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Survey says: Networking is Key in Job Prospecting

March 31, 2009 Leave a comment

groupnetworkingby Chris Pavlides
Founder, Chairman and CEO
Greater Philadelphia Senior Executive Group
HR Performance Article & Bio

With bad economic news seemingly around every corner, more and more people – especially executives – are learning (and re-learning) the value of networking.

That’s the experience of the Greater Philadelphia Senior Executive Group (GPSEG), a non-profit association of senior-level executives aimed at fostering business contacts, supporting members in career transition and generally sharing knowledge. Its Web site is http://www.gpseg.org.

GPSEG recently completed an online survey of its more than 800 members and recorded some telling findings, which demonstrate the need for effective networking for the entire workforce:

• Sixty-eight percent of its members are currently employed.

• Half of all members say networking is very or somewhat important to helping them accomplish their goals.

• Of those members in transition, 44 percent had their position eliminated, while another 29 percent were the victims of downsizing.

● Ninety-one percent of the members reported being satisfied with their membership, networking opportunities, business development, help in career transitions and a learning/growing environment.

So, what can we learn from this data?

For one thing, we can confirm that career success is tied, in large part, to who you know. You can never know too many people or learn too much information. And while this is especially true for executives, it also applies to everyone else in the workforce. That’s why while networking groups such as GPSEG and online business networking sites such as LinkedIn are popular, social networking sites such as Facebook and MySpace may also have value.

Given our difficult economic times, many of our members (32 percent), not to mention plenty of rank-and-file employees, are looking for work. To best find the job you want, you must take advantage of every resource available. Whether that’s joining an organization like GPSEG or just talking with your neighbor about a job opening, every

little bit really does help. For top executives, networking with other senior executives, although time consuming, is by far the most effective way to identify and land the next career position. GPSEG is receiving a lot of accolades from its members in this regard.

Here’s another reason why “Networking for Life” is important: Of our members in transition, two-thirds reported being in their most recent jobs less than six years.

Aside from reinforcing the value of networking, the membership survey provided other interesting information.

Although the glass ceiling may have been shattered for women, men still outnumber women in GPSEG, 85 percent to 15 percent. As might be expected with C-Level executives, most (69 percent) are between the ages of 46 and 60. Another 14 percent are between 40 and 45 and 15 percent are 61 to 65. More than half (58 percent) reported being in the workforce for 16-30 years, with the remainder topping 30 years.

Twenty-three percent of our members were CEO, president or chairman, while 21 percent held other C-level titles and 36 percent reporting being executive vice president, senior vice president or vice president. Peak salaries in the range of $150,000 to $350,000 exclusive of bonuses and other compensation were cited by 81 percent.

As far as job categories go, 17 percent of the membership was in information technology, 16 percent was in sales, 15 percent in marketing, 10 percent in finance, 10 percent in human resources and five percent in operations.

Pennsylvania residents comprise 80 percent of our membership, with 14 percent from New Jersey and six percent from Delaware or Maryland.

Ethics in Business – What’s Really Important Today

March 25, 2009 2 comments

ethics

By Nicolette Wuring
Also featured in The Reputation Garage blog
HR Performance Article & Bio

In the decades of mass production and mass marketing, efficiency ruled the world of business. When that ceased to bring in the returns (profit) and double-digit growth business had become addicted to, financial engineering kicked in. Business became all about creating value for shareholders, losing relevance for its other stakeholders and keeping top management’s ‘eye on the ball’ with extravagant bonuses. The resulting ‘system’ completely stopped caring about employees and customers. Integrity got lost in the quest for shareholder value and personal enrichment, and so did integrity and respect for employees and customers. The world today experiences the collapse of that system, trust has been lost at all levels.

Whether you are a marketer, in sales, in customer service, responsible for PR, for HR, for business strategy or the CEO of a company, you will increasingly come across terminology like Attraction Economy, Expectation Economy, Emotional Age, Return on Involvement, Conversational Capital, Customer Experience, Customer Dialogue, Customer Loyalty, Customer Advocacy, Net Promoter Score. You probably find yourself wondering, is this the next hype? Do I need to concern myself with this? If you find yourself in a position within a company where part of your concern is the differentiating power, the competitiveness and profitable (organic) growth of the company; retention and customer loyalty; Customer Lifetime Value; Recency, Frequency and Monetary Value; Cost to Serve; Customer Acquisition Cost; brand value; brand reputation; etc., you will increasingly find yourself in a position in which you need to concern yourself with the ethics with which you yourself, and every person working within your company are (enabled) to do business.

Ethics as a concept is something you don’t have to explain to entrepreneurs working in small businesses. They feel every day that the emotional connection they have with their customers is what drives their business. It’s what makes their customers come back, what builds preference from their customers to buy from them, even if their prices are a little higher than a competitors’ and what makes them spread positive word-of-mouth about their business, bringing in new customers. The impact on their business when the ethics with which they conduct their business fail, is immediately felt, because they loose their customers to their competitors and the negative word-of-mouth from their customers spreads fast. The entrepreneur is constantly aware of the example he sets for his employees. As he is also constantly aware of the impact of the work atmosphere within his company on the financial performance of his business. When his employees enjoy their work, when they are proud of the company they work for and their job, when they are ‘engaged’, he immediately sees that translated in the financial performance of his company.

In many large corporations these simple and straightforward dynamics have gone lost. Corporate Social Responsibility programs and compliance policies were designed to replace the personal responsibility and accountability of people. Their personal ethics became centered around their own goals, surviving and winning the games within the corporate arena. To quote Bill Clinton: “Leading by the power of your example, or the example of your power.”, the ‘example of your power’ took preference over the ‘power of your example’. To be successful in business, people complied, focusing on how to increase their power.

Brand platforms, with beautifully worded visions, missions and values were designed and communicated to create meaning for the people working within companies and their different stakeholders. But when consistency is lost or even worse, absent, between what a company says about itself and what people inside and outside the company perceive, it backfires.

Ethics cannot be forced upon a workforce (and customer base) by mass communicating a new brand positioning, relevant and unique as that brand positioning may be. When it is not credible for the employees within the company, they will never be able to make it credible for the customers they serve. Consumers nowadays relentlessly punish a company for every inconsistency between what a company says about itself and what they as a customer experience, perceive and feel. Spreading the news faster and across larger geographic areas than any company can afford itself, no matter how large its budget for marketing communication. Negative ‘press’ (WOM) about a company turns every euro spent on a brand campaign into a large disinvestment, hurting the (financial performance of the) company.

Having said that, let’s have a look at ethics- what’s really important today. In today’s world, where the power has shifted to consumers and what they communicate about a brand, whether through old fashioned word-of-mouth or in online social community settings, ethics have become crucial for the success of a company. Ethics are not about what a company says about itself, but what a customer perceives and feels as a result of doing business with a company and the consistency with what a company says about itself. In the days that success in business could still largely be created by focusing on operational excellence and/or product leadership, ethics were of less importance. Rapid commoditization, globalization and the saturation of market places have dramatically changed the rules of the games. Competitive advantages based on efficiency, economy of scale, price or innovation have a far shorter lifespan and can be challenged by providers from virtually anywhere in the global market place. Efficiency and quality are just a pre-requisite to be a player at all. Consumers have an abundance of choice, and have started to pick & choose from that abundance based on emotional connections they feel with a brand or based upon the emotions other consumers express about a brand.

