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Article: Next level strategic workforce planning (SWP)

Written by Mercer's Steve Goldberg

A foundational understanding

Strategic workforce planning (SWP) has arguably been defined in more ways than most other concepts and capability sets in the human capital management (HCM) domain. This variability in SWP definitions nonetheless still coalesces around a handful of very similar elements:

  • SWP refers to the quality, quantity and surrounding deployment aspects of an organization’s workforce based on a range of cost, risk and benefit scenarios as well as underlying assumptions.
  • SWP is the ability to meet future workforce-related demands and objectives associated with potential strategic pivots, restructurings, mergers and acquisitions, or simply year-round changes in resourcing needs resulting from a wide range of operating circumstances.
  • SWP involves a close collaboration between the recruiting function, other HR and external partners and internal business leaders around hiring and developing the talent and skills needed for bottom-up operational requirements and top-down strategic plans.

Then there is this vastly over-simplified and narrow definition that seemed popular for many years and is still used in some circles: “Having the right people in the right jobs at the right time.” Why do I view this SWP notion as very narrow? For one thing, using the word “right” relative to people, jobs and time is not only tied to more variables and assessment methods than even the best leveraging of Gen AI can account for, but it also implies that all possible changes in an operating context are factored in.

Beyond these disparate yet directionally similar versions of SWP, a definition that’s served this former global HR executive and longtime HCM/HR tech industry analyst well is:

SWP ensures that workforce-related actions help elevate organizational agility and achieve other significant business outcomes by bringing together a range of relevant real-time data with appropriate insights and assumptions about resourcing requirements, gaps, costs, risks and opportunities.

It’s well worth noting the significant attention and priority SWP and adjacent processes and capability areas are now being given, perhaps more than ever before, as highlighted in these findings from Mercer’s Global Talent Trends (2024) Report:

  • Only six percent of C-suites don’t have something akin to “AI-driven insights for talent decisions or strategic workforce planning” in their 2024 strategic HCM agenda.
  • 49% of HR professionals say “improving workforce planning to better inform buy/build/borrow talent strategies” is a top priority in 2024.

Workforce planning vs. SWP

While workforce planning (WP) for decades has operated as a largely insular, almost exclusively HR-owned process for predicting and addressing resourcing gaps, those emanating either from a skills or broader capacity perspective, a clear distinction between WP and SWP is that the latter process revolves around what I refer to as the “3C’s”: It is continuous, optimally connected, and openly communicated. SWP features ongoing validation or modification of key assumptions, conditions and dependencies; it is characterized by major collaboration between corporate functions having different mandates, accountabilities and often, systems (connected). Finally, SWP also emphasizes synchronization across each corporate function’s systems, data and processes, as well as the same elements within external partners and suppliers. This modern-day conceptualization of SWP has also driven organizations toward much more transparency (or openly communicated) planning methods employed and ensuing results.

These continuous, connected and communicated planning approaches have enabled countless organizations to enhance the accuracy of their business plans. This has also resulted in the ability to make necessary adjustments and refinements at much shorter intervals, or achieve increased agility in planning, therefore execution as well. Within the SWP arena, however, the focus is much more on “people” resources, capabilities, needs and gaps. It is this people element at the center of SWP that essentially cascades into a plethora of considerations.

The sampling of various types of SWP capabilities and use cases below includes some less obvious ones, such as where Gen AI can play a role in progressing SWP to the “next level.”

SWP use cases and related considerations

Unique operating circumstances

Ensuring that SWP efforts also reflect unique operating circumstances such as in-progress or planned strategic or transformational initiatives, M&A’s, etc. This entails appropriately adjusting upward staffing assumptions to account for employee retention risks and even productivity dips that are typical during these stressful periods. Setting aside these events above, a more “steady state” scenario involving increased staffing requirements is when a new retail store opens. These are often linked with heavier customer traffic and, thus, increased resourcing needs. The combination of Gen AI and Large Learning Models (LLMs) should play an increasingly important role here as one of the “application sweet spots” is knowing best course of action when current staff experience with relevant factors may not be that extensive.

