direction unless your people-planning strategy fits your business direction.

Workforce planning is one of today's greatest business challenges—and firms are requiring that human resources professionals lead the effort. For Duke Power Co. based in Charlotte, North Carolina, planning its workforce for competitive advantage has been a critical necessity. When the organization faced a horizon of deregulation of its power businesses, prompted by the Energy Policy Act of 1992 and a number of initiatives enacted by the Federal Energy Regulatory Commission, the firm's Chairman and CEO William H. Grigg suggested its HR organization develop a strategic, integrated workforce-planning process—linked to business plans—to ensure Duke would have the right people, skill sets and performance culture to fulfill its plans. "Our future depends on our people," Grigg told the organization. HR's mission was to develop a plan quickly, make it simple and implement the process immediately after it was developed in time for the next planning cycle. The result was a revolutionary workforce-planning process that answers the questions that keep a chairman—and HR professionals—up at night, such as:

  • Is there a balance between our workforce supply and demand?
  • What are the right competencies for our strategies, and do we already have them in house?
  • Are we creating superior leadership for the future?
  • Are we eliminating poor performers and rewarding good ones?
  • Do we have the right rewards to retain good employees?

These questions seem so simple and so integral, yet no one had given much thought to these questions given the company's new business direction. It was time to change that mindset.

Focusing on business goals yields big clues to workforce planning.
While most companies do some kind of workforce planning, it usually consists of simply asking, "How many bodies do I need to fill X number of positions?" The answer HR professionals and line managers usually come up with is nearly always headcount-driven rather than competency-driven—not a particularly strategic way to go about things. Faye Hayes, director of workplace effectiveness for Duke Power explains why that strategy was no longer going to work: "There were a lot of changes going on inside the company as well as outside, and the way we had done workforce planning in the past just wasn't going to serve us very well in the future." Not only was Duke facing the deregulation of its power and nuclear businesses, it knew the company's most dramatic growth in the coming years would be on the non-power side of the business in what Duke calls its Associated Enterprises Group (AEG). AEG includes 10 business units such as: Church Street Capital Corp. (investment management, equity funding and credit enhancement), Crescent Resources Inc. (real estate development and forest management) and Duke Engineering & Services Inc. (engineering and consulting). Many of these associated businesses have offices worldwide.

Duke Power also wanted to leverage, to its greatest advantage, the $1 billion investment (in wages and benefits) it makes each year in people—balancing talent between the electric side of the business and the other associated businesses. It's easy to see why: That $1 billion comprised 19% of the firm's total annual costs, and nearly two-thirds of its controllable costs. The company needed to better structure the way talent was utilized throughout the organization—something it wasn't used to doing. In the utility business, which Duke Power had been engaged in successfully for 91 years with little competition, people had become fairly interchangeable. "But when you go to a high-growth environment for an industry that's going through substantial change, individual performance becomes key," says B.J. Smith, manager of workforce planning and forecasting.

Duke also decided that leadership would be a key element in assessing whether the company could move forward as skills were needed. In the process, the company had to determine if it was currently managing performance well and if it had the right reward systems in place. To top it off, there were differing expectations about what kind of a workforce-planning tool was needed. For instance, executives on the utility side were used to having fairly detailed people-planning processes. On the other hand, some executives on the non-utility side of Duke's business wanted a plan that was so simple it could be outlined on a napkin. Everyone wanted a plan that could integrate their current resources with future needs. That's what HR set out to find.

Tie workforce planning to business strategy.
Duke Power's HR professionals knew they needed a workforce-planning model that was dramatically different, yet easy. After calling in several consultants to find out if they could adapt an existing plan to fit their needs, they discovered that a model like the one they wanted didn't exist—anywhere in the world. So Duke's HR managers decided to create what they couldn't find, and took on Lincolnshire, Illinois-based Hewitt Associates LLC as a partner.

First, HR and Hewitt had to assess each of Duke's businesses and business plans to see what was ahead on the corporate agenda. "We wanted to assess whether or not we'd be able to meet the workforce needs of the corporation and our business strategies," says Hayes. "We knew we'd have to leverage the expertise we had in the electric side of the business to help us meet the business strategy we had set out for the other side of the business—AEG."

What they found was shocking. When they looked at their business plans, they were amazed by the large number of "peopleless" assumptions. For example, if they had a goal to grow one part of the business from $100 million to $200 million, there often were no people strategies in place to supply the increased workload. The pipeline was jammed and they needed to rectify that problem quickly.