Ethics start inside and at the top. Ethics are not some trick you can apply. Ethics are all about ‘walking the talk’ from top to bottom. Ethics start with the people within the organization. A high degree of clarity about the ethics of the company they work for allows for a high degree of alignment with people their own ethics. This creates a highly engaged workforce. Why? Because when there is alignment between the ethics of the company they work for and people their own ethics, their work environment can become meaningful for people. Ethics start to create a compelling connective quality. People feel appreciated and acknowledged as a human being, instead of just a ‘human resource’, a ‘human doing’ that represents a production capacity, a means to an end. It also creates that ‘walking the talk’ comes natural to people, which has an impact on the relationships between the people within the organization. Their behavior becomes aligned with the ethics. On an organizational level, the ethics become embedded in the culture and the structure of the organization. The mission, vision and values become a representation and confirmation of what the company stands for and what it goes for (its strategy). The ethics become the guiding principles for the way the company is organized (its structure) and for its governance, the way performance is measured. The resulting consistency builds a reputation in the market place that is congruent with what the company stands for. And helps the company to achieve what it goes for (i.e. successfully execute its strategy). And last but not least builds clarity on the contribution of the company at a societal level.

You may think that this is oversimplifying the issue at hand, but the truth of the matter is that especially in call centre environments, the ethics from which the people -the largest production capacity- operate is the only way to really unleash the hidden assets they and the customers they serve represent for the financial performance and long time and sustainable success of a company. Ethics need to be intrinsically felt by the people within a company for them to become meaningful and for them to be able to create the desired perceptions and feelings with the customers they serve. In a business environment where the ticket to success increasingly hinges on the emotional connections customers feel with a company, the emotional connections the people working for a company feel are a ‘conditio sine qua non’. Take any social event. When your employees talk with authentic and genuine pride to everyone who wants to hear it about the company they work for and their job, they not only give the best of themselves at work everyday but you can also be sure that it comes across in the way they serve customers. They take a personal interest in the way they and their company makes every customer feel, and they will go out of their way to create that feeling, time and again, without having to put in place systems to control them. They see it as their personal responsibility to contribute the maximum they have to offer. And they feel personally responsible and accountable for the results of their daily tasks, focusing on the end result, instead of just the task at hand. In exchange, customers feel that they really matter, they feel heard, recognized, appreciated as a human being, instead of a means to an end. They will tell it to the world. They will recruit new customers for you. They will help you improve. They will defend and support you. And they will buy more from you. When your employees become ambassadors (advocates) for your company, they will also turn your customers into ambassadors (advocates) for your company. But you always have to remember, that advocacy is authentic behavior of customers, and requires authentic behavior of a company and its employees. The only ‘control’ you have, are the ethics from which every employee operates.

Today only one in every four employees is highly engaged in their work. Three in every four workers is disengaged. Disengaged employees give less of themselves than they could. But not only that, they also create an ‘emotional end frame’ with the customers they serve that in exchange results in customers building a reputation that forces companies out of business. On average about 40% of the workforce in companies operating in the financial services industry, the hospitality industry, the telco and cable industry, etc. feel disoriented and disrespected. For (the investments in) service to be effective, it needs to be authentic, genuine and aligned with the brand values of the company. Then, and only then will a customer really appreciate the service. When there’s a lack of affinity with the brand and no love for the work they do, service at best becomes a badly performed trick, which makes nobody happy, serving nobody, not the employee who has to ‘perform an act’ every day, and definitely not the customer, who feels cheated with, at best, a ‘plastic smile’. As human-to-human interactions become increasingly important ‘moments of truth’ for sustainable success of companies, both on the cost and the revenue side, the ethics in any environment where employees serve customers become increasingly “what’s really important today”. So I challenge you to ask yourself, what are the ethics guiding the people within your organization?

Four Ponzies: How the Ponzi is the Victim of the Investor

March 24, 2009 Leave a comment

madoff1

by David Bush
HR Performance Article & Bio

For several years I have been writing about the great pyramid scheme, the origin of which is generally attributed to Charles Ponzi, which explains why it is popularly known as a Ponzi Scheme. I have been fascinated by the way in which apparently competent professionals seem to engage in massive denial when confronted with a financial deal that appears to be too good to be true. In much the same way, many employers have hired people with fraudulent credentials who have caused harm to the company.

 

The SEC website explains the Ponzi or Pyramid scheme as follows:

 

Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period—and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons. Decades later, the Ponzi scheme continues to work on the “rob-Peter-to-pay-Paul” principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses.

 

The three Ponzi schemes I began this writing project with were local to the Philadelphia area and the people who conducted these schemes were quite diverse. Mark Yagalla, a Philly resident form Waiverly, PA, profiled in a Philadelphia Magazine story from 2001, stole millions from his hedge fund investors in a Ponzi-scheme, and spent much of it on lavish gifts of houses and sports cars for Playboy Playmates Sandra Bentley and Tishara Lee Cousino. David Burry was an entrepreneur who created a business that sold candy to organizations who used for fund raising purposes. He claimed to be making a sweet profit on a regular basis. He hoodwinked the congregation of his church, family members and others to support a lavish life style that included a Chadds Ford Mini-Mansion, a Helicopter, two Mercedes and a summer home in Stone Harbor. I learned about him when I rented that Stone Harbor home for the summer of 1999. The third Ponzi was John Bennett. I had met him through mutual friends long before he was known for his pyramid scheme. “Philanthropist Laurence S. Rockefeller believed in John G. Bennett Jr. So did singer Pat Boone, Philadelphia Mayor Edward Rendell and former Treasury Secretary William E. Simon, as well as an array of institutions ranging from the University of Pennsylvania to the Nature Conservancy to the National Museum of American Jewish History.” This quote is from a Time Magazine article entitled, Too Good To Be True. “Bennett promised the organizations and individuals he approached a 100% return on their contributions within six months, thanks to anonymous donors who would match their gifts.” Fortunately, the damages were not allowed to grow to the level of those in the current headlines because an accounting professor did not believe that it was legitimate. Perhaps I should have finished the project sooner and I might fantasize that I could have saved fortunes, but I seriously doubt it. The forces that make these schemes succeed are primarily the result of the people who lose their money.

 

The three Ponzis described above are a very diverse group. We have a 23 year old investment whiz who attempted to live a fantasy derived from the hit movie, Pretty Woman, about a successful investor and a hooker with a heart of gold. He was a short kid who invested in high school and couldn’t get a prom date. He later dropped out of Wharton because he was making so much money with his hedge fund. He was not the originator of the pyramid scheme however. His mentors, a wealthy adult couple who referred their rich friends to him, insisted that he create a Ponzi in order to cover their losses when the market went south at the end of the go-go 90s. Bennett had a career in human services and non-profits and had become an authority in fund-raising. He maintained a low key life style so as not to arouse suspicion. Berry claimed the candy business was great and used an affinity group built around his church congregation and family members.

