Realizing the talent dividendEffectively leveraging employee experience via holistic workforce planning

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Welcome to the talent economyThere is an undercurrent to the global economy; a facet of it that most companies do not realize exists. The convergence of global demographic trends with social media, mobile technology, and analytics now heralds the post digital era, upending business as usual. Many leaders today understand that people are the fulcrum on which fortunes rise and fall. Welcome to the new talent economy.

The fundamental premise of the talent economy is that the people you have are more important — or at least as important — as the hard assets or the data you have. For that reason, talent has outgrown the human resources department. Every decision-maker — from marketing, to finance, to the board — has a hand in directing this asset.

Talent has also outgrown the “debit” column. Rather than a business expense, it is a business investment — one that drives an organization’s performance and its bottom line. Today, talent management is not just concerned with effectively acquiring, developing and retaining the talent companies have on hand; it’s broader than that.

It is about using those assets to gain a competitive position in the marketplace, and understanding how to make the right choices, from among many, in responsibly recruiting and deploying talent, based on global trends and events. It’s about pulling the appropriate levers, prioritizing options, and analyzing the return on talent investments. True talent management is the process of “operationalizing” talent, i.e., getting, keeping, and effectively leveraging talent — now and in the future — to effectively implement and maintain a company's business strategy.

Indeed, organizational talent has a direct impact on the bottom line — on the income statement and balance sheet. Specific financial drivers in the talent economy include: improved productivity, cost management, revenue growth, and improved profitability. These drivers are dependent on having the suitable talent, and utilizing that talent to its fullest potential.

However, it is more difficult to effectively utilize an employee than say, a machine or a building. Employees are human. They bring both tangible — such as skills, experience, and knowledge — and intangible qualities — such as work ethic, emotional intelligence, and motivation — to the organization. However, one of the most valuable qualities in any employee is experience.

For talent to be utilized in new and innovative ways, to create both leverage and value, it is critical to understand what experience people have and how it can be creatively exploited to meet the talent demand profile. Indeed, an employee’s experience — and his or her ability to apply it in novel approaches — is the perhaps one of the most important levers to help harness the value and the potential of talented people.

So what happens to organizations that do not harness the business value of their talent? Simple. They will fall behind. In a global economy, where trends and opportunities are constantly shifting, companies that are not prepared to look into the future — and meet the demands it will likely place upon them — may lag behind their competitors. That is not a good place to be.

Strategies to thrive in the talent economy: Workforce PlanningTop-quality people who have skills, knowledge, and experience are in high demand across the globe. However, top-quality talent is unevenly distributed. Some regions have a glut of talent; others have a dearth.

Effective companies understand that the talent they need is not always lined up at their doorstep, waiting for a job. They develop strategies to identify, recruit, retain, and appropriately deploy the experienced talent they need to implement their business strategy. The idea is that companies should invest in their people — in their skills and experience — to tap into their knowledge to help solve the complex challenges that they encounter on a daily basis. The better the talent they have, the faster and more effectively companies can solve problems, and the more competitive they can be in the marketplace.

The process is not easy, however. Companies need insight about the capabilities and experience inherent in the talent they have now. They also need foresight to seek out the capabilities and experience they’ll need from future talent. This insight and foresight can drive competitive value.

Developing insight and foresight requires a holistic workforce planning and forecasting capability that serves as the foundation of an effective integrated talent management strategy. Without this capability, companies can fail to increase their value and competitive edge in a global economy.

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The process of workforce planning entails understanding where those specific talent assets are, and what experience the talent has. It also facilitates the appropriate, timely, and cost-effective deployment of talent. This section outlines five strategies that can help companies effectively drive value by implementing workforce planning to leverage the targeted experience they need to thrive in the talent economy.

Understand the business ecosystemBefore companies can identify, recruit, deploy, develop, engage and retain talent, it is crucial for them to develop an understanding of the environment in which the organization operates. We refer to this as the business ecosystem. The business ecosystem is the complex interrelationship of the various groups of organizations and events that have an impact on each other, and that influence the outcomes a company is working toward.

