Applying the Power of Scenario Planning to Strategic

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Applying the Power of Scenario Planning to Strategic Workforce Planning Axiom Consulting Partners April

Applying the Power of Scenario Planning to Strategic Workforce Planning Axiom Consulting Partners April 17, 2012 Austin Brussels Chicago Dublin Houston Los Angeles New York Washington, DC

Workforce Planning Has Never Been More Important…and Challenging Workforce planning is increasingly important: §

Workforce Planning Has Never Been More Important…and Challenging Workforce planning is increasingly important: § Market opportunities close at a much faster rate § Skills commoditize and obsolesce more quickly § High quality talent is increasingly more difficult/costly to acquire, especially in STEM fields § Companies are become increasingly more global § Labor mobility is constrained § Human capital risk is becoming a more significant business issue …complexity, uncertainty and the pace of change makes workforce planning challenging: § Uncertain economic environment § Complex matrix organizations § New and unexpected sources of competition § Global economic and political uncertainties § Limited executive mindshare 1 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Failing to Align Talent Supply With Business Demand Has Significant Economic and Human Capital

Failing to Align Talent Supply With Business Demand Has Significant Economic and Human Capital Implications - 2% - 16% 5 -yr TTR % vs. Peers (2012) - 3% 5 -yr TTR % vs. Peers (2012) 2 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning + 1% 5 -yr TTR % vs. Peers (2012)

…So Why Do We Continue to See Disconnects between Strategy and How a Company

…So Why Do We Continue to See Disconnects between Strategy and How a Company Manages Talent? 1. Paralysis due to the lack of clarity about the future business environment 2. Lack of understanding of (and focus on) the relationship between strategy and talent 3. Lack of understanding of the true “cost” of talent 4. Lack of insight into future talent requirements 5. Disparate, disconnected, and overly-engineered talent management processes developed for technocrats, not business people 3 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

High The Evolution and Business Impact of Workforce Planning Impact depends on the operating

High The Evolution and Business Impact of Workforce Planning Impact depends on the operating model Strategic Workforce Planning (SWP) Business Impact Talent Supply Chain Mgmt (TSCM) Operational Planning Headcount Planning Low Plan is based loosely on future budget or growth projections at the enterprise level. § Plan is typically tied to an annual operational plan and budget at the Unit or Function level § May factor in turnover and retirement to forecast backfill needs to achieve plan § Plan is linked to near -term (< 2 yrs) business/demand forecasts and workforce dynamics (lateral, up, and out talent flow) § Requires effective demand data capture and mature workforce analytics § May include external availability of talent § Plan is an extension of the business strategy and core capabilities to sustain excellence § Based heavily on dialogue and analytics regarding talent needed to excel in core capabilities § Focuses on strategic talent through segmentation and buy/build/rent decision guidance TSCM + SCM § Near-term plan is based on a talent supply chain approach § Long-term plan is developed using SWP techniques tied to the business strategy More Recent Established Evolution of Workforce Planning Techniques 4 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Scenario Planning Provides a Methodology for Identifying Alternative Strategic Options Traditional Planning Scenario Planning

Scenario Planning Provides a Methodology for Identifying Alternative Strategic Options Traditional Planning Scenario Planning “Best” case (+15%) Strategic Option A Strategic Option B “Base” case RE FUTU TODAY “Worst” case (-15%) Appropriate in relatively stable environment and/or very short-term talent planning. TODAY Strategic Option C Appropriate for long-term planning and to force “out-of-the-box” thinking. 5 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Four Basic Steps to Scenario-based Workforce Planning 1. Identify the “most likely” business scenario

Four Basic Steps to Scenario-based Workforce Planning 1. Identify the “most likely” business scenario 2. Determine baseline business scenario 3. Identify alternative business scenarios 4. Validate with key stakeholders 6 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Scenario-based Techniques Enable Organizations to… Focus on those strategic decisions that will drive performance

Scenario-based Techniques Enable Organizations to… Focus on those strategic decisions that will drive performance Clarify, model and plan for changing workforce assumptions Build Consensus Build consensus around the most “robust” strategic options Monitor ongoing changes of critical business drivers Adapt Quickly adapt as business conditions change 7 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

The Strategic Workforce Planning Process… 1 Translate business strategy into value drivers Determine actions