 

All three found people who were eager to join an exclusive group and were grateful for the opportunity to make more money that the average bear. All of these people were willing to trust because others told stories about the great returns (ROI) and these guys were quite likeable and the value proposition was making more sense than the stuff of the investment prospectus. After all, who doesn’t like chocolate , pretty girls and money.

 

Now we have a fourth Ponzi: Bernie Madoff and the missing half billion dollars. Mr. Madoff may have been conducting a Ponzi for many years or only recently since the market turndown prevented him from keeping up the promised performance. Stay tuned.

 

It is speculated, that like the others discussed above, Bernie Madoff is a bright man who is too optimistic, too confident and believes that he can always overcome adversity. However, it is more important to understand the investors who should have known better but didn’t. Let’s face it, the relevant discipline to use here is psychology and not economics. These people allowed their social needs and relationships to keep them in an ENRON that they could have walked away from at an earlier time. These individuals told themselves that they were special because they had been accepted by Bernie Madoff’s investment club and they were made fearful that if they violated any norms , like asking too many questions, they would be asked to leave. Had any one of them been so fortunate to have been asked to leave, he or she would still have a fortune intact. The first lesson: Be careful what you wish for. The second lesson: Keeping your principle intact trumps earning higher interest rates. Lesson 3: Most people have become careless about details and misrepresent themselves. Lesson 4: many of us are naively trusting.

 

A recent article on resume fraud illustrates this perfectly. Research on leadership indicates that most of us care most about the leader’s trustworthiness. Yet, despite frequent warnings about the level of resume fraud, it is reported that only 25% conduct background checks on the accuracy of resumes. Thus we see WSJ headlines about winners of prestigious prizes , such as entrepreneur of the year, being outed as a fraud, as having fake companies and counterfeit Ph.D. degrees. Is there an excuse for hiring frauds? No. We all have a responsibility to take the needed steps to assure the integrity of the staffing system and of the procurement system where we work. We cannot afford to have our people managers accused of enabling the bad guys. Failure to assure employee integrity can rapidly lead to the demise of one more formerly successful American employer. HR professionals do not wish to stand accused of that crime.

You Have a Beautiful Home

March 17, 2009 1 comment

beautifulhomeEric Herrenkohl

When my wife and I sold our home in St. Louis to move to Philadelphia, we interviewed a number of realtors. One of my standard questions to these realtors was, “What are the problems with this house? What do we need to change or neutralize in order to sell it for the maximum price?”

Most of the realtors immediately plunged into a long description of the flaws and imperfections of our home and provided detailed descriptions of what they would fix. One realtor, however, would have none of this. Her only response was, “You have a lovely home.” She absolutely refused to be critical of our house until we agreed to list our house with her. We didn’t choose her as our realtor (we chose a realtor who was referred by someone we trusted, the ultimate sales tool) However we were struck by the fact that this woman was a sales pro. She had a process that she used to persuade homeowners to list their homes with her, and one part of that process was to never provide criticism or consulting until after people signed a contract with her.

Performance Principle: Save your consulting for after the contact is signed. Don’t try to begin new business relationships by telling people all the things they are doing wrong. Instead, clarify specifically how you can help them and what this is worth in dollars and cents. And save your feedback and criticism for the client until the contract is signed.

Here are some points to remember and steps to take to improve your consultative selling process:

1. People assume you know what you are talking about. Experts of all stripes believe that they must convince people of their expertise. Prospective clients generally assume that you know what you are talking about unless you convince them otherwise. So stop giving away your expertise in a low-percentage ploy to increase your credibility.

2. Clarify objectives and value, don’t discuss methodology. Instead of spending your time describing how you will solve someone’s problem, focus on clarifying what problems you will solve and how much value this will create. The quality of your questions will go a long way to revealing your expertise without getting you bogged down in discussing technicalities which no one finds valuable.

3. Define specific key results. Clients often talk in overarching terms about their objectives. This helps you to understand the big picture from their perspective, but you have to get more specific as well. You must define specific key results that will indicate if your work together is being successful. These should be specific, measurable results that are tied to your work (our customer acquisition numbers increase by 20%; we operate 5 new programs in the first half of 2009).

4. “Dollarize” problems for clients. Translate every key result that you discuss with a client into dollars. If you are going to help a company overhaul its IT infrastructure, how much money will that make or save for your client? If you are helping a professional services firm implement a new sales tracking system, what is that worth to the client? If you can’t connect the dots between your actions and these hard dollars, you are not going to getting hired.

5. Ask people to work with you. You have to invite prospective clients to work with you. After clarifying key results and “dollarizing” problems, I say something like this: “Joe, I invite you to work with me on this, I think we can make a lot of progress together.” Short, sweet and effective.

6. After the invitation, stop talking. After inviting a prospective client to work with you, you have to stop talking – a feat many of us find difficult. Give the other person an opportunity to agree to become your client.
 
All Performance Principles eletters are copyrighted 2009, Eric Herrenkohl, Herrenkohl Consulting. You may copy, reprint or forward each of these newsletters in their entirety so long as any use is not for resale or profit and the following copyright notice is included intact: Copyright 2009, Eric Herrenkohl, Herrenkohl Consulting. All rights reserved. www.herrenkohlconsulting.com, 610-658-9790.

Herrenkohl Consulting • 333 East Lancaster Avenue #338 Wynnewood, PA 19096 • info@herrenkohlconsulting.com

Improving Selection From A Recruiter’s Point Of View

March 16, 2009 Leave a comment

slackerby John Wentworth
Wentworth Recruiting

“My job is to fill jobs!” roared Sandy, Acceleration Service Logistics Division’s recruiter.  “How can I do that if Corporate keeps putting walls in my way?  My managers want butts in the seats, not a lot of psychobabble excuses why we can’t do it!”

Jim, the Acceleration Service recruiting director, took a long breath.  “Does it matter if they are the right butts?”

“Yes and no,” Sandy said in a more nearly normal tone of voice.  The red cast to his face, which revealed both agitation and high blood pressure, had receded.

“Whaddya mean yes and no?”  Jim growled.  Now his face was starting to redden.  “This guy should not be a recruiter,” he thought to himself.  “He’s all butts in the seats, loud, disruptive and just against, against, against.  He’s setting me back like a big rock.  And I happen to know that he’s not the only person with high blood pressure around here.”  Jim had been hearing about the managers Sandy was serving having high hypertension issues along with other stress related problems.  “Probably their crummy employees,” he thought to himself.”

“I mean that half a loaf is better than none.  A working employee, even if they are not that good, is better that no one in the job at all.”

“Does your management agree with that?” asked Jim.

“Yes!” said Sandy.

By now, Jim had a headache.  It was close to quitting time, so he excused himself and headed to the parking lot, his rental car and the hotel.  On his way, he stopped in the General Manager’s office, buttered up her admin and got an appointment with the GM the next day.

“Ms. Hockney, good morning,” Jim smiled warmly as he shook the GM’s hand.