One way to understanding the business ecosystem is the ability to identify trends and patterns across a range of lenses including:

• Political

• Macroeconomic

• Educational

• Labor mobility and/or migration

• Demography

• Technological

Companies should also combine these lenses to look at events in the context of the business ecosystem as a whole. This ability requires identifying patterns, trends, events, and changes, and the impact they can have on the business.

The next step is to match the labor supply with the demand — both externally and internally — in a cost-effective manner. Becoming able to better predict the experience and skill sets an organization needs, and which locations’ labor pools hold that experience and those skill sets, can help organizations gain competitive differentiation.

Local talent pools may not have the skill sets and or experience companies need, even though there may be a large labor pool within those locations. Therefore, it is essential to determine where in the ecosystem critical skills and experience reside, and to take the business — virtually or physically — to those skill sets.

It’s also critical to understand how experience translates from one job or skill set to another. It is important to compare the talent demand profile with the available labor pool and identify resources available in the pool that, although that talent may not fit the demand profile exactly, may have translatable skills and experience that can be leveraged cost-effectively via retraining.

Holistic workforce planning is the critical discipline that can help companies gain visibility and create insight into how to unlock the potential in the talent pool. With effective workforce planning, organizations can ask fundamental questions such as:

• Is the talent supply adequate where we want to do business?

• Can we meet aggressive growth goals in terms of labor?

• Is there talent available that may have translatable skills and experience, even though it does not exactly meet my demand profile?

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Effective companies find a way to use workforce planning to model the experience they need and find the area of opportunity to leverage labor-pool experience, even though it might not be what the demand profile ostensibly requires. If it is translatable, it can be used. This modeling process can have a high return on investment. By unlocking the value of the experience resident in the talent pool, companies can gain a financial advantage by identifying, reusing, or retraining talent with similar experience.

For example, a large national telecommunications company wanted to implement a nationwide fiber-optic network. The project was challenging because the company had to cope with constantly moving implementation sites and use technical skills that were often in short supply at the various sites. Thus, a specific challenge the company faced was achieving and maintaining the ability to mobilize its workforce on time, and on budget.

To meet the challenge, the company used data visualization, cost modeling, scenario analysis, and labor management techniques to perform a macroeconomic analysis that assessed its current and future talent supply.

The analysis looked at other infrastructure projects that would use common skills, experience, education forecasts, migration patterns, wage growth forecasts, and community-based demographic information to create a more complete strong supply picture. The results revealed that there was inadequate talent supply — across the country — to meet the company’s labor demand, at any price point.

The company then performed a detailed demand analysis to enable it to understand its skill and experience requirements in order to assess its options for changing its work models and completing tasks using different labor models. Once the company had completed this analysis, it developed a training strategy to build a pipeline of talent over a five-year horizon.

The company designed the training program by identifying people who had similar skills and experience, not just in the telecommunications industry. The company hired these people and retrained them. The courses were fast-tracked in order to take advantage of those similar skills and experience. The insight achieved by this analysis was that the biggest skills gaps could be mitigated by hiring talent with adaptable skills and experience and putting those people through a shorter training program than would be required for workers with no translatable experience.

The company lobbied tertiary education institutions to develop and offer an appropriate training program. Together, they secured funding from government sources that could be used to subsidize the cost of the program delivery. The outcome was a win-win solution that gave thousands of workers valuable, marketable skills and helped the company to put the talent it needed in the specific place, at the targeted time.

By unlocking the value of the experience resident in the talent pool, companies can gain a financial advantage by identifying, reusing, or retraining talent with similar experience.

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Expand data setsMany companies are also hobbled by the inability to leverage the mountains of data that inundate them on a daily basis. The vogue term is “big data.” The name is a good descriptor. Data volumes are growing exponentially. Huge amounts of data are generated daily, and this data comes from an ever-increasing variety of sources, both inside and outside the enterprise. McKinsey predicts that data volumes are anticipated to grow 40% each year for the foreseeable future.1

To exacerbate the issue, this data is also increasingly complex in terms of the information it provides about customers, suppliers, and operations, market trends, labor markets data, demographics, educational outflow toward labor markets, industry data, etc.

