Special Report on HR TechnologyTalent Planning for the Times
It is, say firms that sell workforce planning software. Vendors such as Vemo, Infohrm and HumanConcepts pitch products designed to help companies prepare for the future of their workforces.
The tools, which tend to focus on either short-range or long-term planning, aren’t perfect. Over-reliance on data-crunching software can cause companies to lose sight of intangibles that are crucial to a company’s culture, for example. And as the recession demonstrates, business predictions are highly fallible.
But workforce management software is selling at a brisk pace. That’s partly because of a recession that took much of the world by surprise, vendors say. They argue that many firms responded to the downturn with crude people cuts that cost them key talent or handicapped their growth. Wisely implemented, workforce planning tools promise to help organizations handle variable business demand, says Brian Kelly, president of Infohrm for North America.
“We can’t predict economic downturns,” he says. “What we can do is help organizations manage through good and bad times.”
Workforce planning software refers to applications that allow companies to forecast the number and kind of employees they will need at some point in the future. A cousin to succession management, which focuses on specific positions in a firm, workforce planning tends to home in on key job families or skills that will be required. In many cases, the tools let firms experiment with different scenarios, examining what workforce costs or risks may result from taking steps such as entering a new geographical market or eliminating a business unit.
"Having access to as much data as possible and being the owner of the data is a good thing toward achieving the goals of workforce planning."
—Lisa Rowan, IDC
Vendors of workforce management software tend to fall into two categories. The first is short-term or operational workforce planning, meaning preparing for changes within months—such as a restructuring or merger.
HumanConcepts, Aquire and Nakisa offer products in this category, and each has a background in making tools for representing a firm’s employees graphically in organization charts.
Then there are longer-term, strategic workforce planning software providers. Their products are designed to help envision the workforce as far out as three to five years. Vendors involved with long-term planning include business software giant SAP, Aruspex, Vemo and Infohrm.
The amount of spending on workforce planning software is difficult to pin down. Workforce planning applications represent a nascent market, says Lisa Rowan, analyst with market research firm IDC.
“The vendor offerings probably address some but maybe not all of the eventual components,” Rowan says. Long-term planning is missing in most organizations, according to a recent report from research firm Bersin & Associates. In its March report, Bersin said 92 percent of companies have some level of workforce planning, but only 21 percent “take a strategic, long-term approach to addressing the talent demand, talent supply and the actions necessary to close the gap between the two.”
Bersin analyst Madeline Laurano wrote that organizations are, in effect, “bingeing on talent” when times are good and “purging talent” when times are tough. The approach is both costly and hurts the stability of the workforce, Laurano wrote.
“Looking for a more stable path, many organizations are now seriously thinking about workforce planning as a foundation for both a short-term fix and a long-term strategy,” she wrote.
Growing interest in workforce planning has to do with the way organizations have focused on their talent in the past couple years, says Cassie Barajas, chief performance officer at consulting firm Knowledge Infusion. Firms have worked harder to identify and retain key performers, she says.
“What we’re seeing right now is the importance of understanding who the workforce is,” she says.
That understanding is limited at the moment, according to a recent survey conducted by Knowledge Infusion and the International Association for Human Resources Information Management, a professional group. Just 48 percent of respondents said their company has necessary workforce data readily available to make immediate workforce decisions such as layoffs.
The figure suggests that much of the workforce cutting during the past year or so was less than thoughtful. Talented people were cut and companies sometimes slashed more than necessary, says Martin Sacks, chief executive of Bay Area-based HumanConcepts. Many laid-off employees eventually were hired back, and the net cost of the cutbacks was higher than it needed to be in many firms, Sacks says.
A sub-optimal experience with layoffs is a major reason firms are turning to workforce planning applications, he says. “Everyone’s coming out of the recession with a bad taste in their mouth, saying, ‘Wow, I don’t want to go through that again.’ ”
They appear to be putting their money where their mouths are. In late September, Sacks said HumanConcepts’ revenue for the three-month period of July through September was growing at a double-digit rate year over year, putting the company on track for its largest quarter ever in terms of sales.
It’s a similar story at New York-based Vemo, which has 20 employees and whose clients include Toronto-based media firm Rogers Communications, Atlanta utility firm Southern Co. and retail giant Sears. Vemo’s revenue doubled in 2008 and is on pace to double or triple this year, says chief executive Peter Louch.
Firms may want to categorize their positions into strategic roles. "The big thing here is that you are talking about work activities—roles—and not people."
—Peter Louch. Vemo
San Francisco-based Aruspex also expects revenue to double this year. The 25-person firm, with clients including coffee chain Starbucks and insurance provider Aetna, raised nearly $4 million in financing last year. Aruspex CEO Howard Koenig says the firm might take in additional funding to fuel its growth. Already, investors appear to be champing at the bit. Koenig gets about a call a week from venture capitalists interested in his firm, he says.
There’s increased market awareness of workforce planning, says David Ludlow, SAP vice president of solution management for its HR software suite. SAP sells a joint product with software maker Nakisa. SAP also says clients can tackle workforce planning by combining different SAP products such as its core human resources management system and business intelligence analytical software.
Workforce planning is “potentially one of the next big things, like talent management has been,” Ludlow says.
Scanning the workforce landscape
One of the keys to long-term workforce planning is an “environmental scan.” That refers to considering the range of external factors that may affect a firm’s supply and demand for talent, such as regulatory, political or business trends.