The Strategic Workforce Planning Process… 1 Translate business strategy into value drivers Determine actions and investments to close the gaps, including time and money associated with build, buy, rent decisions 6 Identify the value drivers (e. g. , critical systems, processes and capabilities) to achieve the business strategy 2 Determine capabilities needed to win Determine talent strategy to close gaps Identify the current and future organizational capabilities associated with the value drivers Strategic Workforce Planning Identify apparent and hidden gaps and run multiple scenarios, if needed, to understand potential gaps 5 3 Identify and segment talent Identify gaps 4 Determine future headcount demand vs. supply 8 Determine headcount demand vs. supply in each role, while factoring both internal and external labor market dynamics © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning Identify and segment talent (by role) based on relationship to organizational capabilities

High Scenario Planning Techniques Can Enhance the Business Impact of Workforce Planning Techniques ing

High Scenario Planning Techniques Can Enhance the Business Impact of Workforce Planning Techniques ing n n a o Pl ari Scen Business Impact Talent Supply Chain Mgmt (TSCM) Operational Planning Headcount Planning Low Plan is based loosely on future budget or growth projections at the enterprise level. § Plan is typically tied to an annual operational plan and budget at the Unit or Function level § May factor in turnover and retirement to forecast backfill needs to achieve plan § Plan is linked to near -term (< 2 yrs) business/demand forecasts and workforce dynamics (lateral, up, and out talent flow) § Requires effective demand data capture and mature workforce analytics § May include external availability of talent TSCM + SCM Strategic Workforce Planning (SWP) § Plan is an extension of the business strategy and core capabilities to sustain excellence § Based heavily on dialogue and analytics regarding talent needed to excel in core capabilities § Focuses on strategic talent through segmentation and buy/build/rent decision guidance § Near-term plan is based on a talent supply chain approach § Long-term plan is developed using SWP techniques tied to the business strategy More Recent Established Evolution of Workforce Planning Techniques 9 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Scenario-Based Workforce Planning Example: Steps 1 & 2 Case: Wireless Telecommunications Co. § Identifying

Scenario-Based Workforce Planning Example: Steps 1 & 2 Case: Wireless Telecommunications Co. § Identifying the highest priority business drivers § Determining the capabilities that have the greatest influence on strategy execution § Establishing clear lines of accountability for key results § Ensuring the key performance measures are known to all § Communicating to employees how performance in their functional area influences company performance § Determining critical competencies required to deliver against these drivers § Deploying the right talent into the right roles 10 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Value Tree Mapping™ Case Example: What are the Key Drivers of Revenue? Price /

Value Tree Mapping™ Case Example: What are the Key Drivers of Revenue? Price / Value Advertising Effectiveness Ability to Acquire Customers Revenue Number of Customers Ability to Retain Customers Marketing Effectiveness Customer Satisfaction Ability to Understand Customer Needs Customer Loss Rate Prepaid ARPU Plan Type Base Level of Plan Sold Plan Competitiveness Ability to Sell Data/Additional Services Selling Effectiveness Postpaid = High Priority Value Drivers 11 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Value Tree Mapping™ What are the Drivers of Customer Satisfaction and Retention? Availability of

Value Tree Mapping™ What are the Drivers of Customer Satisfaction and Retention? Availability of New Products &Technologies Customer Satisfaction & Retention High Priority Value Drivers Web Role Definition Price / Value Ease of Access to Support Call Center Training Effectiveness Customer Support Effectiveness Ability to Diagnose & Resolve Issues Effectiveness of Service Reps Hiring Effectiveness Service Reliability Network Coverage Systems Quality Clarity of Performance Metrics Billing Clarity Network Reliability Capital Expenditure Alignment + Compensation & Motivation Flexibility of Payment Options Equipment Quality 12 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Lenses to Examine Business Scenarios and Their Impact on Talent Industry Economics § §

Lenses to Examine Business Scenarios and Their Impact on Talent Industry Economics § § § Disruptive technologies Emerging Technology Technologies trends Product life-cycles § § § Cash flow Access to capital Debt to capital ratio Financial Constraints § § Demand growth forecasts Political and regulatory change Labor and material costs Global markets Competitive Landscape Key Business Drivers Customer Dynamics § § § § Emerging competition Pricing Brand position Changing buying patterns Customer demographics Brand loyalty Customer/market access 13 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Scenario-Based Workforce Planning Example: Steps 2 & 3 Case: Defense and Civil Contractor to

Scenario-Based Workforce Planning Example: Steps 2 & 3 Case: Defense and Civil Contractor to the US Government § The business provides professional services to various government agencies with a broad range of capabilities and areas of expertise including cyberwarfare and security § Defense Department has been called on to find $259 billion in cuts in the next five years — and $487 billion over the decade § Panetta has repeatedly said that he would preserve financing for Special Operations forces, cyberwarfare and intelligence, surveillance and reconnaissance systems § An uptick in government contracts and task orders related to cyber security projects suggest a significant change in the type of work the firm will be doing over the next five year and the type of talent it needs 14 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Segmentation Enables Workforce Differentiation and Focuses the Talent Strategy and HR Service Delivery Priorities