A project team, which consisted of people from business-planning functions, business-process functions and HR (assisted by a group of top executives), developed a surprisingly simple workforce-planning model. Key to the model is a concept they call pivotal roles. Pivotal roles are make-or-break positions that keep the business engine spinning at peak performance. Surprisingly, these positions don't necessarily include top managers. The key concept is, certain people or positions are key to each of the company's businesses, and everyone else is in a support role. "What's so amazingly simple about this is that the notion of pivotal roles very quickly brings you to a focal point on what's important to the business," says Smith. "If your business is going to succeed, there are very few roles that make it succeed, and everybody else is in a support role."

"In most cases, the senior management positions were not identified as the pivotal roles," says Christopher I. Stone, practice leader for Hewitt Associates' HR practice for the Southeastern United States, based in Atlanta. Stone served on the team that developed Duke Power's new people-planning strategy. "I think [the fact some senior managers weren't considered pivotal] probably did shock some [people]. The other thing that was probably shocking to many was that traditionally pivotal roles weren't necessarily future pivotal roles," says Stone. For example, as an electric utility, many of the business competencies hinged on engineering skills. But that's not necessarily the case anymore. Because the organization already has that particular skill in abundance, it was no longer seen as pivotal. Instead, new competencies that will be needed now and in the future were deemed pivotal, such as sales and customer-relationship maintenance, marketing and product development, deal-making, merger-and-acquisition implementation and project management.

For example, in the organization's customer-service center, the customer-service reps, who previously would have been considered to be in support roles, now are actually considered to be in pivotal roles that move the business forward. Why? "When we look at how we're reengineering our delivery processes, those people on the telephones at the customer-service center are absolutely essential because they won't be just answering customers' questions—in the future, those people actually will be cutting the work orders and doing the work scheduling for the electric workers so they can go out on calls," says Smith. Not only that, they'll also be doing all the billing online and sending in the materials orders to the stock pickers so they can load the trucks. "It becomes a highly critical point [of contact] that will make or break customer service," adds Smith.

On the other hand, in the same organization, the national account managers, who are highly paid and highly skilled, were deemed pivotal, because they're responsible for approximately 60% of the company's revenue in the industrial and commercial sectors. However, the organization also deemed its meter readers, who are fairly low-paid workers, as pivotal, because they're the ones who are out in the field collecting information the company needs to bill its customers.

The concept of pivotal roles was simple, yet radical—and one that took some getting used to for many at Duke Power. But in a rapidly changing business climate, egos can't be a company's first priority. Good business strategy—and growing the people who can support it—has to be.

A look outside offers a benchmark on internal needs.
"When you look at most planning models, environmental scans are done before you actually assess current and future states [of business]," says Smith. But Duke Power conducted its environmental scan (an external gauge—or benchmarking of how other companies in similar industries make their money and leverage their workforce) after it assessed where it was headed.

It learned some interesting things. For example, Duke typically had built it's Engineering & Services unit with a highly tenured, highly experienced workforce. But when the company looked at how most consulting companies structure themselves, it learned that those businesses usually have one or two gurus and a large support crew with lesser skills. What that structure usually allows consulting firms to do is gain margin on their cost structures. Duke's managers also learned through the environmental scan that they needed to improve in project management—a skill they'd had in their electric business, but not as much in their other businesses. The company needed to transfer the knowledge or build it from the outside as needed.

"Its new way of wrapping an effective people strategy around the business has increased HR's visibility as a strategic partner."

After benchmarking, Duke came back and identified where the gaps were in numbers of people or skills its current people needed. "One of the tools we developed from there was a quick way to identify the make-or-break competencies in each of those pivotal roles and then to determine the level of knowledge you needed to successfully undertake those roles. Was it book knowledge? Was it working knowledge? Or did you have to be an expert at that competency [level]?" explains Smith. "So all of that information then allowed us to ask ourselves, 'Are we roughly on the right track?' Because being roughly right is all you really need to be to determine what your strategy needs to be. This isn't a precise science."

Duke's HR managers and Hewitt Associates also learned what skills the current and future workforce would need. They also determined they need some people who have many—or all—of those skills simultaneously. For instance, although the company had many employees in the past who had project management competencies, it often would have someone else [in the company] make the deal in the first place and someone else figure out the engineering and operations components to the project or implement other steps that went along with it. "We learned we have to have [some] people who can do all of these things at the same time," says Hayes.