“Nice to see you, Bucko.”  Sarah Hockney was smiling, too.  They were not old friends, but their prior interactions had been warm and productive and they liked to kid each other.  Jim and his wife had, in fact, babysat Sarah Hockney’s two daughters one evening.  She and her family had been in town for a corporate office event and the event coordinator had dropped the ball on a local babysitter.  The event was for GM’s only, not staff people like Jim, so he and his wife offered and she gratefully accepted.

Sarah had been at a different division then and Jim had helped her with some recruiting problems, too.

“What brings you here to grace those of us who are not worthy with your presence?”  Sarah asked.

“I got a problem,” Jim told her.

“Is there ever any other reason someone comes 1,000 miles to visit me?”

“I guess not.  Sorry.”

“The nature of the terrible beast, my job.  What’s your problem?”

“We have an approach toward recruiting.”

“I know.” 

“It’s an approach that’s unusual in many people’s experience, but it is not only backed by research but also done with great effect in enough other companies that a knowledgeable and thinking person would not characterize it as odd or weird or fringe.” 

“Just in case I was thinking about characterizing it as odd or weird or fringe.  You will remember that I’ve seen it work.”

“Ya never know about general managers!  It’s pretty well substantiated in our company, too.  We have driven up productivity and driven down turnover significantly in the divisions that have bought into the program and actually used it.”

“So let’s say, just for the sake of this discussion, that since I’ve seen it work I happen to be a believer in your recruiting voodoo, why are you telling me this?  I have other people standing in line to complain to me, you know.  You are not the only one who wants to drink at the fountain of my soothing and my problem solving wisdom!”

“Your boy, Sandy, ain’t having it.  Specifically, his view is that a crummy employee in the seat is better than no employee in the seat and he says you agree.  And, I assume, Sandy’s boss concurs.”

“And, although I think I know the answer, the problem with my alleged logic is?”

“It’s a false dichotomy.  Your only choices are NOT “no employees” or “crummy employees”.  I can move the quality of the employees from crummy to excellent and keep up the pace of hiring so the seats stay filled with butts, in Sandy’s lovely language.”

“What’s Sandy’s real problem?”

This question reminded Jim of why he had liked working for Sarah so much.  She had a very firm understanding of how people worked and which presented issues were real and which were smoke or subterfuge.

“Sandy’s real problem is that he grew up as a volume recruiter.  He gets off on lots of short cycle activity.  He’s probably a little ADD or ADHD and just does not have the blood chemistry for elongated selection cycles.  He also gets off on the kudos he gets for filling a lot of jobs very quickly.  He looks like a hero and who doesn’t like that?  He also, frankly, has a kind of anti-smart bias, so anything that smells of research, or statistics or disciplined process hits him wrong and fires off his distrust.”

“I have to confess,” said Sarah, “that I’m not too current on the state of things.  What kind of shape are we in for staffing?”

“Low vacancy rate.  High turnover.  How’s your productivity?”

“Spotty by department.”

“Wrong employees in the problem departments.”

“A perfect storm.  What do you need from me?”

They sat down and worked out a plan.  The obstacles were Sarah’s direct reports who probably did not understand the cost and damage associated with low performance and turnover, and did, in fact, pressure Sandy to fill the seats with butts.  Also: Sandy’s boss, who should have solved Sandy’s problem by now.  And Sandy.

Their assets either were or were not the numbers, depending on how they turned out.

Sarah and Jim sat down with Sandy and his boss and together laid out a study design that HR would follow: how did the low performing units’ productivity and turnover compare to productivity and turnover in the high performing units?  What hard costs could be associated with their turnover that were not associated with those of the well-performing organizations?  Lastly, what soft costs were they incurring?

They were lucky in that there were a couple of work units inside their division that had low turnover.  Their management was good, so productivity was high, as was morale.  Errors were low, on time and attendance was high.  Each work group had a high social cohesiveness, even to the point of one unit having monthly bonkers games that rotated from one employee’s home to the next and were excuses for elaborate pot lucks and everyone having lots of fun.

Turnover can be given a hard cost and was.  Where there was hardly any turnover there were hardly any costs associated with recruiting, low productivity or training.

The costs to the departments that had high turnover and low productivity could be calculated and were.  The numbers turned out to be a very strong asset.

The department managers and HR were all present when Sarah presented the results of the study.  They differences in cost between the high turnover and low turnover departments were staggering.  HR had also counted the number of employee relations issues from each group of departments and calculated about how much time was spent on each and the resultant cost.  Same story.

And one could feel the differences, just walking through the departments.

Sarah had discussed the findings before the big roll out with everyone in the meeting, so there were no surprises, and no surprise at the plan Sarah and Jim presented at the end of the meeting: keep tracking costs; use commitment measures to quantify morale; begin applying testing and statistical analysis to evolve, over the next year, employee selection profiles that correlated to people staying employed and doing well on the job.  The plan was to make changes slowly, making sure that the seats still had butts in them, just better butts over time.

As they implemented the plan, recruiting got a little harder, as Sandy had said it would, but another recruiter was brought into HR to help.  Better selection meant that they had to kiss more frogs to get a prince.  And so they did.  The additional recruiter allowed them to increase the volume of frog kissing so that could meet their quota for princes.  As the quality of the employees rose and turnover dropped, the cost associated with dealing with turnover dropped, more than offsetting the cost of the new recruiter.  This project was producing a net reduction in expense by shifting money and effort from coping with the results of bad selection to minimizing bad selection.

They reduced the gauge of the selection mesh continuously, as they had data.  The data described candidates numerically across at least 20 requirements and measured performance in the same way.  They then just discovered which profiles stayed the longest and got the best performance scores.  Those success profiles became the selection targets.  They ran this cycle several times during the ensuring year, each time getting more prediction of on-the-job success, and more success.

The managers of the previously high-turnover departments needed counseling to accept that the inflow of new employees was as good as it actually was.  They were having a hard time believing it.  Several of them had been experiencing health issues.  Those issues had resolved themselves as their workforce drove better departmental performance.

Sandy’s blood pressure was down, too, but it had taken a career change to do it.  He just could not deal with 20-30 requirements per job plus testing, plus the analysis.  But everyone recognized that he was a good soul and a hard worker, so they found him a job in logistics management where he got the satisfaction he needed and was doing a fine job.

Sarah had to fly to the corporate office and took the occasion to seek Jim out and invite him and his wife to dinner.

“I just wanted you to know what a talent your husband it,” Sarah told Jim’s wife.  “He pulled off a near miracle in my division, and it’s all because he was able to guide us to start hiring the right people.”

“He cooks, too!”  Jim’s wife volunteered.

“But with no salt,” Jim said.  “Blood pressure you know.”

“If you just hired the right people, that probably would not be a problem,” Sarah grinned.

