What’s New: An organization’s ability to perform, adapt and thrive requires new talent strategies. CHROs and their teams should deploy HR variants of the data-driven, forward-looking FP&A approaches that finance groups employ.
A key point: This may require fundamental redesigns of job roles and organizational structure.
Yes, but: Organizations cannot solve today’s talent shortage problems with yesterday’s thinking of “Just hire someone to fill the vacant position.”
How it works: Instead, they should conduct workforce planning and talent forecasting through a skills lens and implement technology solutions to help redesign roles, automate processes and redistribute tasks to lower-paying positions.
The bottom line: The financial impacts of this new approach can be substantial.
An organization’s ability to perform, adapt and thrive increasingly pivots on two factors: humans and data. Human resources (HR) leaders can harness the former to optimize the value of the latter while ensuring they can access and develop the skills that drive the achievement of strategic objectives, today and tomorrow.
This endeavor requires new talent strategies that extend beyond traditional workforce planning approaches to fundamental redesigns of job roles and organizational structures. This upgrade also requires chief human resource officers (CHROs) and their teams to deploy HR variants of the data-driven, forward-looking financial planning and analysis (FP&A) approaches that finance groups employ. Deeper collaborations between finance and HR teams can expedite the maturation of skills-related planning capabilities.
An unparalleled convergence of macro factors — generative artificial intelligence (AI), robotic process automation (RPA), a systemic talent shortage, geopolitical volatility and more, combined with shorter-term pressures — economic uncertainty and the board’s demands for cost-optimization, among others — oblige CHROs and HR business partners to operate as strategic talent advisers to the board, the C-suite and the rest of the business.
To flourish in this role, HR leaders should reimagine the workforce, rethink how work is done, redesign job roles, get the right analytics and key performance indicators (KPIs) in place to measure and manage organizational effectiveness and develop new forecasts and scenario plans related to talent and skills.
Put simply, all HR leaders need a talent strategy that leverages data and analytics to ensure that the current and future workforce can support the organization’s current and future strategic priorities and objectives.
Perform a Skills MRI, Stat!
Breakthroughs in generative AI could elevate global business productivity by 1.5% in the coming decade, according to Goldman Sachs, but not every company is guaranteed to reap that performance boost. Optimizing the value of generative-AI tools, RPA and other advanced technologies requires new thinking on work design and new approaches to how roles are structured.
Pressure to develop and implement these innovations is growing. Investors and boards expect profitability improvements regardless of short-term economic fluctuations. CEOs and chief financial officers (CFOs) are, in turn, demanding cost-optimization improvements throughout the organization. Plus, a long-term talent shortage tied to demographic realities and the swift pace of technological change means that old-school workforce planning approaches — generally varied and ill-defined — need remodeling.
Organizations cannot solve today’s talent shortage problems with yesterday’s thinking of “Just hire someone to fill the vacant position.” In-demand talent such as data scientists, registered nurses (RNs) and senior DevOps engineers, for example, simply are not easily available in the hiring market. Additionally, workforce planning historically may have been siloed and driven by the needs of individual departments or business units rather than aligned with longer-term business strategies, which should include incorporating new and emerging technologies into day-to-day activities.
The need to conduct workforce planning and talent forecasting through the skills lens has never been greater. Fortunately, new technology solutions — AI-driven talent intelligence tools and workforce planning and design software — are hitting the market at an opportune time. These tools equip HR groups with more accurate, detailed and real-time views of all the skills that reside within the organization. Comprehensive skills inventories fuel more precise talent forecasting and scenario planning and a better understanding of the financial implications of the strategies analyzed to enhance the workforce, in accordance with business strategies.
Those financial impacts can be substantial. For example, consider the bottom-line impact a healthcare organization experiences when hiring 125 RNs as that profession’s average compensation rockets. By inventorying and analyzing all the tasks and skills the healthcare provider’s current nursing roles require, coupled with incorporating technologies, the organization can identify lucrative opportunities to redesign those roles:
- Which RN tasks and processes can be automated?
- Which workstreams can be reassigned to lower-paying positions such as licensed practical nurses (LPNs) and certified nursing assistants (CNAs)?
- Can we upskill LPNs to perform certain tasks?
- Which critical activities should RNs allot more of their time and expertise to?
Answering these types of questions sets the stage for designing more cost-efficient job structures and workflows that can reduce the number of new RN hires from 125 to 75 or even 50. Replicate these exercises across dozens of roles throughout the organization, and the financial returns can soar.
Talent forecasting and skills modeling
Those paybacks take time to materialize, so upskilling and work redesign require upfront investments. This makes HR and finance collaboration and alignment on these decisions crucial — and mutually beneficial. The finance group’s FP&A capabilities offer object lessons and insights HR groups can apply to their talent forecasts and related financial analyses. HR’s forward-looking assessments of skills and talent needs can strengthen the scenario planning CFOs conduct.
While each talent strategy must align with the unique skills requirements of an organization’s business strategy, the following activities are needed to upgrade most workforce plans:
- Understand the business strategy: As the performance of most companies becomes increasingly reliant on the quality of their human capital, it becomes more important to ensure that the talent strategy aligns with the business strategy and remains in lockstep as strategic objectives change with greater frequency.
- Develop a rolling talent forecast: Many FP&A teams deploy a rolling forecast that incorporates a combination of historical and predictive data to predict future performance over a period beyond the next 12 months, and continually updates such projections based on new data. HR teams should deploy a similar approach, and their forecasts should focus on the skills — in addition to headcount — needed to execute strategic business objectives.
- Model multiple scenarios and analyze their financial impacts: The finance group’s profitability and risk-related scenario planning activities also have a talent strategy parallel. By modeling the impact of different external factors (e.g., wage inflation) and strategic changes (e.g., investing in generative AI) on organizational skills needs, HR leaders can identify future skills needs and quantify the financial impact of various scenarios.
- Measuring, monitoring and driving organizational effectiveness: Getting advanced skills analytics and KPIs in place to drive forecasting and scenario planning delivers additional benefits. HR groups can monitor these insights to drive organizational effectiveness — and the extent to which the workforce is delivering on strategic objectives.
Make no mistake, this approach represents a major departure from how most companies have traditionally conducted workforce planning — that is, on an annual basis and with only a high-level focus on headcount. Yet, new and forward-looking talent strategies and planning also represent an HR urgency given marketplace realities and stakeholder expectations.
Protiviti Managing Director Fran Maxwell contributed to this blog post.