Environmental-scan results yield dramatic changes.
After benchmarking, Duke Power implemented a companywide skills and competency assessment process to figure out what skills already were in house, and which ones might need to be acquired in the future. It determined the company had an imbalance in its workforce skills bank, resulting in a targeted reduction of 900 employees.

Next, the HR organization assessed whether the firm's reward systems were rewarding people for the right things under the new structure. It decided the company needed to increase at-risk pay and managed-care benefits to attract and retain the right people to the new, beefed-up roles, especially in the AEG businesses. "People who are the deal makers and marketers have different values from, perhaps, those who were in the regulated utility business, so their benefits structure needs to be different," explains Hayes. In addition, the business was faced with rethinking the traditionally rich benefits plan that's been awarded to utility workers in the past. That may no longer make sense in a highly entrepreneurial and dynamic business environment.

The organization also is implementing a much more focused training and development program around business, reengineering and process-improvement issues. "It becomes a much more tailored thing when you know that certain roles have got to absolutely hum," explains Smith. "So you align your training, your pay, your benefits and your reward strategies—everything to support those roles that make or break the business."

In the company's unregulated side of the business, the strategy is going to be more toward "just-in-time" staffing. Since some of the AEG offices are abroad, they'll simply hire local talent to fill in where skills gaps exist. At home, rather than moving large numbers of people from the electric utility over to the unregulated side of the business, Duke will selectively hire people for the skill sets it lacks. The expectation is that those individuals will help teach others in the organization what they know.

"That gives Duke Power other advantages," says Stone. "Not only does the company broaden the competency base and build the skill sets of the organization [in this way], it also [allows the firm the ability to offer] a redeployment option for people from the utility side—where some jobs may not survive as the nature of the business changes over the years. So the company doesn't have to fire some people and hire other people. It gives Duke Power a tremendous leg up on retraining and redeployment."

The workforce-planning process changes business strategy.
The new process has helped the company focus its business strategy based on the concept of pivotal roles. It's now looking at people with a new set of eyes—looking at the emerging business and focusing planning and leadership development around that—and vice versa. Because it will have an increased talent capacity, the firm will be able to commit to greater business challenges.

Although Duke already had a good executive development program before this new model, the program is now much more focused and is targeted to others in the organization whom the company has deemed high-potential. "The difference is that this is now being done on a very conscious level—putting very specific assignments, very specific coursework and very specific feedback in front of people," says Smith. "Before, it was more [along the lines of] 'We [the management] will put you over here and we'll see if you sink or swim. And if you swim, well, maybe you'll have some future greatness [in store].'" It's no longer left up to chance.

Duke's now leveraging the talent it already has more efficiently. For example, it's more closely tracking individuals who've been on international assignments to see what their next move is. And it's asking those repatriates to share their knowledge with workers when they return.

Interestingly, the whole people-planning redesign also has helped the organization identify the gaps in its HR systems and processes—such as reward systems, performance systems, and training-and-development systems. The HR organization now has a new agenda for the next five years as a result. For example, it's implementing a compensation and benefits structure review, and updating its executive-exchange process and its training-and-development agendas.

Not surprisingly, the new focus on business, and the new way of wrapping an effective people strategy around it, has increased HR's visibility as a strategic partner. To be sure, the business no longer can run efficiently without the right pipeline of people to staff it, and conversely, HR can't staff correctly unless it understands what the business needs and plans are. But HR also has strengthened its own internal focus. "It almost demands a partnership between the business-planning process and the HR systems," says Hayes. HR no longer can staff just by the numbers. It's about driving the right numbers to support your business. Adds Smith: "If you're in the game of trying to make numbers add up, you're probably losing perspective and not adding value."

If you think workforce planning is a bit like pioneering a new frontier, you're right. It demands that HR take a puristic view of what skills are needed to run a business at its leanest and meanest. But it also requires you always know your business may be smack dab in the middle of the next gold rush—with thousands clamoring at your door for your goods and services. You'll have to be ready to staff up at virtually a moment's notice. And while that's both challenging and exciting, one fact is undeniable: Business never again will be like the one-horse town it used to be. If you aren't the best general store on the block, ready to open your doors when customers are knocking, you might as well lock the door and throw away the key. You can count on the fact that there certainly will be someone else ready and willing to take your business.

Personnel Journal, June 1996, Vol. 75, No. 6, pp. 44-52.

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