THE JOURNAL OF PEOPLE + STRATEGY
HR Leaders’ Role as Chief of Scenario Planning
June 4, 2021
Scenario planning is a powerful tool when conducting strategic workforce planning. Learn from real-world examples how to create a flexible, relevant plan that serves all stakeholders.
This article was published in print and online in the Spring 2021 Issue of the Journal of HR People + Strategy.
By Tracey Marsh
Over the last 20 years, while a large portion of the worldwide workforce has been shrinking, industry has been undergoing a technological transformation. This evolution has created additional complexities for our business leaders to contemplate, often looking to their HR partners for answers and solutions.
Today’s businesses are also overcoming another massive obstacle: a global pandemic.
As a result, many employers—no longer able to rely on a surplus of qualified candidates—are thinking more strategically about recruitment, professional development and employee engagement post-pandemic. This has created new opportunities for HR practitioners to play a more strategic role in influencing business outcomes for people-planning activities.
To this end, many CHROs find themselves assuming a compelling new role in their business: Chief of Scenario Planning. Mastering this role requires HR executive to lead, break down barriers and address workforce challenges while enabling flexibility. It is an important responsibility that requires having the foresight to plan for multiple scenarios that can span two years or more.
At Weir ESCO, a global manufacturer, we have developed a strategic workforce planning approach to guide business leaders through various scenarios, blending real-time data to provide clarity about gaps and issues. To guide skilled HR executives with both clarity and purpose, the framework describes short-term and longer-term approaches that may be applied in multinational, large- or small-scale organizations.
Disruption Will Continue to Drive Workforce Strategy
In a 2020 McKinsey & Company study, more than 800 senior executives said the coronavirus has disrupted their business, but has generated focus on adaptable workforce planning, a new business model and renewed interest in reshaping the employee experience. However, businesses will not be sustainable if their workers lack the skills needed to achieve the organization’s goals post-coronavirus.
The situation in the United States is particularly challenging. The country’s population is aging rapidly, with 10,000 baby boomers estimated to reach retirement age each day through 2030. More alarming, the U.S. also is suffering the most among developed economies from the growing deficit of highly skilled workers. Within the next 10 years, the U.S. could experience unrealized revenue of $1.7 trillion due to labor shortages, equivalent to 6 percent of its entire economy.
With greater competition for a smaller pool of skilled workers, organizations must make their talent strategy an imperative.
Press the Reset Button on Strategic Workforce Planning
As in so many companies, the pandemic caused Weir ESCO leaders to consider the uncertainties triggered by COVID-19 while still striving to meet a growth agenda over a five-year horizon. The regional and global economic impacts of the pandemic for the balance of 2020-21 were, at best, fluid. How might supply chain, commodities pricing and demand signals be disrupted? As leaders, we had to think differently about how to best shepherd the organization now that the accuracy and value of traditional long-range planning had become less clear.
The ESCO division of Weir employs approximately 3,000 employees globally. Our leadership and management teams are heavily populated with data-driven engineers and technical innovators who use science and logic in their decision-making. Why should our strategic workforce planning decisions be any different? Pushing ourselves to think more strategically about tools and processes to tackle current and future workforce challenges, collectively, we developed and implemented a strategic workforce planning (SWP) approach that not only supports future planning but drives real-time solutions across the organization.
We started with data. A study by Sierra-Cedar revealed that companies who employ SWP achieve an average of 10 percent higher business outcomes, such as revenue per employee, and 12 percent higher talent outcomes, including engagement, succession and retention. Improving our processes would also assist in more immediate questions regarding physical work environments and how flexible work practices play a role in developing our workforce planning.
We recognized that a total rethink of the business model and deliverables may be required—and in some instances with a very different business footprint and mandate. To address workforce challenges while accounting for pandemic realities, the goal of SWP was (and remains) to have a workforce with these characteristics in the near term:
- Shape: Having the required competencies needed today and tomorrow through succession planning.
- Cost: Labor cost that is too high will have a negative effect on financial performance, but too low will cause productivity declines.
- Agility: Having a lean and flexible workforce will help an organization adapt to changing market demands.
