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Workforce Planning in an Uncertain Economy

Posted by Aaron Green  February 25, 2010 02:00 PM

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Workforce planning is a strategic response to changes in workforce demographics, business models and economic conditions.

There's no doubt that the current economy has wreaked havoc on some workforce plans and has made it difficult to conduct workforce planning for the future. However, it's in just such a climate that workforce planning is more necessary than ever.

My company, Professional Staffing Group (PSG), has been surveying our clients on their HR Planning over the past two quarters of this economic downturn. The latest survey results can be found on our web site.

Respondents have felt the impact of the current economy and its affect on their workforce planning. We've found that:

Uncertainty is prevalent: Employers have high levels of uncertainty regarding their 2010 staffing levels and hiring plans. When asked about anticipated changes in staffing levels, the most common response was "unknown." Many employees are uncertain about the future of their current jobs too. According to a Conference Board survey only 45 percent of workers are satisfied with their jobs.

Pay raises are not anticipated: 63 percent of respondents do not expect to raise pay in 2010; 35 percent expect small increases of 0-2%; and only 2 percent of respondents expect to give pay raises over 2%.

Employees have many concerns: the perceived level of employee concern is quite high in a number of areas: shrinkage of career opportunities (72% perceived their employees to have either a considerable or moderate level of concern); impact of economic downturn on organization (72% perceived their employees to have either a considerable or moderate level of concern); decrease in job security (68% perceived their employees to have either a considerable or moderate level of concern); and increased workload due to recent layoffs (47% perceived their employees to have either a considerable or moderate level of concern).

Employers have concerns too: the most common concerns are retention of top talent, employee engagement, staffing levels that are too low and recruiting top talent.

Spending is not expected to increase: HR budgets were cut drastically in 2009, but employers expect to keep those levels intact for now. Training and Development is the one area that may see a spending increase in the short term.
In summary, there's a lot of stress on Human Resource professionals' efforts to recruit, retain and motivate the workforce, and it's difficult to predict long-term supply and demand.

My first recommendation is to take on the uncertainty by considering these three questions:
1. Where do we have clarity or minimal uncertainty?
2. Where do we have a degree of certainty but many things are unknown?
3. Where are we relying simply on best guesses?

Steps Toward Better Workforce Planning
Once you've outlined the uncertainty it's possible to reduce its impact through strong communication. I recommend involving your entire organization and communicating your three categories of (un)certainty with your employees. Also communicate the possible scenarios for handling the uncertainties and how employees could be impacted. Through this exercise you will also create benchmarking and milestone opportunities.

Our recent survey also found that uncertainty over rates of attrition, turnover and retention is a major HR challenge in 2010. In fact, staffing is the most uncertain area for HR right now. Thirty-one percent of the survey respondents don't know what their staffing level changes will be in 2010 and 29 percent don't foresee a change. Thirty percent of the respondents anticipate increasing headcount in 2010 but are almost equally divided on which quarter that hiring will occur.

One way to mitigate this uncertainty is to utilize flexible staffing. Flexible staffing can include: temporary employees hired through an agency or directly, part-time employees, independent contractors, retirees who return to work, consultants/freelancers/contractors, on-call workers or outsourced employees.
In a recent special report on contingent staffing, Workforce Magazine reported that 73 percent of employers in a recent study said they anticipate some level of increase in their contingent workforce by late 2010, with nearly 35 percent planning increases of 50 percent or more. Workforce also wrote that the labor law firm Littler Mendelson predicts that contingent labor could rise to as much as 30 to 50 percent of the entire U.S. workforce, triple the average of 13 percent that a Staffing Industry Analysts survey estimated it to be in 2008.

Headcount and talent are two key elements in workforce planning and looking at both will help you determine where your workforce gaps are. Smart HR managers evaluate their current workforce, as well as the talent that is becoming available and the expertise that is leaving, to understand where the gaps are, or in some cases, where they are likely to be in the future. You can then work on filling the gaps with recruiting, retention, motivation, succession planning and contingent staffing efforts.

No matter what you think the current economy dictates to your business, retention always matters. Unmanaged attrition can be disastrous to your organizational health. For example, if a company loses employees primarily from the bottom rungs of the organization, it could wind up with a disproportionately older workforce than it had before. In contrast, if it loses employees primarily from the middle, it could lose an important cadre of skills and future leadership. If it loses primarily older workers, it could be losing considerable experience and knowledge.

The most popular recruiting and retention strategies among Boston HR managers who were surveyed are to invest in low-cost training, change recruiting focus, develop a succession plan and develop a new talent management plan.

Don't let the uncertainty of today's economy prevent you from making smart investments in workforce planning for the future. Instead, think about how you can use uncertainty to your advantage. Start by preparing multiple view scenarios for the future that include your relative certainties and uncertainties (the three categories), review your projections and periodically update them. Doing so will ensure that your organization is best positioned to succeed through demographic change and economic uncertainty.


Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

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Featuring human resources advice and columns from The Boston Globe's On Staffing and Hire Authority writers.

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