Everyone talks about the importance of workforce planning. But they frequently speak without really defining what it means. That is why we like the latest report from the Conference Board, released this month: “Strategic Workforce Planning Forecasting Human Capital Needs to Execute Business Strategy”.

This is a must read for anyone serious about workforce planning and this short posting would not make justice of the several case studies and models.

But first, the definition: “Strategic workforce planning (SWP) is the analytic, forecasting, and planning process that connects and directs talent management activities to ensure an organization has the right people in the right places at the right time and at the right price to execute its business strategy.”

A nice view is their segmentation of the different approaches to address the issue. Overall, five approaches that are shown below classify how companies address the challenge to plan their workforce.

We agree with many of the 12 recommendations made to have an effective strategic workforce planning process in place, but we would focus on these three:
1. Data Integrity and up to date standard skills and competency as foundation.
2. Competent HR partner that participate in the business planning process.
3. Focused on critical talent and start small and simple.

For many organizations today the world of talent is a global one. Putting the right people in the right places takes very special meaning in this global landscape of infinite options.

Mercer has published a good framework to help you achieve this goal.

At the micro level, it is always very important to be able to execute. At Taleo we have promoted the concept of workforce logistics. You have to be nimble enough to deliver in your situation. Fortunately today more talent management departments are being consulted prior to making global location selection decisions. So it is imperative to use a strong model to select what will be the best geography.

Cost is the obvious factor and will weight more often than the other factors, but don’t forget to take into account its fading effect over time. Typically, salary growth rates are faster in developing regions. But cost is not the only factor. As shown below, the future labor market from both demand and supply sides is very important as well.

Economic incentives can be strong as well, as shown in Ireland in the past. A factor that can have a way bigger effect than showed here is the work ethic. For jobs with long learning curves, retention is a critical cost and time to market component. As many companies are struggling today to retain quality employees in developing regions, a complete view can prepare them for the right long-term ROI of a macro decision.
But don’t forget, a good macro decision will never counter poor execution.

“The gut-feel proponents start to seem like people who eschew antibiotics in favor of good old-fashioned bloodletting.”

That was the tone of the article from Inc. Magazine’s interesting cover story about what they call the new science of hiring.

But there are tools that work and others that don’t. This article provides a good overview of the different tools that are efficient. For instance, the conventional unstructured interview is much worse than the structured interview or the behavioral interview.
But structured interviews can be improved when we combine them with assessments. According to the article, even though the assessment industry is rich with 2,500 options, it can be very effective. Especially for large organizations which have a large volume of similar positions. For instance, users of Taleo Assessment easily tailor various assessments to their companies and cultures and saw dramatic improvement in retention and quality.

Another interesting quote was the requirement made by some companies to provide 12 references!
That leads us to the most important questions: Do the tools improve business performance? What value do they create? It is not the question asked in the article: Do you believe in the science of hiring or not? We must be more focused at the real process level: What is reasonable to ask a manager to do?

After asking a manager to schedule and interview dozens of candidates, review all their tests and assessments, and speak with their references, it can be seen as too much to ask.

Technology enables managers and HR to automate much of that today. But until managers understand the wisdom of the quote below, we may see only approximate approaches:

"I think the hiring process is the most important process in business, but it's probably the least disciplined in terms of how it's executed across American business."

IDC performed a survey at the Taleo WORLD conference in May 2006 and compiled their results into a new survey called “Talent Pulse Survey”.

Two key learnings for us: (1) retention is a key concern and (2) competencies are well used among Taleo customers.

To the question: “Which of the following issues are you most concerned about regarding your workforce of the future?” — retaining top talent was the #1 issue.

Many Taleo customers have responded to improving retention by implementing Taleo Workforce Mobility to facilitate the mobility of internal talent. They (56%) nevertheless also are concerned about the impending labor shortage.

The good news is that close to 40% of the organizations responding use competencies for all positions and 32% use them for select positions. Another 21% plan to implement competencies.

We have covered here before how competencies are in fact the foundation of a good talent management strategy. Taleo has historically spent much more time developing competencies than many other vendors and offers skills and competencies embedded in the solution. The high results coming from the survey (even surprising the IDC analyst) are a good testament of the hard work done in this area.

AMR Research announced their annual review of the On Demand enterprise application market share and growth projections. An AMR research analyst says:

“Software-as-a-service is on fire, making sure that strong overall growth continues for the next several years.”

They see the customer relationship management (CRM) and the human capital management (HCM) markets as the fastest growing enterprise application segments with projected growth of 10% for 2006. This may look slow compared to Taleo’s growth rate above 20%, but it’s very fast compared to traditional ERP at 3%!

2006 looks like a turning point for SaaS. Not only will enterprise software move towards on demand, but desktop applications as well. We saw Google acquire Writely for online word processing and release Google Spreadsheet while the Microsoft Live product suite went beta.

Maybe it’s time to dust off the NC (network computer) announced 10 years ago by Sun and Oracle. With on demand online software, that thin client approach could become a reality tomorrow!