Segmentation Enables Workforce Differentiation and Focuses the Talent Strategy and HR Service Delivery Priorities Role/Segment Strategic Talent § Key to competitive advantage § Normally a “hot skill” in high demand Core Talent § Possesses proprietary knowledge and skills § Hard to replace – “tribal knowledge” Typical Portfolio Gap § Build capacity through rapid § Talent shortage § Atrophy in strategic organizational capability § Talent shortage (current or anticipated due to attrition) § Atrophy in organizational capability infusion of external talent and accelerated development of select internal talent § Tailor the employee value proposition (EVP) to attract top talent § Protect and strengthen capabilities through ongoing development of current bench and talent pipeline and strong EVP § Strengthen the EVP Requisite Talent § Performs work that is necessary but could be handled through alternative staffing/ delivery strategies § Talent overage § Low ROI on talent investment Non-Core (Misfit) Talent § Possesses skill sets no longer needed Talent Management and HR Service Priorities Required HR Alignment Efforts § Talent overage § Streamline and/or outsource segment or consider re-tooling around core capabilities § § Talent pipelining § § Selection EVP/Branding Retention Accelerated development Attraction and retention Development Performance management § Development/rotation § Performance management § Exiting (attrition, outsourcing, downsizing) § Divest entire talent § Exiting (attrition, outsourcing, § Identify opportunities to move “A” downsizing) players into other roles 15 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Case Example: Differentiating Talent to Penetrate Cyber Security Market Role/Segment Strategic Talent § Key

Case Example: Differentiating Talent to Penetrate Cyber Security Market Role/Segment Strategic Talent § Key to competitive advantage § Normally a “hot skill” in high demand Core Talent § Possesses proprietary knowledge and skills § Hard to replace – “tribal knowledge” Requisite Talent § Performs work that is necessary but could be handled through alternative staffing/ delivery strategies Non-Core (Misfit) Talent § Possesses skill sets no longer needed Example Roles § § § § Malware Analyst Digital Forensics Analyst Cloud Computing Engineer Cyber Intelligence Analyst Penetration Tester Network Security Analyst Network Intelligence Analyst § Systems Administrator Systems Integrator Help Desk Professional § Not Applicable § § 16 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Axiom Talent Optimization Model Talent segmentation identifies the strategic roles that the business must

Axiom Talent Optimization Model Talent segmentation identifies the strategic roles that the business must have “A” players in; talent optimization occurs when “A” players are in the “Strategic” roles. “A” Player Call to Action High/High TALENT on “B” Player “C” Player t en l a T ti a z i m ti p O Low/Low “Requisite” Position Call to Action “Core” Position “Strategic” Position JOB/ROLE IMPACT AND VALUE 17 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Scenario-Based Workforce Planning Example: Steps 4, 5, & 6 Case: An Electronic Systems and

Scenario-Based Workforce Planning Example: Steps 4, 5, & 6 Case: An Electronic Systems and Controls Business Expands Into China § The business develops and applies advanced technologies that enable energy-generating facilities to operate safely and in an energy-efficient manner across the globe § To meet a projected 8 percent increase in electricity consumption, China says it will add about 235 gigawatts of hydroelectric, nuclear, wind and solar power capacity by 2015 § China wants 11. 4 percent of its energy to come from non-fossilfuel energy sources by 2015 and has a goal of 15 percent by decade's end § One strategic option calls for significant growth in the nuclear controls and operation management businesses, but leaders are concerned that expansion in China will be difficult to execute § Difficultly acquiring, developing, and deploying the necessary systems engineering talent to support the business has been identified as a key constraint 18 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Case Example: Scenario Modeling for China Expansion 19 © Axiom Consulting Partners. All rights

Case Example: Scenario Modeling for China Expansion 19 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

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About Axiom: Firm Profile and Brand Promise Firm Profile § Founded to help leaders

About Axiom: Firm Profile and Brand Promise Firm Profile § Founded to help leaders improve execution and results by aligning strategy, organization design and talent. § Led and staffed by highly experienced consultants and industry practitioners. § Axiom’s people have an average of 20 years experience as consultants and corporate executives developing and implementing solutions that enhance organizational capability, effectiveness and performance. § Locations – Austin, Brussels, Chicago, Dublin, New York, Houston, Los Angeles and Washington DC. Brand Promise Our Firm has a closely guarded reputation and brand promise based on how we: § Collaborate with our clients to achieve superior results, in complex situations § Provide insight and customized solutions § Demonstrate an implementation bias and change management focus § Deliver an appropriate balance of process consulting and technical expertise § Value and practice straight talking and plain speaking § Build lasting relationships with clients through collaboration, learning and shared success 21 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

