BUILDING STRATEGIC WORKFORCE CAPABILITY

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1 BUILDING STRATEGIC WORKFORCE CAPABILITY HOW TO ALIGN RESOURCES WITH STRATEGY FOR BETTER BUSINESS OUTCOMES SUSAN DEFAZIO

2 TABLE OF CONTENTS /04 Creating opportunities with strategic workforce planning /08 Building knowledge and capability /12 Aligning strategy with capability /18 People implications /22 Evidence-based human resources /24 Conclusion

3 Increasingly, competitive advantage comes not from your traditional products or services, but the skills, knowledge and experience of your employees. THEY RE THE ONES WHO WILL IDENTIFY AND DEVELOP THE BEST SOLUTIONS AND OUTCOMES FOR YOUR CUSTOMERS. Dr. Anne Dibley, associate professor of marketing at Henley Business School /03

4 CREATING OPPORTUNITIES WITH STRATEGIC WORKFORCE PLANNING The ability to attract and retain people with valuable skills is vital for companies seeking to reduce risk and stay competitive. /04

5 Organisations often invest great time, effort, and money in developing products and services, but few take the same care with their workforce resources. Although human capital accounts for the majority of all operating expenses in most enterprises, too many still apply the same demographic and psychographic HR processes to every role and worker, without differentiation. This one-size-fits-all approach is no longer enough to maintain a competitive advantage. To succeed, organisations must now segment the workforce to elevate critical roles and better align people s personal motivations with core business values. This is where strategic workforce planning (SWP) comes into play. SWP is the practice of aligning workforce resources with strategic priorities. It involves segmenting strategically important roles from standard roles, allowing businesses to better meet demand for key skills to support business objectives. CEOs and executives are coming to understand the strategic importance of human capital and many now view workforce strategy as a priority. But taking a more strategic approach to workforce planning is complex and requires HR leaders to: match demand for workforce resources with supply dynamics account for the changing motivations among soughtafter people with strategically valuable skill sets segment and prioritise strategic roles across the business without distancing other members of the workforce align job roles with strategic execution, finding the right balance between strategic and non-strategic roles. /05

6 CREATING OPPORTUNITIES WITH STRATEGIC WORKFORCE PLANNING Without the necessary experience and skills, the right workforce data or a proven model to follow, these outcomes can seem unattainable for HR leaders. But those who fail to focus on SWP risk losing responsibility for workforce planning as executives turn to marketing, operational design and strategy functions to fulfil their business s need for critical skills. SWP represents a major undertaking for any business, but HR leaders should be able to demonstrate its value to the business with adequate planning. The key is to start small and structure pilot projects around four central processes: 1. Taking stock. Gain a clear understanding of the organisation s current workforce planning maturity level and how this needs to change. 2. Setting goals. Consider how to align strategic plans with worker capabilities and psychographics in key focus areas that might be receptive to SWP. 3. Making a plan. Create a new organisational framework that supports the flow of strategic and nonstrategic workforce resources through the business. 4. Measuring the results. Apply evidence-based human resources (EBHR) practices to measure and demonstrate successes, and use the resulting metrics to support a business case. This paper explores each of these practices in detail. If you are ready to demonstrate the value of SWP to leaders in your organisation, then read on. /06

7 FIGURE 1: SWP IN PRACTICE SWP STEP 1 Strategic priorities Selected Business Initiatives STEP 2 Change Management STEP 3 Increase Organizational Capability Workforce Analytics I believe real success comes from right brain thinking and tacit knowledge that deals with aesthetics, creativity, emotion how a company makes you feel. CAPTURING THAT IN AN HR CHECKLIST IS REALLY DIFFICULT. BUT IF IT WERE TANGIBLE, EVERYBODY WOULD BE DOING IT. Dr. Moira Clark, professor of strategic marketing at Henley Business School. STEP 4 Measure, improve, and close gaps /07

8 BUILDING KNOWLEDGE AND CAPABILITY Rather than trying to boil the ocean with an enterprise-wide project, it s better to focus on small pilots in receptive business areas, using existing capabilities and workforce resources. /08

9 When choosing a pilot, it s essential to find a part of the business that stands to gain from SWP. Think carefully about the strategic and core roles within the business, and then look for ways a SWP framework could help improve business performance. Discovery and design The first step in any SWP intervention is to embark on a discovery phase. It s important to understand your enterprise s current workforce planning capabilities and how these must change to support a strategic focus. There are five central steps when assessing an organisation s readiness for SWP: 1. Determine your workforce planning capabilities and maturity. It is essential to have a clear understanding of what your business is capable of and how this will evolve under a strategic workforce model. 2. Outline realistic goals for your project. Build on quantitative and qualitative activities such as headcount planning and workforce analytics. Research external workforce planning models to develop a decision framework that will inform and support the shift to SWP. 3. Consider the level of investment required. Do you already have financial capacity in your headcount budget, or will you need additional funding to support your pilot? Will you need to build, buy or borrow the expertise required to develop a strategic capability? 4. Create a roadmap. Outline your ambitions for change and plot key milestones along the way. It s important to account for tolerance within the business; if your organisation is overloaded with change initiatives, you will need to consider how best to position SWP to avoid change fatigue among key stakeholders. /09