Companies should analyze and integrate these expanded data sets in terms of specific business drivers to better understand the marketplace and create an agile labor force. They should also look deeper into the data and become more granular in focus, frequently down to the individual employee level.

By using analytical techniques such as predictive modeling and advanced data mining, companies can create supply and demand models that allow them to forecast both the marketplace conditions and talent levels needed to respond both near term and longer term — twelve to eighteen months out, for example.

1 Big data: the next frontier for innovation, competition, and productivity. McKinsey and Company, May 2011.

The search for data does not stop at the doors of the human resources department, however. It is essential to expand the search for workforce planning data to include available business data like customer data, production data, financial data, etc. However, it is also essential to look at external, third-party data as well.

For example, to really understand what’s happening in the business ecosystem — both internally and externally — companies should look at non-traditional data sources such as macroeconomic data sets. They should ask questions such as:

• How does consumer behavior impact demand for our products?

• Would housing starts or auto manufacturing production impact our business?

• Would the price of oil impact our business? If so, how much?

Companies should also gather external data from sources such as the census data, state/provincial, local, and Federal government data, and education data. The list of external data is almost endless. The strategy for choosing which data to examine is simple however: it involves determining which questions companies should ask — and answer — and then finding the data sets that can help them answer those complex questions.

For example, the retention of targeted sales staff is a critical workforce segment for many organizations. The application of advanced analytical techniques, with the use of third party data, can give management a deeper view into potential performance and probability to leave for high performers. Today, most managers are not aware that a high performing employee is at risk of leaving until the submit their letter of resignation. There is little to no opportunity to mitigate this risk. Using analytics to facilitate holistic workforce planning organizations can better predict and score the probability of a candidate to be effective for a specific job, and also predict their likelihood of a longer tenure. This revolutionizes the workforce management process. Using publically available, third party data, companies can now get a better understanding of future performance as well as risk down to the individual level.

The application of advanced analytical techniques, with the use of third party data, can give management a deeper view into potential performance and probability to leave for high performers.

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Financial, lifestyle, and household data sets on potential employees can be indicators of potential fit and success within the organization. Before applying analytics to their workforce planning function, one company believed potential employees with a college-education were the most appropriate targets to hire as salespeople. When the company conducted a series of scenario modeling and predictive analytics exercises, the results of those activities proved otherwise.

What the company found was that, the employee profile with the most potential for success was that of a high school graduate, married, with children in the home. This knowledge entirely changed its recruiting process. The lesson here is that expanding the data early in the process, combined with advanced analytical techniques, can fundamentally change the way companies do business and can create a more effective recruiting, hiring, and talent management processes.

Shorten the planning cycle and cover multiple horizons The timing of the planning cycle is also an important consideration in workforce planning. It is not enough to conduct yearly planning over singular, fixed time intervals. Workforce planning is not a static, once-a-year activity — or at least it shouldn’t be. Instead, workforce planning should be ongoing and dynamic. Instead, effective workforce planning should be an ongoing and dynamic process that cycles through multiple iterations and time horizons.

In fact, planning is not really effective unless it is near-real-time — at least on a monthly, rolling basis with constant updates as new situations and opportunities present themselves. Savvy companies continuously plan over multiple, staggered time horizons. Typical time horizons include:

• Short-term — which roughly translates to 12 months out

• Mid-term — which is typically a three to five year window

• Long-term — this might be as far as 10 years out, depending on the industry.

The reasoning behind planning over multiple horizons is simple. Having a view of multiple, future scenarios can help facilitate the creation of a workforce to help companies implement flexible strategies to make long-term investments and plans.

Specific considerations in planning over multiple time horizons include:

• Knowing what organizational capabilities are required in the long term. This knowledge can provide insight into making decisions about how to invest in talent, both now and in the future.

• Defining organizational capabilities by considering the skills and/or experience requirements at the individual employee or job level

• Creating organizational agility by understating how to flex skills and experience inside the organization — in other words, moving people around as needs change.