A Supply Chain Approach to Workforce Planning

March 9, 2009 Leave a comment

planningPeter Cappelli

George W. Taylor Professor of Management
The Wharton School – University of Pennsylvania

THE GOOD OLD DAYS OF MANPOWER PLANNING

Workforce planning wasn’t always an afterthought. ‘‘Manpower plans,’’ as they were known, had long been a crucial component of overall business planning. Their roots were in the World War II War Manpower Commission, which required businesses to report on expected staffing levels and requirements to prevent shortfalls in skilled workers that could derail production and the war effort. By the mid-1960s, a study of personnel departments found that 96% of corporations had a dedicated manpower planning function. The assumption in these models was that the supply of talent was within the control of the company, an internal function. The plans began by estimating what the internal supply of candidates would be in the future for each position and then matched that to assumptions about company growth in the demand for talent. Because the supply for all but entry-level jobs came only from within, managing that supply involved some hiring but focused on internal advancement and the rate at which candidates progressed from one job to the other
The peak of workforce planning was probably a late 1960s model called MANPLAN, which attempted to model the movement of individuals within a career system by including in the forecasts individual behavior and psychological variables such as worker attitudes and aspirations, the practices of supervisors (appraisals, compensation arrangements, practices for employee transfers), the group norms in place in the workplace, and the situation in labor markets. These individual level estimates were then aggregated up to the company level to produce overall estimates. Arguably nothing more sophisticated has been created since.

THE DECLINE OF PLANNING

Workforce planning and the related practices of employee development began to fall apart when the ability to forecast the overall level of demand in the economy eroded following the oil shocks in the mid- 1970s. Gross National Product, which had been forecast to grow at a rate of about 5–6% in real terms as it had during most of the 1960s, actually declined in 1974, 1975, and again in 1980. The 1970s became known as the decade of ‘‘stagflation,’’ low economic growth despite inflation. The recession that followed in 1981 was the worst downturn in business activity since the Great Depression. Gross National Product fell by two percentage points in 1982 alone. The manpower forecasts turned out to be incredibly wrong, as were the development plans based on them, because they were based on those forecasts of growth. The talent pipelines in the great corporations, which had lead times of 10 or more years, turned out about 6% too many managers every year.
The layoffs that followed were brutal and well known. But companies also slashed their own workforce planning and talent management functions. A study in 1984 documented the decline of these practices: About 30% of employers used elaborate statistical regression models to forecast talent needs in 1978, but that figure fell to only 9% by 1984; sophisticated Markov Chain vacancy models fell from 22% to 6%; and operations research tools in general declined from use in 23% of employers to only 4.5%. A Conference Board study based on companies that were interested in talent management reported that even in this group, fully half reported that their workforce planning efforts were ‘‘ad hoc’’ (the idea of ad hoc planning is something of an oxymoron), and only 19% of these companies, mainly the oldest and largest corporations, conducted workforce planning of any kind in the mid-1990s. This is compared to the 96% of companies that had a dedicated workforce planning department in earlier decades.
How could companies survive without workforce forecasts? For more than a decade following the 1981 recession, the priority in most companies was to ‘‘restructure’’ and get rid of talent. Because cuts could be made instantly, forecasts were unnecessary. When employers needed talent, the glut of experienced talent thrown on the market by downsizing meant that it easy to hire just what was needed when you needed it. No planning was required. Most companies abandoned their planning processes, and new companies never learned how.
An absence of planning worked okay as long as the problem was just having too much talent. Employers no longer had to worry about the risk of carrying excess employees because they just laid them off. Shortfalls of talent happened less often but were also not much of a problem as long as employers could hire whatever they wanted whenever they needed it. After the longest period of economic expansion in US history in the 1990s, that excess supply of talent evaporated. Outside hiring then became uncertain and expensive. Gerard Brossard, then vice-president for workforce planning at Hewlett-Packard Co., was one of a handful of innovators who built support for a new talent management process with senior executives by comparing what the businesses got in terms of talent with what they ultimately needed. The fact that the estimates were so often wrong, and the costs of being wrong became so big, created support for a different approach.

COMING TO GRIPS WITH UNCERTAINTY

Workforce planning involves two types of forecasts. The first is internal, what our workforce will look like in the future if we do nothing new: how many incumbents will we have with relevant competencies in each area in the future? The growing rate of attrition has complicated this forecast because attrition is driven by factors largely outside the control of the organization, mainly poaching by competitors. The other complication is that job requirements are broader now, and teamwork and other systems have made employees more interchangeable, offering a great many more options for meeting the demands of the organization.
An example of how to deal with the latter complication comes from Electronic Data Systems Corp. (EDS), the information technology consulting and outsourcing firm. Like other professional service businesses, people are the product at EDS. Individual employees can work on a variety of projects and can team with others to produce a huge range of organizational competencies. The task of line managers is to put people together to create those competencies and then match them to projects. Mary Young at the Conference Board describes EDS before 2004 as having no central planning for talent. Business was growing fast enough that they simply hired people as fast as they could. The belief among executives before then (and in many other companies) was that the technology in information systems changed too quickly to bother attempting to forecast talent needs.
The real challenge for EDS and companies like it is in understanding their own supply: What competencies do we have, and in what ways can they be deployed to meet which customer demands? Answering this question requires understanding the differences across individuals with similar job titles. The planning asset for EDS in this regard is its skills inventory, which keeps track of the competencies that each employee has as measured by their capabilities with different software and programming languages, previous tasks they have performed, roles they have held in the company, etc. To keep this current, the company requires that the individual employees update it after each assignment. The line managers then use the skills inventory to make assignments. The inventory also includes salary information, which affects billing rates and charges to the clients and helps make the most cost-effective assignments. When there are gaps projected between the current supply of talent and projected demand, managers have the option of hiring to fill them, the usual approach, or rearranging some of their current employees in different ways, based on the skills inventory, or using contractors.
Corning Inc. also developed a different approach to workforce planning. Matt Brush, then director of global staffing and planning for Corning, noted that the need for a new model began during the boom years— when the company could not anticipate or even keep up with hiring demands, a sign that workforce planning wasn’t working. When the telecommunications bust hit in 2001, the company lost 90% of its market capitalization value, and the goal shifted quickly to cutting staff. ‘‘One of the things we learned was that we had to get better at anticipating demand, and to do that in staffing we had to move away from being ‘‘order takers’’ to helping the business units figure out what they truly needed.’’
The supply side of the talent-planning process at Corning presses line managers not just to plan but also to think through where the value is truly coming from in their operations. Rather than simply extrapolating from past staffing levels, the idea here is to rethink how valuable each of the current roles or positions in the organization is, essentially taking a fresh look at the status quo. If done right, the company understands which roles are important to reinforce as well as which competencies – and the individuals who have them – need to be redeployed.What is perhaps most impressive about the Corning approach is that it manages to get business leaders to think seriously not just about the future but also about their current supply of talent: how many of their current staff truly have the skills they need to do the job now, how many could be expected to advance into more senior roles, etc.
Cynics will notice that this is what performance appraisals are supposed to do, but they rarely work. What is different here, as Brush points out, is that it avoids the part that supervisors find difficult to do, and that is confront the employee with the assessment. Because the general discussion is just about ‘‘roles needed,’’ it is a little easier to be objective about talent. And because some of the options include retraining and moving individuals whose skills will no longer needed in their current roles, rather than dismissals, the business leaders are much more likely to be provide an accurate assessment of their workforce. While the results of dialogue with business unit leaders rarely lead to perfect estimates, at least they offer a general direction—we need more of these competencies and fewer of these. That at least allows the staffing function to begin the process of identifying candidates and finding talent. It is relatively easy to add or subtract the number of positions to be filled at a later date when the forecasts become clearer. In the absence of this process, Brush found that line management would consistently underestimate the talent they needed in the future.