10 BUILDING KNOWLEDGE AND CAPABILITY 5. Establish clear roles for ownership and accountability. Ensure your key stakeholders understand the importance and complexities of meeting performance expectations. Some may be blissfully ignorant and need education. Engaging the business Strong leadership can help secure support from stakeholders and ensure the success of your SWP pilot. In the absence of a big-budget organisational buy-in or a dedicated SWP team, it s ideal to position your chief human resources officer (CHRO) as a champion for the initiative someone who drives ownership among key employees and has a clear vision for the organisation s strategic workforce capability. Gaining stakeholders support is an important step. For SWP to work, it needs to be embraced by people throughout the business, from the boardroom through to leaders in divisions such as finance, marketing, operations and strategy. If the organisation uses HR business partners to align workforce practices with business strategy, it is essential to gain the support of these partners from the outset. It s also worth involving key contacts from customer groups, and other influencers. Consider which people might be valuable allies. Who could help you gain traction and carry out your plans for a strategic workforce capability? Gaining the buy-in of these advocates early on is an important step toward the success of your initiative. However, balancing business as usual with futureproof change is a delicate process. Traditional metrics are not always the best indicators of future success, and you will need to show stakeholders why and how this is. /10

11 Prioritising customer outcomes According to Anne Dibley, associate professor in Marketing at Henley Business School, the key to gaining support within the business is to discuss ideal outcomes for customers, rather than products or best practices. This concept that the provision of services rather than goods is fundamental to exchange is known as service-dominant logic and will require stakeholders to carefully consider whether their current processes best serve customers interests. 1 Rather than imposing your roadmap on the business, offer a transparent view of your design and goals for SWP. Share headcount and workforce analytics data with key stakeholders, and show how these metrics support their strategic goals. Identifying strategic priorities and gaining the support of the business are only the initial steps; the real challenge lies in aligning your capabilities with your workforce ambitions. Ask: Are we solving the right problems and creating the right solutions for our customers? Encouraging stakeholders to consider such points will help them shift their focus from legacy processes and products, and help them think strategically about future value and business priorities. 1 Vargo, Stephen L. & Lusch, Robert F. (January, 2004). Evolving to a new dominant logic for marketing. Journal of Marketing, vol.68, pp /11

12 ALIGNING STRATEGY AND CAPABILITY Resist the temptation to create a lofty vision statement for strategic workforce capability, which can make it harder for key stakeholders to recognise specific and attainable project goals. /12

13 Creating a simple, concise statement that outlines your goals will help translate your ambitions into tangible strategic workforce competencies and capabilities. Directional alignment Directional alignment is a valuable consideration when creating a strategic statement for your project, allowing you to synchronise strategic workforce objectives with the business s internal and external priorities. Aligning current capabilities with internal objectives is key, but it is also important to account for external stakeholders. Take care to consider how a shift to SWP will serve the processes and practices of your strategic partners and customer groups. This will help you better understand the capabilities you need from both workers and partners to support a strategic workforce capability. Your strategic statement should also account for the organisation s responsibilities to its shareholders and analysts. Consider what the executive team needs to address with these stakeholders to ensure the business will remain an appealing and viable investment for them. Additionally, it s essential for a strategic statement to align internal and external priorities with workers psychographics. A candidate or employee might have the correct qualifications for a role, but their personal values and motivations will need to fit with those of the business and its customers for their work to be meaningful and valuable. Once you have outlined your strategic goals, test them out within the organisation, considering internal processes and whether existing practices can support your ambitions for SWP. Concepts such as the McKinsey 7S Framework are useful for gauging the strength of a strategic statement in this context. /013 /13

14 ALIGNING STRATEGY AND CAPABILITY Role segmentation Separating critical and strategic roles from nonstrategic roles is the core process in building a strategic workforce capability. Understanding which roles are critical to the future of the business will help you source workers with skills that can best support the organisation s strategic priorities. Role segmentation is a useful exercise in this process and involves clustering necessary skills and existing roles into different groups, based on differing needs. This allows you to think about the future in terms of strategy rather than resources by considering where there are unmet or under-served market requirements and how the business might need to change to maintain competitive advantage. Once you have determined what you need to achieve strategically, review all the roles within your pilot focus area, identify competencies that are strategically important, and develop a plan to support these roles into the future. Consider both contingent and full-time employees when conducting this segmentation exercise, as workers required for strategic roles may fall into either category. Take care when distinguishing between talent and workforce resources all jobs are important to the business but not all are equal, and the most strategically significant roles might not be the ones you expect. Throughout this process, it can help to view your pool of workforce resources as a portfolio of assets, with workforce analytics and SWP forming bridges to the operations, resourcing and procurement methods that support your strategic plan (see Figure 2). /14