• Using effective modeling techniques, such as scenario modeling and predictive analytics to "look around the corner" and predict future needs. Predictive analytics facilitates more effective planning because it can help deploy the talent that is core to the business strategy. Preparedness yields competitiveness

• Committing to a business strategy, and by default, a talent strategy. It is important to continue to evaluate the effectiveness in the more near-term horizons to implement strategy and meet business goals.

• Developing plans that can be implemented and monitored frequently around major initiatives inside the strategy (e.g., leadership development, capacity management, capability building, and culture). Planning is not just defining what is needed. Instead, it is more so about measuring the effectiveness of actions taken and taking the proper direction based on the results of the measurements.

Workforce planning is not a static, once-a-year activity — or at least it shouldn't be. Instead workforce planning should be an ongoing and dynamic process.

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The practical point to these considerations is that effective workforce planning is a lever that allows companies to control their own destiny. It allows companies to understand and manage the gaps where they are ineffectively using resources and most likely losing money.

In terms of leveraging experienced talent, it is also critical for companies to continue to monitor and evaluate, over these different time horizons, whether they have talent with the relevant experience in the appropriate place, and whether the interventions they have put in place to support getting more value out of that experience are providing the required return. It’s a question of getting appropriate value out of available experience.

For example, a defense industry organization was in peril because its engineering capability was under attack by wage pressure from the private mining/resources sector.

The company used scenario modeling, predictive analysis, skill attribution, and performance analysis to help develop a retention strategy that focused on understanding the current drivers of employee turnover, as well as the future skills and experience that would be required to support new capabilities. The future state capability planning was done using a 10-year horizon with strategies and plans that also covered one, three, and five-year intervals within the 10-year horizon.

In doing the analysis, the organization found that competing on wages is not always the answer. Instead, the company found that an effective strategy to recruiting and retaining talent was determining how to leverage an employee’s experience and put the right people in the appropriate roles for them. Another factor was determining what other benefits and/or outcomes employees were looking for, such as the ability to develop mastery in a particular job or skill set.

Embrace new technology trendsEffective workforce planning also requires taking advantage of new technologies, such as the cloud to accelerate planning and lower your cost of ownership. The ability to effectively capture, store, search, share, and analyze information on a real-time, global scale makes the use of new technologies such as cloud computing practically mandatory.

Cloud-based workforce planning solutions can give companies the ability to mine and analyze expanded data sets while keeping cost of ownership manageable. They also help accelerate workforce development at a lower price point — giving companies faster and more cost-effective workforce planning capabilities. With cloud technologies, companies do not have to make the hard technology investments to reap measurable benefits. Instead, they can leverage the cloud’s software-as-a-service paradigm and use what they need, when they need it.

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The open architecture of the cloud helps companies to integrate multiple enterprise resource planning and human resource management systems solutions. Further, the adaptability and scalability of cloud-based solutions give companies the benefits and control of an on-premise solution with a lower cost.

For example, using the cloud to store data and to access analytics-based talent management applications, companies can collect and analyze vast data sets to gain deep insights of both current and potential talent. With this ability, companies can link workforce data with business, industry, and labor market data to put the applicable people in the targeted roles, and help them to perform at the top of their game.

Embrace complexity and build the foundationFinally, a well-organized and executed planning and forecasting capability can provide the much needed visibility and controls to help senior management reduce risk and make smarter, better informed decisions around both top- and bottom-line business issues. The idea is that, to create a sustainable and scalable workforce planning capability, companies should think beyond just software.

Workforce planning is multifaceted, and it requires the proper data for senior leaders to make informed decisions. Short-changing the workforce planning process will not give companies the capability to support their leaders. Buying a workforce planning technology and checking the box is not good enough.

Why? Because there are many complex factors that go into workforce planning. For example, take the technology a company uses to implement its workforce planning activities. There are many questions that companies should ask and answer, such as:

• Will the technology provide the right modeling capabilities?

• Is the technology scalable?

• Can the technology help us truly become better at planning, both currently and in the future?

Building a scalable and sustainable strategic workforce planning capability requires a strategy that integrates five dimensions:

• People/Organization — the people who will analyze and manage the workforce planning process

• Process — the processes needed to effectively connect the planning process to the business

• Technology — the technologies needed to support a strong planning process. Hint: it is not just one.

