3 Workforce Planning Software Analysis Capabilities to Aid Your Business
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By Micah Fairchild
Workforce Planning Applications Net Analysis and Improvements
The continuing challenges of the global economy are leading organizations to analyze both their fixed and variable costs (through workforce planning software) —often with the express intent of reducing them if possible. And given the fact that workforce costs can represent anywhere from 20% on up to 60+% (according to the U.S. Department of Labor) of a company’s operating budget, it’s no surprise that an increasing number of firms have sought to make cost containment a priority. Even so, many firms considering the route of leveraging workforce planning applications are doing so by adopting the approach of deep and drastic workforce reductions. While this approach is understandably justified, the fact of the matter is that these types of dramatic cost measures are an inherently risky strategy; in large part because (as countless experts have discussed before me) a company’s workforce is key to gaining (and keeping) a competitive advantage and increasing long term shareholder value. Unfortunately, far too many firms see workforce cuts as simply a necessary evil and simply the cost of doing business—perceptions that can invariably destabilize company efforts and threaten both productivity and long term prosperity.
As such, organizations need to be cognizant that workforce reduction should only be carried out as part of a comprehensive and strategic workforce planning process—taking into account both the current and future supply/demand of employees as well as salient economic factors. Workforce planning software can help achieve this, but it must first be understood in terms of what benefits it can actually bring; especially in terms of analyses. And from our perspective, there are really three different types that we think companies should know about: Predictive Analysis, Talent Gap Analysis, and What if Analysis—discussed in more depth below.
One of the most powerful and highly sought-after elements in the workforce planning tool chest (and consequently a core feature of most best-of-breed workforce planning software), Predictive Analysis is essentially the culmination of workforce planning efforts—the ability to forecast how workforce changes will impact your business. In short, predictive analyses provide detailed statistics to help make informed decisions; ranging from low-impact, short-term judgments to longer-term, multi-year strategies. For, example, an organization might receive data from their workforce planning application on areas such as predicted turnover percentage, reasons for voluntary termination, resignation trends, or even risks related to seasonal absences. As well though, this feature set also enables firms to spot high risk employees; develop profiles of those who are more likely to leave and stay; and to model how that risk might be distributed throughout the organization based on talent shortages. Businesses can then use this information to support decision making and develop targeted programs to reduce unwanted turnover, and lower recruitment, and retention costs. Still not convinced? Then consider this…recent research from Aruspex highlights that cost savings for one global manufacturer leveraging this functionality net just south of $20M.
Perhaps even more interesting than predictive analysis is the ability to incorporate third party, economic data, and even social trends into the system to help understand what future workforce supply and demand will look like—essentially identify those areas where future talent gaps will be. It’s more than just interesting though, according to recent research; in fact it’s vital. Indeed, as PricewaterhouseCoopers recently found, fully two-thirds of 1200 surveyed CEOs claimed to have a “limited supply of candidates with the right skills”; while nearly 35% of them indicated they would be focusing on “strategies for managing talent” over the next few years. And this was an even higher priority than investment decisions, organizational structure, or risk management. Why? Because having visibility into future talent gaps means that a business can build plans which address these concerns—issues that could otherwise harm continuity, productivity, customer satisfaction levels, and in some instances lead to a longer term decline in competitive advantage and shareholder value.
Still, even though predictive analysis and talent gap analysis are powerful tools and serve a unique purpose in the workforce planning environment, the increasingly fluid business landscape can create a certain level of uncertainty that challenges even the most powerful predictive analysis software algorithms. In fact, in a recent survey by IBM of 1500 CEOs world-wide over 60% believed that their businesses today were “more volatile, uncertain, and complex” than ever before. As such, in increasingly uncertain conditions, scenario planning or “what if” analyses may yield more fruitful results—providing businesses with greater agility or ability to respond to changing circumstances. And interestingly enough, this tactic was identified by Aberdeen Research as the number one goal of Best-in-Class businesses. Indeed, a recent case study by the group highlighted the example of a utilities firm (beset with an aging workforce, skills shortages, aging infrastructure, and technology changes to contend with) which saved just over $8M by using this “what if” modeling via workforce planning software to lower RIF costs; minimize the use of contractors; and lower retirement deferment costs.
Where it isn’t possible to predict future scenarios with a helpful level of certainty though, the “what if” feature of leading workforce planning software solutions still allows companies to visualize a range or scenarios based on differing environmental factors. And in an environment where the luxury of certainty is hardly ever a guarantee, often the best thing that can be achieved is knowledge to empower business agility—allowing adjustments to changing circumstances to be handled quickly.
Workforce Planning Software Benefits: Final Thoughts
Although the current economic environment has meant that many workforce planning software models have been aimed at cost reduction, businesses shouldn’t forget that this software enables plans for growth/change as well as cost reduction. Indeed, these technologies can provide detailed planning functionalities that can enable a business to optimize its workforce makeup for maximum agility, efficiency, and productivity—allowing for resource expansion in some areas and contraction in others. This capacity to respond to small and large changes in business circumstances is likely to deliver genuine competitive advantage for organizations, but only if the right analyses are leveraged at the right time.
Even though predictive analysis and talent gap analysis are powerful tools and serve a unique purpose in the workforce planning environment, the increasingly fluid business landscape can create a certain level of uncertainty that challenges even the most powerful predictive analysis software algorithms.