TAKING BUSINESS UNCERTAINTY SERIOUSLY

The second and more difficult forecast in the planning process is to predict the demand for talent, what the organization will need to meet its business objectives. As noted earlier, the competitive environment for businesses is so changeable, and firms adjust their own strategies and practices so frequently that these estimates are rarely accurate. And they getmuchworse the farther outone goes.The error rate in theU.S.ona 1-year forecast of demand at the stock keeping unit (SKU) code or individual product level, for example, is over 30%. Long-term forecasts are essentially worthless in all but the most predictable operations. Even in stable industries like public utilities, an unexpected chief executive officer (CEO) change or a restructuring program can throw all plans up in the air.
Dealing with this uncertainty begins by borrowing techniques from supply chain management, where the overall task is similar to workforce planning: How do we ensure that we have just the right supply of parts or components to meet demand when that demand is uncertain? Among the newest developments in workforce planning is the shift from forecasting to simulations. Dow Chemical Co. is one of the first employers to make this shift. Dow moved to a system that exploited standardized data from its enterprise resource planning system to produce estimates for each location that could be aggregated for the company as a whole. Then it sought a university partner to develop an even more elaborate model, one that used the standardized data to generate estimates for each business unit. The forecasts incorporate a wide range of site-specific factors such as estimates of the political and business climate in each of its countries of operation, changes in labor and employment legislation, and business plans for the operating unit, which include targets for operating productivity. Those forecasts were then aggregated into company-wide estimates.
The advantage of modern computing power with a model like this is that estimates are generated instantly, which allows one to vary the assumptions to see what happens. Playing around with the assumptions basically turns a forecasting model into a simulation: What happens to our forecasted headcount, e.g., if the economy slides below our assumption or if new competitors enter a market? The ability to simulate allows business leaders to see the implications of different strategies for talent, to anticipate how talent constraints could impact those strategies, and in some case, to adjust their business plans if the talent requirements are too extreme.
Arguably the most sophisticated workforce planning is being done by Capital One, the innovator in the credit card business. Capital One had just under 20,000 employees in 2001, it then made outsourcing and other decisions that brought headcount down to 14,000 by 2005, and later with a series of acquisitions saw employment rise to 30,000 by 2007. The need for better talent planning was driven by the costs incurred when employment changed so rapidly.
Capital One made its name in the product market through sophisticated analysis of customer data. Pat Cataldo, a vice-president in the human resources (HR) area, describes the culture of the company as one of ‘‘test and learn,’’ where analysis and application is encouraged. Prasant Setty came into that HR group from Wharton and then McKinsey & Co., with the challenge of improving workforce planning. He assembled a team from fields like marketing and operations research (no traditional HR experts). They used data mining techniques, systems dynamics models from manufacturing, and information from their PeopleSoft system to generate talent-planning models for each business unit in the company. They modeled outcomes like attrition rates, employee morale, and rates of promotion and outside hires. Among the factors they consider in their models are aspects of the organizational chart—span of control, levels of hierarchy, which affects promotion rates, and ‘‘stretch roles,’’ positions that are reserved for developmental assignments.
The HR planning team works with the business unit leaders to develop models around their particular business plans and goals in an effort to align the talent management practices with those business goals. As with Dow Chemical, the forecasting models were easily turned into simulation models, and this is where the power of the analyses comes in. The models allow the line managers to see the options involved in achieving any business plan: If you are planning to grow at 10% this next year, here are the talent requirements needed to achieve that growth. If you do it by accentuating outside hiring, here’s the likely effect on reducing prospects for internal promotion and the associated effects on morale and then on attrition. If you change the span of control, here is the effect on talent needs at the management level, but also the effect on promotion rates. Most important for the Chief Financial Office, the models also allow the managers to see the total compensation implications of all their choices. The line managers see the talent management issues as a system and also see how their choices concerning any single outcome in that system affect the other aspects.
Prasant, now at Google, reports that, rather than resisted by the business managers, this approach has been embraced by them as a useful tool because it takes what are often very general statements of business goals and shows their concrete implications. And it has raised the status of the human resources function in the process by bringing these issues into the beginning of the planning process. Other companies, like Citibank, have also embraced the simulation approach. Its talent-planning models allow them to calculate, for example, the human capital requirements and costs of opening a new branch office as opposed to expanding others in the area.

MIND THE GAP: THE MISMATCH PROBLEM

Simulations help us manage uncertainty by recognizing it, providing a sense of how outcomes could vary based on changes in assumptions. The best outcomes from the simulation process occur when we can identify implications that are robust to several different assumptions, suggesting applications we should definitely pursue, versus implications that are highly variable to changes in context. This information is most useful, though, when we have one other piece of data that has not previously been part of the workforce planning process.
The additional piece of information we need to make the best decisions is to know the costs of being wrong with our forecasts. What is important in answering this question is first to recognize that there are two ways we can be wrong: Not enough talent or too much. In the language of operations research and supply chain management, these problems of undersupply and oversupply are collectively known as ‘‘mismatch costs.’’ The insight comes from the fact that the costs of being wrong in each of these two directions are almost never the same. The goal in supply chains and in workforce planning is the same, to deliver just the right amount of supply to meet demand, neither falling short nor going over. That goal proves almost impossible to do. The next best outcome, however, is well within our grasp, and that is to minimize the costs of being wrong, the mismatch costs.
It might seem reasonable to assume that the two types of mismatch costs will balance out because we will either undershoot or overshoot the estimate: we can’t do both at the same time. This is what most workforce planners implicitly assume by worrying only about what we call the ‘‘point estimate’’ of demand, that is, the precise number our forecasts generate. In other words, if the forecast predicts that we will need 100 computer programs in our division next year, then we try to deliver exactly 100 programmers and stop there. This approach either assumes that we are absolutely certain about what we need, that there is no error, which is almost never true, or that the probability of overshooting the forecast is equal to the probability of undershooting it (i.e., that the probability distribution of the forecast is normal), so that even if we are wrong, focusing on the point estimate is the way to go. But this approach also assumes that the costs involved in overshooting will be the same as the costs of undershooting the forecast: If we are short 10 programmers, it is as big a problem as if we have 10 too many programmers. And that is almost never the case.
In previous generations where there was no real alternative to internal development, having a shortfall of talent was a much, much bigger concern than overshooting. Having too much talent simply led to a deeper ‘‘bench,’’ candidates who had to wait before stepping into a role that made use of their abilities. As a result, most planners, if they recognized uncertainty as an issue at all, tried to set their plans to make sure that they didn’t fall short of talent, even if it meant creating an excess supply in most circumstances.
Outside hiring and the related issue of attrition have now reversed those costs. The cost of undershooting a talent forecast are much less than theywere in the past because they can more easily be offset by outside hiring to fill in any talent gaps that occur if actual demand overshoots forecasts. The costs of overshooting and having an inventory of talent, on the other hand, can be much greater. One reason is because of retention problems. Asking qualified employees to ‘‘sit on the bench’’ and wait until an opportunity comes open for them is a recipe for disaster when the best of those employees routinely get calls headhunters offering themopportunity rightnow,nowaiting,nouncertainty. Another drawback to deep benches is the periodic pressure from operating managers to ‘‘restructure’’ and look for ‘‘fat’’ to cut in order to lower short-term costs. Underused talent can look a great deal like fat to a restructuring agent, and the difference between ‘‘fat’’ and investment in a ‘‘deep bench’’ can all be in the eye of the beholder. In this context, overshooting demand is the bigger problem.