We Work With Leaders to Align Strategy, Organization Design and Talent to Deliver Sustainable,

We Work With Leaders to Align Strategy, Organization Design and Talent to Deliver Sustainable, Profitable Growth strategy organization We help clients build organizations designed to support effective execution: § Organization Design & Restructuring § Governance & Operating Model § Business Process Improvement We help clients clarify & communicate strategy to create value and compete: § Strategy Alignment § Strategy Clarification § Leadership Alignment § Value Analysis (Value. Tree Mapping®) § Growth & Sales Effectiveness § M&A Integration talent We help clients ensure they have the right mix and quality of people, deployed in the right roles: § Strategic Workforce Planning § Succession Planning § Competency Modeling § Talent Assessment and Selection Systems § Hi Potential Programs and Leadership Development Performance Management § Engagement & Employee Value Proposition Diagnosis and Design § Compensation and Rewards 22 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning

Aaron Sorensen Ph. D. www. axiomcp. com | asorensen@axiomcp. com | +1. 312. 343.

Aaron Sorensen Ph. D. www. axiomcp. com | asorensen@axiomcp. com | +1. 312. 343. 4644 Expertise Notable Achievements A psychologist with a background in advanced analytics, Aaron brings unique insight to organization, leadership, and workforce issues that impact profitability and constrain growth. He is known for his ability to develop innovative, yet pragmatic solutions that blend quantitative rigor with practical business savvy to help leaders cultivate the capabilities in their people and business. He has worked with numerous leading organizations including 3 M, Allstate, Corning, Booz Allen Hamilton, the National Basketball Association, the National Football League and Novartis. § For a rapidly growing nutritional division of a Fortune 50 company, designed and Professional Background Prior to joining Axiom, Aaron was a Senior Consultant with Sibson Consulting where he worked with a variety of leading organizations to maximize their business performance by designing and implementing organization effectiveness and talent management strategies. Prior to working at Sibson, Aaron worked as a consultant with Halverson Group; a leading organizational R&D firm that helps organizations improve the experience of their customers and employees. Professional Affiliations/Published Works Aaron speaks frequently on the topics of succession planning, strategic workforce planning, talent management, employee engagement and the employee value proposition, and human capital metrics. He has shared his perspectives with such organizations as The Conference Board, Worldat. Work, SIOP, HRMAC, CUPA and NACUBO. Aaron is frequently published and quoted in periodicals that include Workspan, CFO. com, and HR Executive. He is a contributing author to The Talent Management Handbook chapter on strategic workforce planning. Aaron is a member of the Society of Industrial Organizational Psychologists (SIOP) and the American Psychological Association (APA). implemented a strategic workforce planning process to help achieve their strategic business objectives and desired financial returns. This initiative also enabled the division to more proactively focus and scale human resource services to the global needs of the business to achieve a greater return investment. § For a Fortune 500 global technology-based company, worked with Plant Management and Key Stakeholders to identify the changes required to introduce new production capabilities into the plant while improving capacity on existing production lines. This work ensured that the plant met the increased capacity targets, enabled a smooth workforce transition to new work processes and procedures, and added new production capabilities. § For a $3. 5 B specialty retailer based in the Midwest, worked closely with the Board of Directors and the current CEO to design and implement a succession planning process to provide a reliable and objective assessment of existing in-house leadership of multiple executive level roles. This work resulted in the identification of several viable internal successors to multiple executive roles, as well as the assessment of external candidates to determine fit and performance potential. § For a $400 M division of a Fortune 500 aerospace and defense government contractor, designed and implemented a program to assess their leadership team alignment as well as their collective and individual skills and capabilities. This work helped to identify the strengths and developmental areas of the team/individuals and potential roadblocks that could lead to team/individual derailment. Education/Training Aaron has a Ph. D. and master’s degree in Industrial/Organizational Psychology with a concentration in Applied Statistics and Business from De. Paul University and a Bachelor of Science with honors in Psychology from the University of Iowa. He is also certified by Hogan Assessments and The Center for Creative Leadership (CCL) in their suite of leadership assessment tools. 23 © Axiom Consulting Partners. All rights reserved. | HR. com Webinar: Applying the Power of Scenario Planning to Strategic Workforce Planning