• Data — the data, from both inside and outside the enterprise, needed to execute strategy

• GovernanceandSecurity — the process of securing data and standardizing it across the enterprise

That’s the beginning. Once the strategy has been established, and these capabilities have been deployed, the next challenge becomes that of growing and managing these capabilities over the next three to five years — in other words, executing effective workforce planning on an ongoing basis.

Buying a workforce planning technology and checking the box is not good enough.

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There are five components for ongoing effective workforce planning:

• Data — both internal and external data sources should be leveraged to get a holistic picture of the business ecosystem.

• Supply — it is critical to understand the organization down to the individual employee level and to be able to have clear picture of employee inflow and outflow, and the trends associated with those transitions.

• Demand— it is also critical to understand macroeconomic data and its effect on the business ecosystem, and the individual organization, so that supply can meet demand.

• Scenarioplanning — many leading organizations engage in scenario modeling that facilitates “what-if” analysis to help deploy the appropriate talent wherever it is needed, across the globe.

• Reportandmonitor— workforce planning never stops. Ever. It is crucial to implement appropriate reporting and monitoring capabilities so that management can have access to real-time data for decision-making and strategy execution.

With this approach, organizations can increase their visibility into their workforce planning issues and develop both short-term answers and long-term solutions to these issues. With this insight and foresight, they can increase the effectiveness of their decision making and strategy execution.

Five Components to build a leading WFP CapabilityDeloitte’s data driven approach to workforce planning combines internal and external data sources with supply/demand projections to perform repeatable reporting and scenario planning to help influence talent strategies. Developed over time, this component strategy is designed to provide long term value.

Step 2: Supply ProjectionsVisualize the

organization down to the individual

level and calculate “inflow” and

“outflow” trends (i.e., attrition, hires,

mobility) Step 4:Scenario Planning

Allows for “what if” planningStep 3: Demand

ProjectionsIncorporate macro economic data and drivers to project

workforce demand for the organization

Step 5: Report & Monitor

Provide real-time data,

enterprise data to leadership

and stakeholders to help influence

decision making and human

capital strategy

Finance

Operations

HR

Internal Benchmarks

Internal

Pipeline

Industry Specific

Macro Economic Data

External

Labor Market

Benchmarks

Step 1: Data sources:

With this approach, Deloitte has helped various organizations in developing a short term answer to current business/workforce issues and establishing a longer term path for increased effective decision making and visibility

into workforce issues.

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Thriving in the talent economyIn an increasingly global, extremely competitive business environment, companies need every bit of leverage they can gain to survive and thrive. Experienced talent — and the recruitment, management and retention of that talent — is an important component to competitive success. An essential part of talent management is a holistic workforce planning process.

Workforce planning is a fundamental part of any organization’s ability to function in the talent economy — to mine the labor supply to meet their demand profile, and identify and deploy experienced talent when and where it is needed. With workforce planning, aided by advanced analytics, companies can gain access to the insight and foresight they need to model their labor supply and demand and understand what skill sets and experience they need from the talent pool and how to obtain that talent.

Indeed, with the ability to “look around the corner,” smart companies can seize the opportunities to build advanced talent management systems to thrive in the talent economy. These companies will likely be able to enhance their ability to proactively respond to the environment — and perhaps to shape that environment — within the capabilities of the organization. Those organizations that have a strong workforce planning function to effectively leverage the experience of the labor pool that resides in their business ecosystem may prosper in the talent economy — they can reap the talent dividend. Those that don’t may not.

For more information, please contact:RussellClarkeDirector Deloitte Consulting LLP United States rclarke@deloitte.com +1 973 602 5249

AndyPeckPartner Deloitte Touche Tohmatsu Australia anpeck@deloitte.com.au +61 3 9671 6204

DavidConradiePrincipal Deloitte Consulting (Pty) Ltd South Africa dconradie@deloitte.co.za +27 115174207

AdBourgonjeSenior Manager Deloitte Consulting B.V. Netherlands ABourgonje@deloitte.nl +31 882888698

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