15 FIGURE 2: A HOLISTIC VIEW OF WORKFORCE RESOURCES /15

16 ALIGNING STRATEGY AND CAPABILITY Understanding workers needs Segmentation helps marketers understand who their customers are, and group them together according to needs, priorities and the benefits they associate with satisfactory outcomes. In a similar way, segmentation can help you understand what matters to strategically valuable candidates. The more you know about their capabilities, skills, motivations and personal values, the easier it is for you to attract key people and place them in roles that match your organisational priorities and strategic needs. Professor Moira Clark, head of strategic marketing at Henley Business School, stresses that psychographic and demographic segmentation is essential. She believes that HR managers too often focus on a candidate s skills and competencies without considering their attitudes and motivations, and how these align with company values. Similarly, she notes it s important to strike a balance between people with logical, rational skills and those with strong creative and interpersonal skills. HR needs to be passionate about getting the people with the right personal values and attitudes, says Prof. Clark. We become obsessed with checklists, but I think real competitive advantage comes from looking at the attitudes, motivations and personal values of workers. Anyone can recruit a candidate with the right skills but the intangible, tacit, right brain knowledge that relates to creativity and relationships is what will differentiate the business from its competitors. /16

17 Most companies these days are weakly differentiated. One bank is like another, one airline is like another, and each can copy the other s customer service and IT strategies, products and services. Segmenting employees according to psychographics and demographics can help you understand how workforce implications such as style of working, benefits and organisational design might affect their experience within the business. This process will help you understand workers priorities and align them with those of your organisation, which helps to create more meaningful engagement practices. THE THING THEY CANNOT COPY THAT GIVES THEM REAL COMPETITIVE ADVANTAGE IS THE QUALITY AND HISTORY OF THEIR RELATIONSHIPS. It follows, then, that if you recruit the right people, segment them in the right way and make sure you cluster employees with particular skills, competencies, attitudes and motivations, you re going to be much more successful at reaching your target market. Dr. Moira Clark, professor of strategic marketing at Henley Business School. /17

18 PEOPLE IMPLICATIONS Which tools and practices will best support your strategic workforce objectives? /18

19 With an SWP model in place, you will need to devise a new framework to manage the flow of resources through the organisation in a way that people understand and accept. The method you use to design and orchestrate SWP in your business must support the business s strategic goals. In many cases, you will need to supplant best practices with frameworks that better suit the organisation s strategic workforce priorities. It s also essential that your organisational design and people practices allow for changing worker psychographics, and support the practice of matching right-brained and left-brained workers or resources with roles that suit their capabilities. In other words, you need to let workers engage with you on their own terms, while placing them in roles that make best use of their psychographic strengths. Human Capital Institute s (HCI s) 6B talent framework is useful when applied to organisational effectiveness (see Figure 3). Buying external resources or workers through traditional hiring practices and borrowing necessary skills in the form of consulting, outsourcing, and contingent labour can help meet your organisation s strategic need to acquire talent. The framework then breaks talent management into four categories: Building or developing talent within your organisation Binding or retaining workers critical to your strategic goals Balancing contingent and permanent, strategic and non-strategic roles Bouncing low-performing or unproductive roles and re-skilling workers who have old skill sets. /019 /19

20 PEOPLE IMPLICATIONS Frameworks such as this can help you gain a holistic view of existing workforce resources within the organisation, while accounting for strategic priorities in talent acquisition and management, and psychographic variations among employees. Communication for continuity Frequent and regular communication with specific business leaders is critical to ensuring your strategic workforce initiative is not treated as a one-off project. Your pilot needs to characterise the way your organisation will conduct business moving forward. Communicating with key stakeholders about your successes and project milestones helps convey the message that SWP is a powerful, active initiative capable of driving change and delivering positive outcomes. HR leaders will also benefit from translating strategic priorities into activities that resonate with leaders. Aligning process with practice and publicising the results is an effective way to gain internal traction with SWP. But how do you demonstrate the return on investment (ROI) to shareholders, analysts and the board? /20

21 FIGURE 3: HCI S 6B TALENT FRAMEWORK BUSINESS OPERATIONS HUMAN CAPITAL PRACTICES 6B TALENT PLAN BUY BORROW BUILD BIND BALANCE BOUNCE HR/BUSINESS STRATEGIC LEVERS TALENT ACQUISITION TALENT MANAGEMENT /21

22 EVIDENCE-BASED HUMAN RESOURCES Return on investment is an essential piece of the strategic workforce puzzle. So how do you measure the effect SWP has on your business? /22

