Workforce transformation has been the most-discussed topic in the HR community for years. The Corona pandemic has only accelerated this. How much workforce expansion, downsizing, and reorganization is needed due to digitalization, for example, and where exactly is it needed?We have collected some important experiences in concrete projects and I would like to share them here. What are promising approaches? Where are the risks in such projects? What can be derived from this?
Workforce transformation in its original form
A short practical report from 2005 (slightly adapted for confidentiality reasons):
At the time, we had a client who dealt with desktop remote services. In other words, people who physically came to the workplace and set a computer up, installed software or repaired it. That was still a lucrative business back then. But even then it was clear that it would probably not continue this way for much longer: remote service (when a technician virtually connects to the computer) had already been invented, and software as a service (SaaS) and cloud computing were already on the horizon.
So there was a dilemma in management:
If we pull out now and sell, we’ll still get money for a profitable business, but we’ll lose customer contacts. And we are giving away good employees. If we hand it over too late, we’ll have expensive employees with outdated skills in outdated jobs that we’ll have to cut. Who knows if we will be able to reskill them at all and how many we will really need with which skills?
The solution: We develop one or more future scenarios about the ramp-up of the new business and look at what impact this will have on the individual jobs and how we can then successively restructure the team. So it’s that simple?
Upon closer examination, a number of detailed questions arose:
- Timing: when exactly will which technical innovation become established on the market?
- Scenarios: how would the change in our business model unfold over time?
- Focus group: which roles/functions will be affected exactly?
- Competency model: which new competencies are needed?
- Reskilling: who has the potential to develop these new competencies – and who probably doesn’t ? Who should/could stick to their “old” way of working?
- ROI: What would the restructuring cost? And until when does which scenario pay off compared to the ‘continue-as-is’ and against the ‘sell-it-now’ option?
A workshop and a model are needed
With a business unit comprising more than 1000 employees, it makes no sense to deal with the whole thing in a one-off workshop in purely qualitative terms by ‘sticking cards on pinboards’. So we had to come up with a quantitative data model that would allow us to calculate such scenarios and then obtain precise figures for the target profiles. It also occurred to us that we could do profile matching to find out which employee groups we would have to address with which specific measures. Analytic decision making’ is what we might call it today.
And the whole thing soon had a proud name: ‘Strategic Workforce Planning’.
At last, we in HR were on the right strategic track (i.e., not running behind) – and secondly, we were finally dealing with business-relevant data and planning and not just with headcounts or payroll totals.
In addition, we bought a tool from a large management consultancy, which was still set up in ACCEESS at the time – and the consultancy plus advisor at the same time, of course.
Many parameters – many trends – many scenarios
I will spare you the details of the workshop at that time and summarize the result: It was quite a disaster and ended in a conflict with management.
Why? That’s simple:
If you want to build a data model that calculates scenarios with so many parameters, you need very precise parameter data from the business. What exactly will the future roles look like? What competencies are needed in these roles? When exactly will which innovation come along and replace the old one in the market? And we also need some internal data: age structure of employees, skills, fluctuation now and in the future, level of training, mobility between locations, etc.
We were like the climate researchers: An equation with so many parameters quickly exponentializes if you screw with a few parameters. In other words: Depending on how you spin it, the result is either: ‘We don’t need to hire anyone more’ or ‘We need to hire 20% new employees per year to even maintain the headcount in 5 years’.
In summary, the equation had too many unknowns to really deliver scenarios mathematically accurate down to roles and skills. In particular, the business managers could not say exactly when which scenario would really come into play and which skills which role would really need to have then. Also, the planning data that was given annually to the board for business planning was suddenly not quite as reliable.
This creates frustration in such a workshop!
And one has little confidence in the scenarios when it really comes to deriving expensive measures.
In the meantime (15 years later!) there are professional tools (e.g. from Dynaplan), which can do much more. Only a few months ago I was allowed to accompany such acustomer project. The problems remained the same: A lot of parameters and uncertain scenarios that can come out when modeling the future. And then, of course an event like Covid-19 can quickly render such a model invalid.
Thus, does strategic workforce planning not make sense?
Does this mean that the whole world is becoming data-driven and analytical, and only we in HR cannot join in because our parameters are too soft, too complex, and there are too many dependencies on external factors? I wouldn’t go that far! On the contrary. The whole thing actually made a lot of sense when viewed from a distance. Apart from this frustrating experience and an unsatisfactory, unclear workshop result, there were a whole series of insights for everyone involved:
- A much clearer sense of which different scenarios are even conceivable.
- What complex dependencies and parameters exist and influential
- What dramatic changes could occur in 5-10 years, if, for example the fluctuation is not 2% (as is the case here) but 10% (as is common in China, for example).
- we did not know exactly what competencies are to be found within the pool of employees – who caters s which skills and who will invest how much energy to internalize a new technological skill.
- In retrospect, it became clear that these scenarios were not so bad in their basic tendency. With a little more research, more could have been done. Not a workshop – but a project.
- That a continuous cooperation and focused discussion between HR and management is urgently needed.
And another interesting thing happened: These scenarios that we had developedwere widely talked about! Employees took this as an opportunity to think about what kind of movie they actually want to be in.
‘I’m 55 years old – I’m still riding this technology wave to the end of my professional life. I’m continuing my education a bit, but I’m no longer making a quantum leap. I would also let myself be sold – I go where my core competence is core business’
I’m 35 years old and want to get off the long-term sinking ship. New remote technologies interest me anyway. I want to continue my education and take the next S-curve. To do this, I am willing to make sacrifices, change companies or relocate.
