How and why your approach needs to look different
2020 was a year of change. Demand levels, staffing levels and cashflow look different for most businesses than they did in 2019, and previous workforce plans are as redundant as your travel plans. We are not done changing, and we don’t yet fully understand the impacts on employees, customers and the economy. You still have to plan, but the process needs to look different. This post highlights the three main ways your workforce planning process should change to better suit high levels of uncertainty.
1) Revisit productivity expectations
Your previous models likely had productivity targets, such as $200 sales per retail employee per hour, or 12 sandwiches made per cafe employee per hour. This way you could forecast demand and make reasonable assumptions about how many staff you’d need. Today, your staff responsibilities may look a little different, in which case the target productivity may no longer be realistic. Many employees now spend extra time sanitising and walking products out to outdoor customers, or are limited by maximum capacity restrictions. On the other hand, some businesses may have invested in technology to remove manual, physical-handing processes, in which case employees may be more efficient than before. For more examples of operations changing, check out our blog post on the future of the leisure industry, written in May 2020 in response to the pandemic. The key point is that you have to use reasonable productivity assumptions or you’ll be set up from the start to either under-serve customers or over-schedule employees.
2) Do scenario planning
George Box, a British statistician, famously declared “All models are wrong, but some are useful.” The point is that life is more nuanced than what can accurately be captured in a model so you are unlikely to get exact predictions; you always need to apply some human logic and sense-checking. However, as we all know, models are an incredible tool for piecing together logic into a framework and understanding potential forecasts based on our assumptions. The tricky part right now is that we are running on A LOT of assumptions. Will we go into lockdown again? Will customers have enough discretionary spend? Will demand surge as we reopen, making up for lost time? Will we be impacted by more bush fires, or regulation, or changes in border restrictions? The list goes on.
So what’s better than having one model loaded with many unknowns? Having a lot of models. To get more control, businesses can choose 4-5 of the most likely scenarios and model them. This way, when you make a decision like “hire two more casual staff”, you can plug the decision into all of the models and see if there are any scenarios where that would be detrimental to cashflow. If it is, you have to weigh the likelihood of that scenario against the benefits and likelihood of other scenarios, or come up with a mitigation. It is a puzzle, but it’s worth it to sort out the pieces to gain some visibility over the impacts of decisions instead of leading blindly into the unknown. While it requires work up front, scenario modelling is a capability that will be beneficial well beyond the pandemic; the Queensland Government has listed it as a component in the highest level of their strategic workforce planning maturity model, published in 2019, before COVID-19.
3) Increase your cadence
It’s not uncommon for businesses to have light workforce planning, where hiring needs are only evaluated when there’s a vacancy or when there’s a notable increase in demand. Alternatively, many businesses plan quarterly or annually to proactively and strategically decide on their workforce needs. This year, however, workforce needs should be evaluated weekly, with a slightly deeper dive each month. It will require some work to set up a new process, but once you have it you should be able to review the latest data and make decisions swiftly. A few key things you’ll want to regularly be checking on are:
- Your forecast accuracy: how well are you forecasting demand, and how can you improve? Are you learning that certain drivers, like promotional events, are impacting your demand reliably?
- Your assumptions: has any public information come to light that will change the likelihood or details of your scenarios, such as major events, industry trends or consumer behaviour?
- Your customer service levels: do your employees have enough time to provide an experience so good that customers will want to come back?
- Your cashflow: can you afford to continue paying as much as you are now?
- Your employee engagement: are staff reporting fatigue; is there high turnover; are they following safe processes?
There may be additional key metrics depending on your situation. If you know you need to hire many more people, for example, you may measure ‘time to productivity’ and work to improve training so that new employees are adding value more quickly. For a more comprehensive version of what and how to monitor regularly, McKinsey recommends building a ‘Plan-ahead team’ to collect information and strategise based on continuous monitoring.
If the events of 2020 have shown us something good, it’s that we can adapt quickly. You probably have all of the information you need to get started on the above and just need to rejig what you do with the information. Alternatively, if this sparks you to start measuring something new it will surely benefit your business beyond the pandemic. Another positive point about the three points above is that they aren’t time-consuming to maintain; they just require effort to build up front. I can comfortably advocate that the effort is worth it, since many businesses will be teetering on the edge of survival this year, with labour cost being the key factor to make or break the budget. In case you can’t tell, I am quite passionate about the subject, so reach out if you’d like to discuss workforce planning at your business.