Larger organizations do demographic analyses during their workforce planning efforts. This post is going to explore the principles I draw upon when advising a client on how best to engage in this analytical effort. This post is inspired by the very thoughtful article in HBR: Authors – R. Strack, J. Baier, & A. Fahlander, Managing Demographic Risk, February, 2008, pages 119 – 128)
A typical demographic centered analysis includes doing the following:
- Collecting and understanding historical attrition patterns (retirements, turnover, churnover, and termination/layoffs) within the organization and drawing “reasonable” assumptions about future patterns. In some cases it is useful to examine “soft” attrition such as sick leave patterns. These are soft in the sense that the resource is nominally present, but in fact is unavailable. One organization I worked for found value in looking at factors (including sick leave) that resulted in systemic losses of productivity.
- Looking at how the current workforce complement will evolve without intervention over a forecast period (I recommend using a 10 year horizon, at the very least it is recommended that it be 5 years). Systemic “undercurrent” like forces only show their consequential faces when you look at the outcomes over longer period of time (i.e., the power of compounding in slow/low/gradual level changes).
- Assessing external demographic trends to assess the risks of replacing through recruitment means. This is a risk analysis that needs to incorporate leading indicators (i.e., indicators that provide a hint of what could happen 3 – 5 years beyond the indicator observance). To do this means understanding what “drives” the supply market place. One client needed a specialist type engineer that was part of a particular university’s course offering in its engineering school. Because of economic issues, the firm had not recruited anyone with this background for several years. They a lost by accident discovered that the engineering faculty had dropped this course when they learned that nobody was hiring graduates with this course because they had their economic constraint issues too.
- identifying various strategies (I recommend always having at least 2 preferably 3) to meet future replacement and growth needs. This is simply the prudence of having a Plan B and C to go along with A.
The contextual piece to this analysis is of course the business strategy. This determines whether a particular talent is going to be needed in the future and in what ways. The above list suggests that this is a quantitative exercise, but this is true only if the future talent needs mirror the qualities of the current talent profile. AND, this is rarely the case.
Doing a qualitative demographic analysis is much more interesting for several reasons:
- The current profile of talent over time needs to factor in “discounts” for talent shifts (e.g., we are going to enter a new market – customers with differing language and cultural norms than we are customarily used to dealing with. Talent shift implication – our talent will require language and cultural intimacy features)
- The ability to shift the profile of talent features needs to factor in “practical” consideration of how to achieve that. The example in the point above suggests that we will have to recruit from this customer group because language and cultural features are usually not easily developable within the organization. this fact can bump up against several organizational values and internal constraints: the value of achieving talent shift needs through development (often a retention strategy); collective agreement clauses that limit internal talent mobility due to add on requirements; implications on supervision – will we have supervisors that can manage this new group?
The logistics of implementing strategy shifts as it pertains to talent is often ignored. A treasurer who does not consider the constraints on the financial markets (debt/equity and retained earnings) in terms of the proposed business growth strategy (e.g., by moving from a retained earnings towards a debt based funding strategy) may do the firm ill service.
I am firm believer that during strategy development, it is prudent to be risk adverse (What can torpedo or hamstring our strategy? What can we do about that?). The TM head in the organization is responsible for dealing with these talent risks just as the treasure is for raising and dealing with securing working capital risks.
I am also a firm believer that once identified, almost all risks and identifiable event uncertainties are manageable.
Some of the principles I draw upon to help with these risks include:
- Using a 10 year planning horizon to be able to “envisage” consequences and implications of choice and establish capacities to deal with them if they should arise
- Using multiple talent sourcing strategies (my preference is 3) that are activated (i.e., not shelf-ware) so we have the operational flexibility to respond appropriately (speed and characteristically) to emerging events and surprises. The HBR article that inspired this post suggest 6 strategy possibilities (page 126) that we can look to and augment to develop a game plan.
- Using the simplest of assumptions when doing attrition type scenarios. Predicting the future is foolish – we can’t do it. I have worked with sophisticated and simplistic attrition modelling, I prefer simpler for 3 reasons: I understand what a simpler model does and does does not do; I am never unaware that it is a gross simplification of human behaviour; and, I find it generates speculation results that mirror closely enough what the more sophisticated models provide. As a display/formatting choice, I use whole numbers when displaying the 10 year scenarios (I don’t know what it means to have 4.3 people retire in 2016), and this visibly accentuates the simplicity of this work.
Depending upon the general mindset of the client (e.g., highly technical, creative, administrative, etc.) I accentuate these 3 principles differently.
I have been well served by the points of view outlined above and with every new assignment I continue to augment them.