From Theory to Practice
Our choice to adopt SWP is proving out, and we have experienced some important learnings during the pandemic. We employed the following process to guide us through our SWP effort and inform decision-making about our future workforce needs:
- Organizational demographic data analysis. Conducting an assessment of our workforce allowed us to understand our current resources including perspectives on flexible work practices and the viability of moving a significant proportion of the workforce to permanent home offices. This knowledge helped us to determine how current talent gaps will affect our strategic roadmap, what type of people development can be achieved in a virtual world while being cognizant that people development is a multiyear undertaking, requiring deliberate planning.
- Market analysis. An evaluation of relevant political, environmental, social and economic factors provided a context in which to view the business over the coming five-year time horizon. We explored the business model and assessed if our end user products are still viable in the new world—the answer was “yes.”
- Executive interviews. Holding candid conversations with department heads revealed views on current and future business needs, including skills, experiences and changing dynamics. This information will impact how our people will do their jobs effectively using different approaches in the future.
- Findings report. This brought together the data and insights from the steps above to provide the team with an understanding of “the size of the prize” and create a change-willing mindset.
- Workshop for senior team perspectives. These sessions build upon the findings report and gave us the opportunity to dig deeper to elicit team support and attain alignment and diverse perspectives on our long-term professional development needs.
- Deliverables. Having this knowledge allowed us to define the urgency of each necessary skillset and prioritize learning initiatives within our current workforce. It’s important to define key activities to address people needs and organizational changes that will facilitate new ways of working—with ownership of many of these deliverables being a partnership with business and HR.
Implementing SWP or any workforce planning method will require discipline and flexibility as the process will be new and unfamiliar for many participants. HR needs to lead from the front—our seat at the table has never been more legitimate in the eyes of the business.
As part of our learning process, we saw successes in our remote work practices in a global pandemic that started to allow our organizations to re-evaluate flexible work policy and global footprint, while enhancing workplace communication, health, safety and worker diversity. It has also resulted in a truly global talent pool, unconstrained by the labor shortage encountered in certain geographies.
Scenario 1: An Emerging New Business Model with Initial Focus on SurvivalIn this scenario, the business model may undergo a radical change to remain sustainable and meet customer demand in a COVID-19 environment. Business deliverables may look very different and the mode of delivery may also be re-engineered to ensure survival. As a result, the current work environment may reflect remote or hybrid work arrangements, additional flexibility, different skill sets and experiences and a shift to a more digital workforce, among other impacts. Anticipated risks: Continued disruption resulting from pandemic-related market influences, downstream economic impacts, social and geopolitical changes, market cyclicality, decreasing productivity, mental health and wellness challenges, shift in workplace culture. These factors—coupled with new business deliverables, new client requirements and a workforce adapting to new practices—requires deliberate planning. Take action:
What’s worked well for Weir ESCO: Although it is a data-driven process, SWP requires a certain amount of abstract thinking and “seeing” into the future. Our management teams had to engage in discussions of “what might be,” considering the five-year time horizon. That felt vague and futuristic to some, making them uncomfortable. Our HR team had prepared for this possibility and was ready to frame the discussions so that we could collect insights and intelligence to inform decisions about future people needs in support of the business. Through this approach, our leaders became more comfortable engaging in vigorous discussions and helped create workforce project plans within all departments. These are tangible and we’re starting to deliver some results. We started with assessing what our business would look like over the next 12 months and which areas would need a radical shift in thinking and/or approach to work through the COVID-19-triggered disruption. We also learned to be realistic in setting goals, balancing resource capacity and capabilities of the organization. To overreach and fail with project implementation can be disheartening for all involved. |
Scenario 2: Fundamental Status Quo with Near-Term Tweaks to Ensure SustainabilityThe business model is over a six- to 12-month horizon, with some immediate adjustments to ensure survival or sustainability, but the fundamental business deliverables remain intact. For example, your salesforce may adopt new techniques to serve their customers in a remote work environment. Your engineers may adapt to using more digital tools. This scenario yields a shorter-term focus with SWP as business begins to experience some signs of recovery. Successfully planning up to 12 months at a time will require you to hold course. Plan for the current workforce based on your existing business model, but evaluate your workforce and adapt longer-term. In this case, begin with an understanding of where the organization is headed with a focus on the immediate adjustments required to sustain through the current business demands. Is transformation on the horizon? Building on scenario 1, what skills will the business need to meet its current and future objectives? Is there a plan in place to ensure that needed skills are developed or acquired to satisfy future business demand? Anticipated risks: It is common to focus only on longer-term thinking when it comes to SWP. To redirect efforts on shorter-term thinking in this scenario, HR executives must be the steady hand guiding senior leaders—balancing the here-and-now realities while not losing sight of the mid-term drivers. Expect some of these actions, described below, to accelerate in order to adapt to the new normal, with other actions maintaining some continuity. Take action:
Additionally, data plays an important role in this exercise, but the data is just a starting point. Metrics help leaders make decisions only when they approach those choices from a set of values shared within the organization. Numbers do not replace operating principles, such as a commitment to enabling work/life balance or improving inclusion and diversity. If you do not have alignment on values, then difficult questions will be impossible to answer. Keeping your leadership team grounded in the company’s vision and purpose will help reveal misalignment and reinforce the HR team’s value as a transformation partner with the expertise to help shape the organization’s strategy, growth and direction. In fact, this process often helps refocus our leaders at various levels in reacquainting themselves with the longer-term business goals and what it will take to reach them. What’s worked well for Weir ESCO: At Weir ESCO, we brought those conversations forward with the executive leaders early in the pandemic and often. This means HR needed to help leaders engage in conversations about how today’s roles and skill sets will need to evolve more immediately—and significantly, in many instances—to be relevant to the organization’s future. For example, it may mean your salesforce is engaging in more virtual calls versus being on the road and ensuring we understand the changing dynamics of this new reality. HR must be at the helm of SWP, leading and facilitating the multistep process to reveal in-depth insights into what an organization needs in terms of talent and skills.
Scenario 3: Long-Term Business as Usual with COVID-19 Near-Term AdjustmentsThis scenario is about planning for the next 24+ months. The near-term impacts of living through a pandemic are having a real impact on our people and while longer-term business strategies are intact, the immediate impact on the workforce must remain front and center. Remember, your time horizon needs to be far beyond tomorrow or you will be behind the change curve before you begin. In this scenario, you have determined your business will be viable and the market outlook appears stable. One critical element of SWP is its focus on identifying the long-term needs of the business and prepare for COVID-19 recovery. For most employers, future workforce strategies will account for the new work environment. As part of your planning process, be conscious of the current impacts of COVID-19, including physical distancing requirements, employee safety, mental health and well-being. The percentage of employees working remotely before and after may significantly differ. Gartner research asserts that remote work arrangements have resulted in a net positive for most organizations, leading to cost savings and improved productivity. But remember that senior executives are relying on HR leadership for the vision for defining skills gaps now to accomplish their strategic objectives. Ensure your 24+ month SWP vision is dynamic, flexible and adaptable. Consider asking yourself, is the business viable? What long-term changes or investments will be required to serve your customers? If you completely transform and pivot your operating model, what workforce skills development do you need and how will that be accomplished? Anticipated risks: Hiring to fill skills gaps is a realistic option for many organizations, but not the only one. SWP makes a compelling case for investing in an employee’s training and development by drawing a bright line between those learning opportunities and desired long-term business outcomes. When it is necessary to hire external talent, focus on adding team members with an emphasis on agility to learn with a growth mindset. Our objective is to leave nothing to chance by implementing clear action plans that address and develop critical skills in our employees. Take action:
What’s worked well for Weir ESCO: To meet Weir ESCO’s five-year objectives, the organization adopted a build, buy and borrow approach. We believe it is important to invest in developing the skills, knowledge and experience of our current employees so they can build on their competencies to enjoy a career journey within our organization. Undoubtedly, scenario 3 is the most complex. With this in mind, a SWP process allowed us to define a positive set of deliverables that will help us meet the future needs of our unique organization. These include development of:
Tackling Complexity Is an Ongoing Journey Creating a successful workforce plan amid a pandemic is not a one-and-done effort—and even without a pandemic, perhaps long-range planning has permanently changed. Workforce planning should be a living strategy with the ability to flex along the way, accounting for business changes and market realities. A good workforce plan must be able to pivot as the strategy, workforce supply, customer demand or other business factors change over time. To ensure this is the case, Chiefs of Scenario Planning must connect regularly with stakeholders and stay in sync with the organization’s business plan. Follow through to confirm that the talent development programs you provide remain relevant to your company’s growth. And, stay on top of evolving skills requirements in your business and industry. In our experience, a well-executed SWP process clears away the fog in an organization’s people strategy by providing defined and measurable actions tied directly to critical business outcomes. In turn, the process provides a valuable opportunity for the HR organization to demonstrate a positive and meaningful impact on the business while earning a role as a trusted advisor.
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