Koenig says that in the energy sector, firms have to take into account the price of oil when predicting retirements. That’s because stock prices of employers are linked to oil prices, and at a certain price per barrel, older employees with significant stock holdings can be expected to exit their firms.
Once organizations figure out what data sources to include in their planning calculations and how to weight different factors, they typically lay out a number of scenarios and segment their talent. Vemo’s Louch says firms may want to categorize their positions into strategic roles critical for a long-term advantage; key roles crucial to short-term results; core roles that are marginally important to business priorities but are nonetheless necessary; and non-core roles that may represent places to cut or make more efficient.
There's an increased market awareness of workforce planning. It is "potentially one of the next big things, like talent management has been."
—David Ludlow, SAP
“It’s kind of like marketing,” Louch says, referring to the way firms cluster customers into different groups and plan marketing strategies accordingly.
Workforce planning strategies might look strange at first glance. Infohrm’s Kelly gives the example of an insurance firm that wants to trim its staff of $100,000-per-year underwriters to save costs, but wants to do so without threatening future growth.
By examining data on the performance and career paths of existing underwriters, Kelly says, an organization might learn that its best underwriters rise from the ranks of its own call center managers, who make $50,000 a year. Such internal promotions also save tens of thousands of dollars per underwriter in recruiting fees.
An optimal choice might be to cut underwriters now but load up on call center managers and actively shepherd them into the underwriting role over time.
At Greater Baltimore Medical Center, the main challenge in recent years has been retaining nurses. The 340-bed hospital experienced 18 percent turnover among bedside nurses a few years ago, says Mark Thomas, Greater Baltimore’s vice president of human resources and organizational development. That contributed to nursing shortages and the need to spend more than $6 million annually for pricey staffing agency nurses.
Workforce planning strategies should not remain static. "We're constantly tweaking those plans. Don't think that it's a 'once and done' type of activity."
—Nick Nyhus, Ameriprise
With the help of Infohrm’s consulting and technology, the hospital noticed particularly high turnover among new nurses. So it upgraded the onboarding process with better-trained coaches and the use of cohorts for new nurse graduates, which can create a sense of community. Partly as a result of these efforts, overall turnover among the hospital’s 1,100 bedside nurses has dropped to 13 percent, and spending on temporary nurses has fallen to “well under” $2 million, Thomas says.
An advantage of working with Infohrm, Thomas says, is that the vendor has taught his team how to do workforce planning largely on its own. Next up for the hospital is a project to apply workforce planning to its growing hospice unit. “We’ll be doing most of the work,” Thomas says.
Niche firm or big company?
Companies looking to buy a workforce planning application face a familiar issue: Should they go with a specialist or tap a more comprehensive business software provider? SAP’s Ludlow argues that his firm has an advantage when it comes to building sound workforce planning tools, because its software can tie directly into HRMS systems and other key applications, such as business planning software.
IDC’s Rowan says SAP has a point. “Having access to as much data as possible and being the owner of the data is a good thing toward achieving the goals of workforce planning,” she says. Rowan adds that time-and-attendance and scheduling information is important, especially for an hourly workforce. “Being able to visit historical staffing trends is needed.”
Niche providers counter that their systems can be configured to gather a wide range of data, including external sources such as Department of Labor information.
Another challenge related to workforce planning tools is trying to capture and preserve the positive facets of a firm’s culture. Simply focusing on key jobs or critical skills can blind a company to crucial factors, such as firmwide values, that ultimately translate into business success.
Vemo’s Louch, though, says it’s possible to account for the importance of cultural fit in different roles by considering performance review data, if those reviews assess workers partly on how well they embody corporate values.
Louch says it’s generally easier to launch a workforce planning initiative in an individual-oriented, quantitative culture. But, he suggests, workforce segmentation also can be done in an organization that is by nature more group- oriented.
“The big thing here is that you are talking about work activities—roles—and not people,” Louch says. “So even in egalitarian cultures, you may acknowledge that certain work activities drive greater immediate or long-term value for an organization.”
Then there’s the question of the overall power—or limitations—of workforce planning products. HumanConcepts’ Sacks says frequent use of his firm’s tool can help organizations avoid drastic cuts during tough times. Continually updating a firm’s talent structure to fit with business realities and goals, he says, is akin to driving a car with incremental turns of the steering wheel rather than a sudden swerve.
“You make lots of little changes as opposed to a big one,” he says.
That captures the philosophy at financial services firm Ameriprise Financial. The company, with about 11,000 employees, uses software from Infohrm to create workforce plans looking two to three years out. But those strategies are not static, says Nick Nyhus, vice president of talent management at Ameriprise.
“We’re constantly tweaking those plans,” Nyhus says. “Don’t think that it’s a ‘once and done’ type of activity.” Nyhus says workforce planning software helped as Ameriprise downsized during the recession, affecting approximately 300 positions. The company was able to get data quickly on matters such as how long positions had been open, which indicates talent scarcity, and average tenure in positions, which gave a sense of institutional knowledge at risk. The software saved Ameriprise weeks of data analysis, Nyhus estimates.
Still, there’s a danger in leaning too heavily on software that all but implies users have a high-tech crystal ball. Aruspex CEO Koenig suggests even the best tools rely on people plugging in sobering scenarios.
That was largely missing in the latest recession, with its abrupt drop.
“Everybody was so bullish and drunk on growth they didn’t model this scenario,” he says.
Workforce Management, October 19, 2009, p. 37-43 -- Subscribe Now!