GENERATING BETTER FORECASTS

Fortunately, the information needed to produce these more refined workforce plans is not all that hard to come by, and the analyses are straightforward. At present, most employers don’t even recognize that their forecasts are uncertain and make no attempt to estimate mismatch costs. So our estimates don’t have to be perfect to represent an enormous improvement over the status quo.
Let’s begin with the hardest task, estimating the uncertainty around our workforce forecasts. We start with whatever forecast we already have for talent needs. Spending a lot more time and resources trying to generate a better point estimate of our talent needs is unlikely to do us nearly as much good as learning about the uncertainty of that forecast and the costs of being wrong. The reason is that business demand for most employers is subject to so many factors that are effectively unpredictable (e.g., will the economy be up or down in 3 years, will a competitor invent a new product, will the board of directors appoint an outside CEO with a different vision?) that additional resources are unlikely to add much precision to our forecasts.We can learn a lot more by getting a quick sense of how uncertain that best estimate is.
The easiestway to do this is to look at the forecasts in previous years and see how accurate they were: What did they predict, what did actual demand turn out to be? For those employers that have no prior workforce plans to assess, a very good substitute is the overall business forecast for the organization as compared to actual demand. We then calculate the ratio of what actual demand turned out to be to the forecast of demand. If, for example, actual demand last year turned out to be 900 units while we had forecast 1000, then that ratio is 90%. A reasonable assumption, therefore, is that the error rate this year will be about the same, about 10% of this year’s forecast.
If we have forecasts for several years, we can calculate the average error rate of our forecasts in the past and use that to generate our estimate of demand this year. If we don’t have the error rate for prior forecasts and don’t have prior workforce plans against which to work, we can at least estimate the standard deviation of actual demand: How much did the level of business vary year-by-year over the past decade?
Say that our forecast for next year calls for adding 1000 middle managers to the workforce. The average error rate on prior business forecasts is 10%—actual demand tended to differ fromour estimates by 10%. So we conclude that we might need from 900 to 1100 new middle managers. We can also use the standard deviation to calculate the odds that the actualdemand will be any particular number, say, 900 middle managers, or any range, say between 900 and 1200 middle managers. (Doing this last step requires a few assumptions, especially that the distribution of the actual demand over time will follow a normal distribution, and the use of standard normal distribution tables from statistics.)

RECOGNIZING UNCERTAINTY

My colleague and decision theorist Paul Schoemaker suggests engaging the line and operating managers in a process to recognize the uncertainty of their own forecasts for the business with the following exercise:

• Ask them first to identify the four most important assumptions behind their forecasts.
• Ask them to array those assumptions on a twoby- two graph—with importance on one axis and how certain they are about the assumption on the other.
• Then ask them to establish a 90% confidence interval for their forecast. For example, ‘‘our forecast is that demand in this division will grow by 7% next year, and I am 90% certain that the actual demand will lie between 5% and 8%.’’

The purpose of this useful exercise is to force participants to acknowledge that their forecasts are not very accurate and to recognize that the efforts to map human capital onto those forecasts will have to address the underlying uncertainty in demand.

THE COSTS OF BEING WRONG

The next step in the process is to estimate the costs of falling short or going long in our estimates, what happens if we have too many middle managers or too few? Few employers have data like this handy, so we will probably need to generate some rough-and-ready estimates simply by asking the line and human resource experts the following questions: What do we do if we need more talent than we have planned for? Do our projects stop, can we hire on the outside, subcontract, or outsource? In other words, what are the costs per vacancy of our next best alternative to staffing these positions internally? Similarly, what happens if we have more staff than demand requires? Can we find something else useful for them to do, and how does this affect the risk of turnover? More generally, we need to calculate the cost per excess worker. These questions are hard to answer with precision, but for the purpose at hand, the important issue is simply which direction is more costly for us to err and by roughly how much is the difference. A useful answer would be something like, ‘‘the cost of having too many employees is roughly twice as great as the cost of having too few.’’
These mismatch costs are likely to differ not just across organizations but also by job. Because the cost of falling short is typically the additional cost of outside hiring to make up the gap, the mismatch costs associated with hiring too few employees can be reasonably small for lower level jobs where the competencies are readily available on the outside market and internal wages are close to that market rate. For jobs with skills that are harder to find and more unique to the organization, the costs of undershooting are much higher because it is more difficult to find qualified candidates on the outside market. Those costs include the cost of outside search as well as having to pay a market premium for compensation and the possible costs associated with ‘‘on boarding,’’ getting the new hire up to speed with the culture and tacit knowledge needed to operate in the new organization. Finally, we need to estimate the risk that outsiders will not do as well as internal promotions—because we are less sure about their capabilities, because questions of culture and fit are more difficult to assess, etc. These may also differ by job.
We use this information on mismatch costs to make a further adjustment to our workforce plans. If the costs of falling short in talent or in going long are about equal, then we might want to stick with our best point estimate of demand, even if that estimate is uncertain. If the costs are unequal but our estimate is highly accurate, with little anticipated error, we might also want to stick with our point estimate. But in all other cases, which represent the vast majority, we need to make adjustments. The bigger the error rate and the bigger the cost difference between going long and falling short, the more we have to adjust our estimates.
Say that our original forecast for middle managers of 1000 was adjusted to be between 900 and 1100, based on a 10% estimate of forecasting error. Say we also conclude that the costs of having too many managers is twice as great as the cost of having too few because the extra cost of hiring some replacements if we fall short is nowhere near as big as the risk of losing the investment in surplus middle managers who are inclined to quit. Now we have the information needed to adjust our estimates of demand. We should develop less than 1000 middle managers to reduce the chance that actual demand will fall short and that we will have a surplus.
Exactly how many fewer we should develop could be estimated with some precision from our estimate of demand if we know the standard deviation of demand, which again requires some assumptions and the use of statistical tables. But a ‘‘seat of the pants’’ estimate will often do. If we think our revised estimate is pretty accurate, we may want to undershoot it only by a little, say develop 900 managers internally because the risk that actual demand will fall short of that is small. If, on the other hand, we think our 1000 estimate is really closer to a guess in which we don’t have a lot of confidence, we might want to go well below—develop only 500–600 managers. The reason, again, is that we want to avoid overshooting actual demand. While such estimates are certainly rough, they clearly beat the alternative of ignoring the problems caused by mismatch costs.
Vivek Gupta, senior vice-president at the Indian software company Zensar Technologies, reports that his company went through something like this thought process in deciding how many computer programmers to train in order to meet their anticipated demand. Fearing retention problems, they initially undershot their best estimate and filled in the gap with outside hiring. As the labor market began to tighten and the ability to hire from the outside grew more difficult, the mismatch costs changed. Now it was more costly to undershoot demand, because shortfalls could not be filled on the outside—which meant that they likely could not get their projects done if their forecasts fell short of actual demand. So then they switched their plan and increased the proportion of talent they developed internally, exceeding their estimate of demand to ensure that they do not fall short of any unexpected increase in business.
This approach to workforce planning gives us a guide not only for how many candidates to develop internally but also how many we should expect to hire from the outside. Where the costs of overshooting are greater, as they typically are now, we aim to undershoot actual demand, which means that there is a good chance that we will need to do some outside hiring to make up the gap. How much hiring we will need is clearly uncertain, but we can get a rough idea by comparing our adjusted forecast of demand (1000 middle managers in the example above) to the number we decide to develop internally based on our assessment of mismatch costs (900 or perhaps 500 for highly uncertain estimates). The difference between those estimates gives us a good guide as to the amount of outside hiring we might end up having to do.
What about those jobs for which there is no internal development, where all vacancies are filled from the outside, such as associates in professional service firms, which hire a new class of associates from college every year. The process is the same: Actual demand is uncertain, the forecasts are measured with error, and there are costs to being wrong. One important difference is that the costs of falling short of the forecasts could be greater because the alternatives may be more limited. It is possible for an employer to address the problem of falling short by going back into the market at a later point in the year and hiring again. Some consulting companies have essentially moved to hiring two classes per year precisely to address that problem. If additional hiring is not an option, temporary help or contracting might be.
Leased or temporary employees and contract work can lower mismatch costs further because they can be deployed at the last minute should actual demand overshoot forecasts. They can also be more easily taken out should demand fall in the next period and fall short of estimates. As a result, we might think of a second decision framework within the general make versus buy choice for getting work done in organizations. An employer might decide to undershoot their expected demand for talent in terms of the amount of internal development they are willing to do. Some proportion 13 of the remainder of the work, the component that is most predictable, might be met through outside hiring. The remaining component that is even less certain might be met by outsourcing and using leased employees. The most flexible components cost the most per unit of work completed, and the employer is paying a premium for the more flexible components to avoid either undershooting or overshooting the actual demand for talent. The more accurate the forecast, then less risk there is of mistakes and the fewer of the more flexible arrangements the employer needs.