Without these scenarios, which had been discussed and declined once, we would never have been able to have these discussions properly. The future roles, which were subject to a lot of tension and uncertainty in the workshop, were also very useful.
The employees knew: ‘It probably won’t look exactly the same – but this new role at least seems plausible and at-tractive enough to me to roughly orient myself to it. I know what I have to do to get there.‘
Paths to the future
The different scenarios played out in the workshop were also very useful:
They acted like paths on a fresh blanket of snow: They invite us to mentally retrace them – as different possible paths into a future, as options to think oneself and one’s own biography into these scenarios and to make personal decisions. Like when a bit of the fog clears and a number of possible options open up.
I’ll also reveal the result: At some point, we sold the business unit to an IT provider. And 15 years later, the business and some names I know are still there. Many of my colleagues at that time have made careers in the new technology fields – even without us having planned it for them in detail. So the plans developed a dynamic all on their own.
A completely different approach: job-specific scenarios
A few months ago, I met an interesting young scientist: Dr. Jakob Mainert. He has developed a method he calls ‘Cognitive Lense’. It classifies job profiles of any kind according to two basic dimensions of a matrix, which he has worked out using a factor analysis based on parameters of digitalizable competencies.
Within this matrix, each individual activity of a role can be examined according to its ‘digitizable parts’. This can also be done in an activity survey and a workshop – but each employee can also do it him or herself. The activities that represent economically ‘viable’, purely human core competencies can be expanded and further developed.
Others can be actively outsourced, bundled or outsourced. This creates an individual, but also an overall picture of an organization. This inductive approach is a smaller alternative to the more deductive ‘Strategic Workforce Planning’ derived from the business strategy. It does not include all business aspects – in this respect, it is not complete, because it is inductive – but it still creates clarity about the effects of different digitization technologies on individual jobs. And this method also has an interesting self-referential effect on the employees: As soon as the method is presented, the participants/listeners start to think through their own activities: ‘What of what I do could a machine do one day?
Workforce transformation – an interim conclusion
- Regardless of whether one chooses a deductive or an inductive way of dealing with the question of the survivability of a role, function, task – it always has a systemic repercussion on the actions of all those involved. It trains and shapes the thinking of those involved.
- If you want to calculate real quantitative scenarios, you need really good data: We have a lot more options there today than we used to – for example, there are companies like HR Forecast that can distill large amounts of data from a data pool or from job ads on the web at low cost using AI to create answers, such as by skills. But you really need solid scenarios that allow you to omit parameters, even in a model-like way, to simplify the world enough. These tend to emerge in the context of a project and that needs solid methodology.
- It is an excellent exercise for every HR manager to work through such a scenario project together with their business managers. Afterwards you often speak a common language of change and the thought patterns start to synchronize. It strengthens your own role and relationship.
- 4th most important point: Not everything can be planned exactly mathematically in such scenarios – even if consultant projects sometimes sound so tempting. But:
- a) The basic direction of the scenarios is usually correct if the trends and parameters have been sufficiently researched and discussed.
- b) Basic strategies for HR, such as a new competency model, new role profiles or a training program, can be easily derived from them.
- c) You can also develop such a project into a participative change project: Sharing the results with employees will have the effect that they will set out on their own.
Workforce transformation is more than planning
A classic strategy project can also be developed quietly with just a few participants and produce good results. Workforce transformation in a more comprehensive sense has to be seen much more broadly due to the large amount of organization-specific parameter data. If you really want it to become a viable path for the organization, it is more like an expeditionary journey into a future that cannot be planned exactly, but is becoming more concrete. A journey with imponderables and possible setbacks for which one must equip oneself – for example with a broad competence profile.
Because it involves a large part of the organization, there are usually a large number of stakeholders who are affected. The more you involve employees in this travel planning, the more effectively you can also harness the energy of those involved in a positive way. After all, who doesn’t want to think about their own job risks, development and career opportunities? Maintaining employability is a strong intrinsic motivator to go the extra mile.
In this process, bitter realizations sometimes arise. For example, that tasks or stages of the value chain cannot be kept profitable in the long term.
Planning transformation in good time is a responsibility
People and organizations often develop forces to protect themselves from such structural change or simply lie to themselves. We experience this ourselves in many industries or at the level of society as a whole – whether it’s coal-fired power generation, drive technologies in automotive engineering or our financial industry. Threatened job losses are the strongest lobbying tool for protectionism and subsidies.
In companies, too, there are forces that have a structure- and status-preserving effect. In some companies, this includes the works council. My experience, however, is that the more closely works councils and employees are involved in such planning and scenarios, the more they recognize the systemic interrelationships and often change from being obstructionists to protagonists. This creates a spirit of optimism that can be put to good use.
In holistic workforce management projects, therefore, there are not only ‘push’ but many ‘pull’ options that can be played in order to involve employees in future scenarios and not to have to leave them to the wild market forces later on. For me, this is sustainability – you could also call it a duty of care.
In sociopolitical terms, too, we should embrace the principle that it is more socially responsible to actively and transparently drive forward foreseeable changes and thus give people the opportunity for active personal adaptation in good time than to hold back structural change in vain.
Seen in this light, companies are also taking on an important social task with workforce transformation.
If you are interested in this topic feel free to contact us!
CEO and Partner Breitenstein Consulting