Different skill needs and worker types

The relevant skills needed at different times can drive the mix of employment or worker types, including those falling within the “temp labor” category. While gig workers, “contingents” and contractors share several similarities (e.g., they all fall under the umbrella of flexible employment arrangements), gig workers (sometimes called freelancers and often operating on their own) are usually deployed on short-term engagements to perform certain tasks or project work, where contractors are often governed by more formalized, medium- to longer-term arrangements with an employer. Contingent workers are often provided by staffing agencies, which gives rise to another Gen AI use case example. I am referring to push notifications to hiring managers with open job requisitions encouraging them to use alternatives to hiring regular employees when appropriate but highlighting considerations surrounding each worker type.

Also, with respect to the sourcing and use of gig workers, contingents and contractors, the corresponding set of processes clearly extends further in scope than mere cost management elements. Other critical activities relative to these nonemployees include optimizing their scheduling, onboarding, evaluation and as-needed coaching while still ensuring compliance with all relevant IRS worker classification and management rules. Finally, it should be noted that whether an organization uses gig workers, contractors, contingents or regular employees, all these workforce segments can help, or hurt, the reputation of a business by their actions.

Two alternative and perhaps more creative ways that some organizations use to deal with short-term spikes in resourcing demands (e.g., those determined by an SWP cycle) are job rotation programs within the same enterprise. Another is via staff exchange reciprocal agreements with other organizations, likely of the noncompeting variety, and when respective periods of heavy staffing demands don’t coincide.

Changing business priorities

The changing of business plans and/or priorities is another very common set of circumstances that gives rise to several additional SWP use cases, especially now with the dynamic duo of Gen AI and large learning models. The one that immediately comes to mind for me personally is when it is best to address a staffing need by hiring a regular employee, procuring a contractor, effecting an internal transfer, upskilling an incumbent or outsourcing the job or role. For that matter, another incredibly impactful “Gen AI in HCM” use case is knowing what proficiency level is truly needed to be considered a viable resourcing option. And let’s not forget that skills taxonomies have effectively been used for a few years now in guiding organizations around what skills readily transfer to other skills, what jobs or projects require similar skills, etc. Finally, when business priorities change or get elevated, Gen AI-powered HCM systems can offer guidance around paying above market salaries and/or total rewards packages when business- justified.

Corporate culture considerations

Corporate culture unfortunately tends to get inadequate attention within many organizations, especially those immersed in the process of assessing the pros and cons of pursuing different resourcing paths. What I’m referring to is the notion that redeploying staff from inside the organization, or even alumni that have proven to fit well with the core values an organization promotes, logically present less of a risk and challenge from a staff onboarding and integration standpoint than workers brought in from external sources, whether full time employees, contractors, gigs or contingents.

Coming to the topic of SWP execution, we should also highlight such dimensions as how realistically achievable the business’ resourcing dependent KPI’s, and success metrics are to begin with, how reasonable are the set of assumptions being applied, and whether all major potential obstacles are being minimized or properly accounted for. AS we know, the process of testing assumptions (i.e., how realistic they are) is also fertile ground for Gen AI as the corresponding cycle time can be dramatically reduced.

Corporate structure considerations

Lastly, another SWP dimension that is often shortchanged is the importance of having a manageable span of control across people managers, especially when their teams become larger or more spread out geographically, in other words, the existence of sub-optimal organizational structures. This is of course driven by each particular business context, and again, is the type of high-impact guidance that Gen AI can offer.

Next level SWP brings next level benefits

Among the benefits accruing to organizations committed to deriving the many benefits of SWP, some are more recent, perhaps attributed to a combination of best practices becoming more universal, or the impact technology innovation is increasingly having within businesses. These next level benefits will include enabling organizations to better deal with both market volatility as well as less predictable internal dynamics; minimizing the disruptive effects of hiring/firing cycles; and finally, having the confidence and enjoying the competitive advantage that comes from simply knowing what it takes to always have a "future-ready workforce".

About the author: Steve Goldberg began his collaboration with Mercer in December 2023 as a contributing analyst, author and advisor. He has been operating on all sides of human resources, human capital management and HR technology for over three decades across three continents. Steve earned an MBA in HR and is a frequent speaker at industry and solution provider events. He has been engaged by 60+ HCM solution providers to-date.