23 Evidence of your pilot s success will be important in promoting uptake of SWP in other parts of the business. Using workforce analytics to create a platform for EBHR is an essential step in gaining buy-in from stakeholders inside and outside the organisation. As you roll out your project, use workforce analytics to track changes in key metrics such as fulfilled strategic objectives, worker satisfaction, and retention. You should also take care to measure key organisational health metrics so you can demonstrate the organisational effectiveness of your SWP pilot. These should be both qualitative and quantitative, and comprise an effective blend of leading, lagging and public performance indicators. Implemented well, SWP will help to fill key roles with suitable candidates who will likely perform more effectively than before. To determine whether your SWP plans are on track, you will need to ask a few questions: Are workers in key roles performing more effectively following the pilot? Have you seen better rates of retention in roles previously plagued by high turnover? Building a business case The ability to create a business case for strategic workforce capability both for internal departments, and for external shareholders and analysts is critical when scaling your SWP initiative beyond the initial pilots. There are three key considerations at the core of any strong business case: 1. How is your initiative relevant to the overall business strategy? 2. What impact will it create? 3. How will you secure the support of stakeholders throughout the business? With a successful pilot behind you, creating a business case will help guide the development of strategic workforce capability throughout your business. /023 /23

24 CONCLUSION When will your organisation turn speculation about the benefits of SWP into actions and tangible outcomes? Adopting a model for strategic workforce management is a major undertaking for any organisation. It requires careful planning and intricately aligning business objectives with stakeholder priorities within and outside the organisation. Yet SWP holds great rewards for businesses intent on securing key workforce resources to support their strategic priorities, reduce risk and grow competitive advantage in future. If you re intent on establishing SWP in your business, we recommend you follow these four core steps: 1. Start small the secret to successfully creating a strategic workforce capability in your business is to focus on the functions likely to yield promising results. 2. Articulate your goals gauging current capabilities, considering future goals, and engaging leaders and partners with a compelling strategic statement will help you garner core support for a strategic workforce pilot. 3. Segment roles and resources by segmenting roles and resources according to strategic priorities, worker capabilities and psychographics, and integrating internal and external priorities with HR processes, you can begin to align existing workforce capabilities with strategic priorities. 4. Measure the results apply workforce analytics to build a platform for EBHR, and use key success metrics to support a business case for SWP in other parts of the organisation. /24

25 Carefully targeted communication is key throughout this process whether you re clarifying strategic goals and aligning them with business priorities, or implementing new people-management frameworks and demonstrating ROI. By communicating and sharing key details throughout the project, you can establish a groundswell for SWP that will ultimately support the business s competitiveness and help mitigate risk in future. FIGURE 4: A BIRDS-EYE VIEW OF SUCCESSFUL SWP > TALENT MANAGEMENT > ORGANIZATIONAL DESIGN > WORKFORCE SOLUTIONS ACTION PLANNING MONITORING & REPORTING PREPARING FOR SWP & BUSINESS STRATEGY ALIGNMENT STRATEGIC WORKFORCE PLANNING MODEL CAPABILITY/ ROLE SEGMENTATION ENVIRONMENTAL SCANNING GAP ANALYSIS SCENARIO PLANNING/ FUTURING CURRENT- STATE ANALYSIS /25

26 /26

27 REGARDLESS OF THE SWP MODEL, YOU MUST EMBRACE THE INSIGHTS AND COMPETENCIES OF YOUR PEOPLE. If you lack the internal expertise for change management, data analysis and interpretation, and other required competencies, you must accept the need to bring in those resources or external consultants as required. Nina Ramsey, CHRO, Kelly Services /27

28 ABOUT THE AUTHOR Susan is a Principal and Supervising Consultant within the Global Centres of Excellence. Based in London, Susan s specialist topics include strategic workforce planning, human capital strategies and advising on stakeholder engagement practices. Susan has extensive experience in the human capital sector, which includes leadership positions in staffing operations, strategic account management, thought leadership and has developed a CRM model with practices designed to support understanding, mutuality, trust and longevity. The institutions where Susan has studied include Henley University of Reading, INSEAD Business School, Cranfield University, Human Capital Institute and London Business School. She is HCI certified as a human capital strategist and in strategic workforce planning. Susan is also a certified to deliver SWP Accreditation Courses developed by The Human Capital Institute. ABOUT KELLYOCG KellyOCG is the Outsourcing and Consulting Group of workforce solutions provider Kelly Services, Inc. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition and Executive Coaching, and Executive Search. KellyOCG was named in the International Association of Outsourcing Professionals 2015 Global Outsourcing 100 list, an annual ranking of the world s best outsourcing service providers and advisors. Further information about KellyOCG may be found at kellyocg.com Kelly Services, Inc.

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