The most valuable resource any organization has is it's employees, and this is especially true for small, high growth businesses. As you proceed with your business expansion plans, maintaining and growing your workforce skill inventory is vital to achieving your short and long-term objectives. And since your workforce can be comprised of individuals from four generations all with different career expectations, understanding these dynamics is key.
The following chart, published in a Buck Consultants Survey* from February 2024, provides very telling information on the significant differences in expectations between generations.
A key fact is that Millennials, which make up the biggest component of the workforce in 2024, are much more open to switching jobs to better meet their career aspirations. While organizations today are well past any expectations of 20+ year employees, maximizing how long key performers remain with your firm is vital to sustainable business growth. Improving your average length of service by 2-3 years above the average can have significant positive productivity gains for your firm.
Companies that had effective succession planning activities in the past recognized the importance of promoting career advancement to retain it's top performers, otherwise their talent pipeline for key jobs would be disrupted. But a practice that seemed strategic at the time is woefully insufficient today. The current business climate, especially with the integration of AI, will have an exponential and somewhat chaotic impact for years to come, with accelerated change never experienced before. Work roles will be eliminated and new ones created as AI alters both how management, professional and non-professional work is performed. This will inevitably alter the skills inventory organizations will need to be agile and successfully navigate accelerated change and achieve business objectives.
So what are the ultimate goals of strategic workforce planning and why are they so critical to business survival and growth? In summary it's this:
To generate a comprehensive view of workforce requirements and skills needed by your organization to achieve current and future business demands in the midst of ongoing business environmental changes
To identify existing workforce skills gaps as compared to these requirements
And to develop effective training and recruitment capabilities to eliminate those gaps and attract, engage and retain needed external talent
Maximizing capacity utilization is the ultimate outcome of your strategic planning efforts, and two critical components to achieve this are workforce engagement/retention and skill gap analysis.
First let's discuss engagement and retention. Turnover higher than market norms can have a detrimental impact on a firm's productivity. Conversely, turnover below market norms can provide a competitive advantage. And placing a priority on retaining your top performers is especially important for productivity and for preventing critical knowledge loss. Turnover expenses can be quite significant, ranging from 30% to 50% of an employee's salary for entry level non-skilled workers to upwards of 100% to 150% for management level employees and above. While the productivity loss component of those numbers is a soft measure to account for, it doesn't lessen its significance. A position being unfilled for a period of time and other employees trying to pick up the slack creates a significant drain on productivity; along with the aforementioned knowledge exiting the company and supplemental retraining required. And these productivity issues get magnified as the pace of change in the new business environment escalates.
While successfully managing employee engagement and retention is critical for any successful business, their impact can be muted by neglecting an equally vital strategic practice; your workforce's skill gap analysis. Why is this so important? Because it's absence can led to a less than optimal workforce planning outcome. As you conduct your long range planning and determine targeted business goals, their achievement is depended on the development of a supporting workforce plan. This plan must obviously take into account the number of employees needed, which must include projected turnover and new hires. But the skill map of your employee population is what is truly the key. If you were to purely measure existing headcount and related productivity output, then apply that to projected workload requirements to determine your future workforce population, you can potentially inadvertently over-hire because your existing employee population is under-skilled. By conducting a thorough workforce skills gap analysis, you can effectively accomplish the following:
Identify specific skill asset additions that need to be recruited for
Identify critical training requirements of existing employees needed to close these gaps. At the same time you are providing career development for your employees, increasing the probability of higher engagement and retention.
Identify if any of these skill gaps exist within your high performer population, allowing for more aggressive training and career development actions for these individuals.
The end result is a more efficient, streamlined and engaged workforce. It also assists in developing your existing talent pipeline for key jobs within your organization, which is another vital outcome for small high growth companies as they develop their future leaders.
Once you are done with these analyses and finalize your strategic workforce planning activities, it's important to develop which "Key Performance Indicators" (KPI's) you will use to measure how successful your planning activities were, and to make adjustments within your strategic plan time frame as business conditions vary from projections, which is an inevitability. Some of the common internal KPI's are the following:
Recruitment: Vacancy Rate, Time to Fill
Workforce: Turnover, Tenure, Training Completion Rate
Financial: Cost per Hire, Fringe Rate
Lastly, when conducting your strategic workforce planning activities as part of your overall business strategic plan, be sure to focus on two important implementation components, level of involvement and transparent communication.
Level of Involvement:
It is key to go as low in the organization as you can within your leadership ranks when conducting your planning activities. Identification of true high performers as well as existing employee skill gaps needs to have the involvement of leaders most knowledgeable of those employees and their capabilities. Any significant inaccuracies in these assessments can lead to perceptions of unfairness and lower employee morale and engagement.
Transparent Communication:
Once the strategic plan and related workforce plan are implemented, open and transparent communication of planned activities is important. The majority of employees want to believe that their efforts have a positive impact for their company. Likewise, they also need to understand the short and long-term benefits to them as an employee. Having a transparent and ongoing internal communication platform, both in writing and through group meetings, will pay huge dividends. Educating your employees on the firm's strategic goals, the plan for achieving them, and the value and importance the company places on the contributions of its employees to it's success in this mission will go a long way toward increasing the engagement and productivity of your workforce.
I hope you find this information useful, and we welcome an ongoing dialogue about this very important topic. I welcome you all to share your comments and experiences. The more we share, the more we generate creative thought that feeds innovation.
Iconic Rewards is a unique workforce planning firm that assists small businesses in identifying important talent management priorities for developing an effective workforce planning strategy. Please review our website for more detail: www.iconicrewards.com.
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