The Economist Intelligence Unit and DDI have produced a report called “The CEO’s role in talent management” based on 20 interviews of CEOs and COOs of $1B+ companies worldwide.

The conclusion should be a motivation for HR people: “The management of a company’s pool of talent is now too important to be left to the human resources (HR) department alone and has become the responsibility of the top executive.”

All 20 leaders said that it was their responsibility and 30% said they spent up to half their time on talent management.

The CEO’s view of talent management included: identify potential; psychological testing and performance assessment centres to determine capability gaps; training and development programs, relocations, project work, and job experience to accelerate development.

“However, few of the executives appear to have a strategic approach to talent management of the same rigor as other business planning processes.” An interesting point I noticed is that the importance of 360-degree feedback seems to be stronger for non-US companies, as out of the five CEOs mentioning doing it, four were non-US.

But why are CEOs all of a sudden spending time on talent management? According to the Economist, two factors largely account for this: “the shift in focus towards intangible assets such as talent” and “increased board scrutiny in relation to both ethics and performance”.

But what is the role of HR if it is not the sole owner of talent management? All of the interviewees say that HR departments are responsible for:
1. Executing talent management strategy.
2. Being custodians of the talent management process.
3. Providing guidance and fresh thinking about talent management programs.

Where to start? As you have seen, many processes must be tackled, but a constant seems to appear when CEOs start to think about talent management. They think about recruiting and internal mobility & development as the starting points.

As many leaders strive to optimize organizational performance, many are turning to talent management. We’ve seen references on this blog to the many aspects of an optimized talent supply chain. But we’ve also seen that there is often a disconnect between what leaders or people in charge of policy development believe and what the employee population are looking to achieve.

The latest Gallup panel poll of 540 adults showed another very important aspect of job satisfaction that re-affirms best of class talent management practices.

To the question: “What do you particularly like about your job?”, the first category of answers that came out was not related to salary or benefits—they were #s 5 and 14. What came on top was “Doing what suits me best/fulfilling” at 18%; “Interacting with the public/helping people” at 15%, and “Freedom/flexibility to do job my own way” at 13%.

In other words, as social beings we like the interaction and feeling that what we do is helpful to others, but we want to be doing it in a way that is flexible and gives us the freedom to best organize our time.

But above all, and this is where talent management best practices come first before organizational structure, people want to be doing the job that is right for them. That is the role of talent selection and deployment: assist the individual to find a niche where they can not only be the most productive for the organization, but also the most personally fulfilled, working in the career that’s the best fit!

If you are involved in global talent management, you must ask yourself this question even if you don’t always want to admit it: “Where is it the least costly to hire, employ, and fire?”

We were pleased to see the World Bank report: “Doing business in 2006 – Creating Jobs”.

So here is the answer on the table below where the hiring cost indicator measures all social security payments (including retirement fund; sickness, maternity, and health insurance; workplace injury; family allowance; and other obligatory contributions) and payroll taxes associated with hiring an employee.

Hong Kong has an average cost of hiring at 5% of salary, US is at 8%, UK 9%, Portugal 24%, France 42%, Belgium 55%, Australia 21%.

What about the cost of firing?

The firing cost indicator measures the cost of advance notice requirements, severance payments, and penalties due when dismissing a redundant worker, expressed in weekly wages.

Hong Kong firing cost is 13 weeks salary, UK at 34 weeks, Portugal 98 weeks, France 32 weeks, and Belgium 16 weeks.

This question was asked to the staffing.org respondents of their 2006 survey.

For organizations, the #1 rank was given to technology. #4 was branding. #7 contingent workforce management. #2 was still the job board selection!
Outsourcing was #6.

Here are more key Q&As:

What was the metric that organizations will focus next year on? It’s quality with 58%. Time was second with 23%.

Are they planning to reduce their budget for next year? About 15% will reduce and 28% will increase.

For the job seekers (879 employed in Internet technology, research and development, product development, and sales professionals), one key pain point was well above all the others: provide good communication and follow up.

Our friends at Staffing.org have released their 2006 Staffing Performance Report on staffing metrics. It’s a good read for anyone trying to get benchmarks and many other interesting data.

For years we supported their emphasis on quality of hire; it should be the #1 metric that any organization measures. However, today only 40% of organizations have some measure of quality.
I won’t speak more about this as we already push enough hire quality on this blog: here.

There are other great metrics that add a bit more context and meaning, including a new way to calculate cost per hire. This better approach is to make a ratio out of it and divide the cost per hire by the average compensation recruited. This gives the recruited cost ratio. This year it is 14.8% with about an equal spilt between internal and external spend. The ratio varies greatly by industry from about 8% to about 23%.

The only metric we do not fully support is the way they measure time to start and prefer to make a ratio out of it. The ratio is actual time to start divided by contracted time to start. Why don’t I support it fully? Because most of the requisitions are needed tomorrow. And if it can be good to set the expectation to the hiring manager for a specific time (as we have seen with a couple of organizations), it lowers the expectation for the recruiting department. What they see as success is to meet the expectation, not to go as fast as they can.