Peter Howes LFAHRI, vice-president of workforce planning and analytics at SuccessFactors, an SAP company, says all HR capabilities can benefit from workforce planning and analytics – if they’re done right.

Q. What is your definition of workforce planning?

First of all, we need to differentiate between what I call operational workforce planning and strategic workforce planning.

If I use the term workforce planning, by default I’m referring to strategic workforce planning. The key to this is that your forecast period is more than two years into the future. This differentiates it from labour resource planning for the next calendar year, for example, which is more operational planning.

When we talk about strategic workforce planning, the key concept to me is about risk mitigation. It’s understanding the risk to the organisation of not being able to fill critical job roles in the future and the potential impact on business performance or organisational performance.

My premise would be that, if you’re confident you can easily find people in the external labour market in the future for all your critical job roles, and you can relatively quickly get them fully productive, you don’t need to do workforce planning. You just need good staffing processes.

There are also other factors. I think workforce planning supports the development plans of your internal staff – it’s a prerequisite in order to do effective career management and career path planning. So there are some internal factors. But, overall, I think risk mitigation is the key orientation.

Q. How do workforce analytics fit with workforce planning?

There is still a connection between workforce planning and workforce analytics.

My key thrust for workforce analytics would be about the principle of workforce segmentation. Most companies do a woeful job when it comes to workforce analytics because they only report aggregate data. And I regard aggregate workforce data as being totally useless.

You get the insights you need when you segment the workforce down; segmenting turnover by high performance by engagement score, or high performance by position tenure.

I have no interest in knowing a company’s total voluntary termination rate. It’s a totally useless piece of information without the context.

I think it’s very hard for organisations to build a strong workforce planning capability without also building a workforce analytics capability. They’re very closely aligned.

Q. Do you think some companies are so focused on mitigating risk that they don’t take ‘good’ risks with regards to staffing?

I think companies need to learn to take a certain degree of risk, but the bigger problem is that most companies are unaware of the degree of risk they’re associating with. To use a typical phrase, people live in blissful ignorance. They don’t know what they don’t know about their workforce.

The issue is not so much about not taking acceptable risk, but not being conscious of the degree of risk.

Q. What is your definition of international best practice?

On one level, international best practice is a bit of a misnomer because it infers that best practice is better in some countries than in others. I think international best practice is unique to individual companies.

There are companies in different countries in the world that are more effective at doing workforce planning than others. And there are companies in Australia that do it just as well as companies in north America and western Europe. I’ve spent the past 15 years in these regions, so I know them better than other parts of the world.

For example, in Australia, I think National Australia Bank does great work with workforce planning, as do divisions of BHP Billiton. Airservices Australia has consistently undertaken workforce planning for a number of years.

In north America, I think companies like Ameriprise, based in Minneapolis, do very good work, but more in workforce analytics. Some of the larger retailers like Target, Starbucks and Gap are also good at it.

Q. What affect can workforce planning have on specific HR segments such as talent management?

Personally, I think strategic workforce planning is the foundational component for the whole talent management cycle. If you don’t have a good grasp of your future workforce demands by critical job role, and if you don’t know the projected gap between demand and supply in those critical job roles, it’s very difficult to implement effective talent management processes in general.

I don’t see how any company can do effective talent management without an effective workforce planning process.

Q. How closely does HR have to be aligned with business strategy?

Let’s start with the premise about contribution to business performance. This can be measured in multiple ways, such as revenue growth or margins. It can also be things like innovation, customer service and product quality.

I think it’s too simplistic to say that it’s just about revenue or profit. They’re the manifestations of the outcome, but you don’t get those outcomes just by focusing on those issues. We need to focus our people management priorities on the factors that in turn can impact revenue growth or cost management for margin growth.

And we then need to see how the people factor is one of the key differentiators in those areas. That’s how I see it.