Break the Cycle: Proactive Planning and Hiring Cycles

Oct 16, 2008

Imagine a manufacturing plant for a moment. While it produces thousands of widgets every week, no one knows what the various machines actually do, nor does anyone know where the raw materials are located, how much of them there is, or of what quality they are. Yes, it would be unimaginable, and a scenario that would lead to almost certain bankruptcy.

Yet, if you are like most of us, you probably have a sketchy picture of your employee population. I would bet that no one could tell me the exact headcount, nor could they tell me much about the skills and competencies of your workers except in general terms.

I believe that because of this inaccurate and vague picture of the workforce, American firms are caught in a vicious cycle that seems almost impossible to break. We hire like madmen when times are good, and dump thousands into the labor market when times are bad. This is an unsustainable cycle that leads to disgruntled workers, lower profits, and cynical candidates.

If we can plan and fine-tune our factory production cycles with precision, we should be able to do this with people — at least better than we do now.

An answer, however, may be forming.

At the latest Future of Talent Retreat that just ended, the concept of an employee-driven talent strategy emerged as core to the future success of organizations. The concept of a Chief Talent Officer is also gaining more popularity and strength if for no other reason than to have someone responsible for the overall supply of talent who is removed from the day-to-day operational tasks. Human resource departments are usually so consumed with tactical and operational issues that they have no time for strategy or planning.

I spoke a few weeks ago to a small group of the most senior HR executives from 15 Fortune 500 companies. The topics of their conversations were executive pay and stock options, freezing the headcount given the current economic times, and how to reformulate compensation to improve retention. Not even one of them focused on an overall talent strategy.

This reactive and administrative view that has ruled us for the past 50 years is a simple response to a very poorly understood supply and demand system. Fortunately for many firms, the labor they needed was unskilled and abundant. We all know that is no longer the case.

And let me ask you a few questions more relevant to today.

  • How much is your firm planning to grow over the next five years?
  • How many and what kinds of people will it need? Are these people out there? If so, where? If not, what are you going to do about it?
  • Do you know who the most valuable contributors to your organizations’ success are? Do you have strategies in place to keep them?
  • Do you know who your best hires were last year in terms of their contribution to your firm?
  • Have you worked with management to develop an overall plan for the numbers and types of people your firm should employ? What percentage of employees should be full-time regular employees vs. temporaries, part-timers, or contractors?

I could go on.

I doubt many of us could answer these with honesty or any certainty. I am sure some of you have “guesstimates” of how many people you will need to hire due to turnover or growth. Maybe some of you even have an idea of how many of your projected hires will need to be engineers or computer scientists or some such professional. But we do not have a comprehensive picture of needs, nor do we have any kind of adequate picture of the potential supply. Most HR and recruiting functions have made an effort over the past few years to install software or improve their data gathering processes so that they have some idea of what the employee population looks like, but we are far from success.

If we are to ensure that are organizations remain competitive and are able to meet their talent needs, we need something more than we have now. What we need is a set of tools and processes that enable us to project, run “what-if” scenarios, and make financial projections. While software from companies such as Oracle and SAP are providing some if this capability, until we demand more we will not get it. These vendors have to see that there is a market for that and then it will be readily available.

In the meantime, here are some simple steps you can take to start the process of developing a talent strategy for your firm.

Step #1: Forecast likely demand.
Looking at all your internal growth projections and expected turnover, put together a picture of probable need. Break this down by occupations, skill sets, profession, or whatever makes sense. Constantly check this with line.

Step 2: Develop knowledge of likely supply.
Use whatever software tools you have, including Taleo or other talent management systems or the software from those firms I have already mentioned. Collect data on how many jobs are posted on job boards and track how quickly the jobs are filled. Use local employment data, and competitive intelligence which, when combined with your other facts, will paint a picture of likely supply. Include projected college graduates with the majors you are seeking and place a realistic guess, based on past experience, on how many experienced people you will be able to recruit from competitors and other sources. Take into account mergers and acquisitions and the excess people they may bring to your firm. Have contingency plans in place to deal with this through outplacement, internal redeployment, or development. These supply projections, when subtracted from the demand estimates, will give you an idea of how big your gap is and what kind of people you will need.

Step 3: Develop a methodology of getting at that supply or of changing the demand.
Once you have this, you can begin to propose ways to get more of the people you need. Will you put in place internal development such as Cisco and IBM and HP have done for years to supply some of the people you will need? Or will your plan be to vigorously recruit from your competition in the hopes of getting what you need?

You may also find that working to reduce demand or to change the focus of the demand will reap benefits. Why does everyone have to have an engineering degree, for example? Perhaps a technician would be adequate to do that job? There is no doubt that we have had degree inflation, and many jobs that were previously performed by high school graduates now require people with degrees. We may have to readjust this concept. And, there may be ways to simply use automation or process engineering to make it possible to do the work without more people. These are all choices that recruiters should be involved with and they are the kinds of things a talent officer would be focused on.

Step 4: Prioritize your needs and make line management aware.
Prepare a talent strategy report that contains the supply and demand data I have discussed and that outlines your proposed approach to dealing with the issues. Use facts, figures, and business-oriented examples. Ask for the resources you will need, and guarantee a certain level of result.

Step 5: Report on progress.
Develop a set of metrics and facts that you can report regularly to senior management to keep them aware of the supply and demand balance and to let them know how you are doing.

We owe it to ourselves and our organizations to ratchet up the strategic capabilities of our firms and provide senior management with the decision-making information they need. Until we do this we will remain in the cycle of panic hiring and mass layoffs. Proactive planning is the only way to get the people-cycles under control.

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