How can companies deal with the current situation of the new working environment, when the unlimited availability of potential employees on the labour market can no longer be taken for granted? Nils Gimpl and Ronald Gleich find out
The current labour market is being significantly influenced by the megatrends of advancing digitisation and demographic change, causing Volatility, Uncertainty, Complexity and Ambiguity (VUCA) Digitisation means, for example, that tasks in certain occupations can be increasingly automated, leading to a shift in tasks or an expansion of tasks, which is why new skills and competencies are required of employees.
In its 2018 study, the McKinsey Global Institute shows that employees will be required to have more social, emotional and, above all, technological skills in the period up to 2030. However, the same study also makes it clear that companies that automate heavily in the future will tend to build up rather than reduce the number of employees. The rapid skill change will therefore lead to an enormous shortage of qualified workers in the labour market.
This shortage is further exacerbated by the aging society in many OECD countries. For example, while there were 51.7 million working-age citizens in Germany in 2021 (62% of the total population), this group is expected to shrink to 46.4 million by 2035 (56% of the total population). This demographic trend will put additional pressure on the already strained labour market.
But how can companies deal with the current situation of the labour market and the new working environment in general, when the unlimited availability of potential employees on the labour market can no longer be taken for granted? An important instrument to secure the corporate strategy is the strategic workforce planning (SWP) in the organisation – but this can often be difficult to implement for firms.
In our recent study on SWP we investigated the relevant drivers of introduction, the problems of implementation and the influencing success factors of SWP.
The target group for the study were 123 German companies with more than 1,000 employees that have already implemented and employ SWP. The size criterion was chosen because small companies, due to their greater flexibility, place different quantitative demands on their SWP or do not require strategic workplace planning at all.
The survey was a standardised online survey in which companies could participate from September 15 to November 30, 2021.
A total of 123 companies from a range of industries took part in the study. The participating companies consist of 33% companies with 1,000-2,500 employees, 31% companies with 2,501-10,000 employees and 36% companies with more than 10,000 employees.
Drivers for the implementation of strategic workforce planning
In the study, approximately three-quarters of the organisations surveyed stated that they are in a highly to very highly complex business environment in the categories of technology, competition, and market. Firms are becoming increasingly strategic in order to remain competitive and successful in the future. In order to survive in this environment and to implement their strategy optimally, however, organisations need the right people at the right time.
When asked why the organisations in the study initially implemented SWP, the majority of organisations cited the aforementioned megatrends of demographic change (75%) and new skill requirements for employees (67%), which are both impacting the labour market situation (74%).
Implementation reasons such as growing cost pressure (58%), a change in organisational strategy (50%), or diversification of the business model (46%) follow behind. According to the study, the organisations recognise the situation and the acute pressure to act and want to take countermeasures with SWP. However, the study also makes clear that the organisations often had to contend with similar problems during implementation.
Problems during the implementation of strategic workforce planning
The most frequently reported problems in implementing SWP are poor data quality of HR data and other required data (41%), lack of methodology for conducting proper SWP (43%), lack of support from organisational departments (41%), and inadequate definition of roles and responsibilities (41%).
The poor quality of data is largely due to the complexity of HR data, since it is obtained through a large number of processes and is not necessarily stored in integrated IT systems. In addition, HR data is usually private data that requires the consent of the employee and a legitimate interest on the part of the organisation to be processed and analysed. However, linking HR data is essential for SWP.
Furthermore, many organisations lack the general understanding and methodology for successful implementation of SWP, especially if HR has not yet played a role in the planning process or has only played a subordinate role.
Most organisations find it difficult to define clear roles and responsibilities in relation to the SWP process right from the start. However, a clear allocation of roles is particularly important because the implementation of SWP is a massive task for most organisations. Here, redundancies, information leaks and ambiguities in the process must be avoided from the very beginning. Therefore, a central governance can help to clearly define the process and all roles and responsibilities and to optimally structure and coordinate the tasks of the process participants.
In addition, many companies have problems implementing effective and successful workforce planning because the need is not seen by all departments. In order to ensure the necessary support from all departments and sufficient participation in SWP, the focus must always be placed on the respective benefits for the departments.
However, if organisations manage to circumvent these problems and stumbling blocks in the implementation of SWP, their effectiveness and success is not yet guaranteed. The results of the study provide interesting insights and recommendations for practical action to ensure it is successful.
Organisations whose top management extensively supports SWP and emphasises its importance are significantly more successful with their planning than organisations without this support. Strong top management support means that top managers are highly interested in the success of SWP and therefore proactively support it, as it provides them with important aspects that they incorporate into the organisational strategy.
If top management succeeds in presenting and clearly communicating the importance of SWP to all departments right from the start, this problem can be effectively circumvented. For this reason, the general process responsibility of SWP should, at best, be anchored at the highest organisational level. This underlines not only its importance, but also its transformative character for the organisation.
Another important success factor for workforce planning is the comprehensive use of a holistic skills management system within the organisation. A skills management system is a database in which employees can enter their existing skills, similar to social business networks such as LinkedIn. The skills of the employees are then compared with the requirements of the position. In this way, skill gaps can be identified directly and addressed through appropriate development measures.
Organisations with a strong skills management system were characterised on the one hand by the fact that HR managers, executives and employees are very familiar with the system. On the other hand, they have a comprehensive skills catalog in which all the necessary skills of the organisation are listed, which is continuously updated and communicated. The sample shows that the use of a skill management system is statistically positively related to better planning results.
Five recommendations for action
For the successful implementation of SWP, it is essential to avoid the problems mentioned and described above. In particular, the following five recommendations for action should help to establish successful SWP:
- Build an infrastructure in which you can easily link HR data from different sources and evaluate relationships. Ideally, all HR data, like other data in the company, should be made available in an integrated management system to avoid data disruptions and errors.
- Determine the planning parameters and methodologies best suited for your organisation. Review available use cases from various organisations that use different planning methodologies and evaluate which one best fits your organisation. For organisations with high uncertainty and a complex environment, qualitative planning methods should be used first, as they usually lead to better results under the given circumstances. In the next steps, quantitative planning methods based on mathematical or statistical models can be used for more stable business areas or roles.
- Establish a central governance function that holds ownership of the SWP process, defines its stakeholders and their responsibilities and tasks.
- Make clear the importance of SWP from the top, both for the company as a whole and for the participating departments. Always emphasise the concrete benefits for the various departments.
- In addition, you should implement a skills management system in your organisation in order to increase the planning results and the level of insight of SWP to be able to develop appropriate measures in case of deviations.
Nils Gimpl is Research Associate at the Centre for Performance Management & Controlling at Frankfurt School of Finance & Management. His research focuses on topics related to the digitalisation of controlling, data analytics and strategic (workforce) planning.
Professor Ronald Gleich is Academic Director of the Centre for Performance Management & Controlling of Frankfurt School of Finance & Management and Head of the International Controller Association’s Think Tank.
