Why Workforce Planners Should Forget about Position Management

Workforce planning is the process of ensuring that the business employs the right staff at the right time and at the right cost. As a best practice workforce planningOpens a new window should be continuous. However, the problem is that most finance departments still develop budgets for people the same way they do for chairs. This is a traditional approach often known as Position Management.

It creates risk and headaches for the organization because it fails to articulate the impact on teams and the roles that need to be planned for and managed throughout the workforce plan’s lifecycle. Creating a workforce plan based on position structure works fine at the budgeting stage, but once you get into the fiscal year, tracking positions is like playing a game of musical chairs. When the music cuts out, you may be left with no chairs—a.k.a. budget for a new hire. How does this happen?

The Human Layer of Workforce Cost Management

Finance is numbers-orientedOpens a new window —if a team has six full-time employees and plans to hireOpens a new window four more this year, Finance counts that as 10 positions. Salary values are assigned to the 10 positions and that is the team’s total workforce budget.

From Finance’s perspective, there are “six filled chairs and four chairs to be filled for a total of ten chairs in marketing operations this year,” but the reality is that teams are rarely this stable.

At any point in the fiscal year, employees may leave the company, get promoted to a different position or team, or go on leave. Teams may need to fill more or less positions than they originally planned, but their ability to manage this type of churn is hindered by the basic way in which cost limits are allocated and the inflexibility of the plan monitoring process.

 

To Finance, an empty position simply means no costs are incurred. Finance will often count this as a cost saving and look to “manage” a vacancy rate to reduce spend. But to HR and a line of business leader that empty seat could either mean revenue that is not being earned or customer satisfaction that is being reduced.

If that empty seat eventually does need to be filled, the budget assigned to that “chair” may not get released or may have been allocated elsewhere. And if line managers don’t get the funding needed, they may leave a critical position empty until the next year, resulting in higher costs due to lost productivity and missed business targets; or they may resort to hiring contingent workers who bring all sorts of other costs and risks with them.

This leads to situations such as that of a company with 20,000 employees—and 9,000 extra positions. The budgeting by position process led them to have 29,000 potentially funded positions in an organization with 20,000 actual people. If the average budgeted cost for each position is $50,000, then there is potentially $450 million of the approved cost that the company is struggling to track. In addition, a portion of this money is “locked” inside the budget and, therefore, is not available for strategic business initiatives such as new product development.

Applying Business Analytics to Workforce Plan Tracking

When HR tries to fit the people plan into this type of budget framework from Finance, they’re forced to forget about people dynamics, market demands, and changing business objectives throughout the year.

Workforce plans require a more agile model, but this has been difficult to implement due to an over-reliance on spreadsheets—even as HR becomes more data-driven, they often still track workforce plans using the position-based spreadsheets generated by Finance POS.

Additionally, traditional analytics—derived from limited transactional systems or expensive data warehouse projects—can’t drill down to the team-level and pick up on the nuances of position changes. The little information that can be extracted takes an army of people and weeks to accomplish.

So how can you better track workforce plans and ensure managers have the funding they need when a critical position opens up?

1. Move to a continuous planning model: Reviewing the plan to actuals routinely throughout the year helps you see problems before they become pitfalls. With this kind of insight, you and the line managers can investigate both problems and successes, and re-allocate budget according to what will happen in the future.

2. Stop tracking workforce plans based on Finance’s budgeting model: When HR tries to reconcile the workforce plan by positions, the workforce plan collapses as soon as that position changes. Instead, HR should move to a plan to actuals comparison, which enables more precise tracking of team-level changes and makes budget-tracking easier.

3. Look for technology that makes the job faster and easier: Look for a people strategy platformOpens a new window that enables rapid cycle planning so you can look ahead at how many open positions need to be filled, when they must be filled by, and wherein the organization they are needed the most, which gives you the necessary time to either move budget around or talk to the manager about delaying the hire until budget accumulates. Beware of trying to use generic business planning tools (like Hyperion or Anaplan) for this—they are designed for Finance not HR use.

When workforce planners can access the current budget or forecast from Finance, they’re able to seed the upper limits on headcount and make data-driven decisions in advance of problems coming up. This, together with actual historical data on which headcount and costs are projected in the plan, and fast collaboration between other planners and stakeholders, makes for an even more accurate plan and hiring forecast. It’s the best way to avoid the music cutting out too soon and finding yourself with a critical chair that needs filling and no way to fill it.