SUMMARY POINTS

Now we have a means for beginning to manage the uncertainty in workforce planning. More accurate estimates on the supply side, especially of competencies at the level of the individual worker, allow us to begin with a better sense of where we stand in terms of talent. Simulations of demand allow us to see the talent challenges associated with business plans and adjust business strategies to them. They also give us a clearer sense of how actual demand might change if any of the assumptions built into the models turn out to be wrong. From that point on, our approach looks at the uncertainty of prior estimates and the mismatch costs of being wrong about demand to adjust our forecasts to the risks of uncertainty. One very important aspect of this approach is that it does not require that one construct elaborate forecasting models of the demand for human capital. Because such forecasts are derived from the business environment, which is highly complex and extraordinarily difficult to anticipate, it is hard to make them better. Rather than assuming that we have certainty about the future, which is how most forecasting models are used, this approach recognizes and then comes to grips with the uncertainty that is inherent in business forecasts.
A final thought about this process is to remember that it is not that difficult to get significantly better at workforce planning. At the moment, most firms do no planning, which essentially means that every development comes as a surprise and the only response is to react to those responses after the fact. The means for responding – outside hiring for shortfalls, layoffs for surpluses – has become expensive and difficult. Traditional planning, which relied entirely on forecasts, has proved equally unsatisfactory because those forecasts have proved to be so unreliable. In this context, a simple and straightforward approach to workforce planning that takes on the central challenge of uncertainty is highly useful.

Organizational Dynamics, Vol. 38, No. 1, pp. 8–15, 2009 ISSN 0090-2616
2008 Elsevier Inc. All rights reserved. doi:10.1016/j.orgdyn.2008.10.004 http://www.elsevier.com/locate/orgdyn

Challenges & Opportunities Facing 50+ Job Seekers

March 9, 2009 Leave a comment

workerBy David Mezzapelle
Founder, Director of Marketing
GoliathJobs.com

There has been much buzz surrounding the explosive growth of the Baby Boomer & Retiree segments of our population. Today, when combining the state of the economy with this population shift, the topic of employment is certainly the most popular. To get a feel for the impact here are some powerful statistics:

• The 50+ demographic will grow by 49.1% for the next few years, 5 times the growth rate of the rest of the US workforce.

• From 2004 – 2010 workers ages 35 – 44 will decline by 19%, workers ages 45 – 54 will increase by 21% and workers, and workers ages 55 – 64 will increase by 52%.

• Boomer spending is projected to increase $800 billion to over $4.6 trillion by 2015.

• Boomers are the highest earners, best educated & largest home ownership group of any generation to-date.

Boomers (people born between 1946 – 1964) control the lion’s share of the population and will do so for the next 30+ years. They are a major driver of our economy. They also have needs including retirement. However, after completing extensive market research it became clear to us that today’s 50+ population wants to continue working past retirement. Advancements in healthcare as well as improved nutrition & exercise are allowing people to work past 65. Most cite the need for income (84%), boredom avoidance (78%) and health coverage (56%) as the reasons to continue working. The good news is that working past retirement, even 2-3 years, can result in a dramatic improvement to a 401(k) balance, higher Social Security benefits and less dependency on savings. Plus, the ability to continue exercising the mind can actually extend one’s life. So what opportunities exist and where? Companies that embrace the talent & experience of our 50+ population will win in the competitive global marketplace. They are finally realizing that their longevity is contingent on understanding these trends. As a result, companies are starting to develop programs to hire & retain 50+ workers. This is easy to do because 50+ workers bring a lot to the table. They are loyal, possess significant interpersonal skills and are flexible in terms of schedules, benefits & pay. They are also tech savvy; In 1990 the desk of every 40-year old worker had a PC. Those same workers are now 59 with 19 years of computer experience and have been online since the advent of the web. 50+ job seekers can turn to head hunters, staffing agencies and even classifieds. Online services such as JobsOver50.com and AARP do a great job as well. Another powerful resource for job seekers is their Alma Mater. Schools & alumni associations across all education levels are starting to pay close attention to the employment needs of 50+ alumni. These are great venues for job seekers to go for job search as well as up-to-date advice and best practices. Many schools even offer “lifetime career services” in their mission statements. Thanks to the proliferation of social & professional networks and web-based alumni associations, more & more alumni are connected to their schools daily. These networks are also the perfect place for employers to post their jobs into a sea of talent. There are certainly challenges facing 50+ job seekers today. However, their mass, experience & talent yields an opportunity to drive the US workforce to new heights. We will see a significant economic recovery as employers embrace this growing trend.