The purpose of strategic workforce planning (SWP) has always been to get the right people with the right skills in the right place at the right time. While that sounds straightforward on the surface, determining what all of those “rights” are, obtaining buy-in, and achieving that future state in the right way has been anything but simple in practice.
As a case in point, several years ago one of our business units identified an opportunity for a new product launch. The financial plans and sales goals were complete and the leadership team was committed and excited about the opportunity. The local HR team was poised to hire a few new leaders and create a longer-term workforce plan to support this new product and the business’s future growth.
We set out to understand the business strategy, conducted leadership interviews to identify critical roles, and produced models and forecasts of staffing plans. The SWP work came to a stop because we ran into a common problem: the local business and HR team found it difficult to articulate and agree on what the right workforce looked like a year or more in the future. We had all the tools and techniques we needed to hit a target—if only we knew what that target should be.
While we eventually agreed on and implemented a successful strategic workforce plan for the business unit, we recognized that this difficulty in target-setting was a recurring problem that had hindered many of our earlier projects as well. Business leaders had a clear line of sight of their strategic business goals, but often lacked clarity regarding the talent implications of those goals. Likewise, HR leaders had a deep understanding of the talent issues of the moment, but were conscious of sacrificing near-term results in the name of long-term needs.
We as strategic workforce planners were caught in the middle—trying to navigate between these two worlds, defining what right meant for the business and translating what we heard from our partners into actionable steps to achieve their talent goals.
We needed a better approach—one that would help us establish what right looked like quickly and correctly, gain consensus and commitment from leaders and HR business partners, and create an actionable plan.
Enhancements to the traditional strategic workforce planning process have helped PepsiCo accomplish these goals more effectively and efficiently today than in years past. Instead of asking our business partners what they want, we’re better equipped to tell them what they need to deliver for the business.
SWP Is More Critical Than Ever
Strategic workforce planning, especially for global companies, has never been more important. The traditional reasons to plan are still relevant, but they have been magnified by the increasing complexity of our operating environments. This complexity is driven by several factors, including talent diversity and scarcity, new digital technologies and ways of working, and a broadening set of stakeholders to satisfy.
Talent Diversity and Scarcity
The demographics of the employee base as well as the talent pools we draw from can be very different in developed and developing markets, and even across units in the same location. For example, data from the Organization for Economic Cooperation and Development (OECD) shows that older workers in developed markets are staying in the workforce longer, making them a talent pool that organizations can tap for their experience and deep skills. This trend also suggests that reskilling or upskilling as a talent strategy may be important in those markets, rather than looking for scarcer millennial and Gen-Z talent.
Economic factors also drive our talent planning. Unemployment rates vary country to country, but in the U.S. they are at a 50-year low, requiring thoughtful hiring and retention strategies. Companies are also striving to build more diverse and inclusive workplaces that reflect their consumer base and communities.
New Digital Technologies and Ways of Working
Digital transformation is driving changes in the work we do, how we work, where work gets done, and who (or what) does the work. In 2016, The World Economic Forum published their report on the Fourth Industrial Revolution. Since then, there has been much speculation about the number of jobs that will be impacted, the number of entirely new jobs that will be created, and how jobs that remain will be fundamentally changed. These ideas have huge implications for strategic workforce planning experts, as we will need to project which, if any, jobs will be eliminated, what new skills and capabilities will be needed when new technologies are introduced, or how skills will recombine to become new jobs. While the exact magnitude of these changes is unclear, a recent study by Deloitte showed that 86 percent of executives believe reskilling is important and 40 percent of the workforce will need to be trained in the next 12 months.1
Broadening Set of Stakeholders
External stakeholders such as institutional investors are demanding greater transparency about how we manage our talent. For example, BlackRock and State Street Global Investors have made clear that they will use information about how companies manage human capital factors in their investment decisions.2 Gartner showed that talent topics are more likely to be discussed on quarterly earnings calls, increasing 16 percent between 2010 and 2017.3 Investors are driving the C-Suite to pay closer attention to talent issues and to shift their thinking about human capital as an asset to be leveraged, not simply a cost to be minimized. Strategic workforce planners are ideally positioned to help corporate leaders make this shift.
|PepsiCo at a Glance
|Our Strategic Workforce Planning
- 260,000 employees worldwide
- Operates in 200+ countries and territories
- $64B in net revenue in 2018
- 22 billion-dollar brands
- Products consumed more than 1 billion times each day
- Begun in 2013
- Started in one country and expanded to other key markets
- Refreshed annually or as needed
- Localized plans developed
- Skill gap commonalities addressed globally
- Results used in hiring and reskilling efforts
Enhancements to the Traditional Approach
Given the increasing demands on business leaders, it’s no wonder they have difficulty projecting future talent needs. To address these complexities, we’ve made several changes to our strategic workforce planning process: we adapted our methodology to provide a closer connection to the business strategy process, added new external data sources to assess talent market opportunities, completed a country-by-country analysis on what really makes a business impact, and linked local needs with global solutions.
Process Alignment and New Data Sources
The first two changes were relatively easy. We realigned our strategic workforce planning methodology and language to be consistent with the strategic business planning process that was used by each of our businesses. This allowed us to better communicate with business partners and they could readily see how talent planning aligned with business planning.
Additionally, as more sophisticated and global external data sources became available, we incorporated those into our process, which allowed us to assess talent availability market by market, proactively and more dynamically than in the past. Even just five years ago, it was difficult to get a sense of how many people with the right skill profile existed in a specific location, and how many of them were seeking employment or persuadable to your employee value proposition. Today, one can get answers to these questions in a few clicks and keep track of how the dynamics are changing on a daily basis. These new data streams provide powerful insights we can use to set realistic talent targets and know whether it makes more sense to build, buy, borrow, rent, or automate our way to those targets.
Quantifying How Talent Drives Financial Performance
There is a sizeable body of academic literature that demonstrates a relationship between human capital and company financial performance.4 However, most HR professionals cannot articulate which human capital actions drive financial performance in their own organizations. This lack of clarity was one reason it was difficult for business and HR partners to define talent targets for their strategic workforce plans.
To tackle this issue, we approached it from a different direction. We set out to explicitly test which HR-related activities and decisions have the greatest and most direct impact on whether a business unit makes money in the future. In this process, we tested hundreds of hypotheses.
The results were surprising in their simplicity. We found that a few key things that HR does in conjunction with business leaders matter a lot, while many other things they spend time on are not making a significant difference to business performance. We now have the facts to tell a business where they stand today on these critical talent metrics and what they need to do to improve their financial performance. It provides an evidence-based approach to setting the right targets quickly and correctly.
Coupling this knowledge with the new data streams mentioned above allows us to provide clearer direction to our business and HR partners. We can now articulate the talent factors they should focus on to achieve business results and what the labor/skills supply looks like in their markets.
Linking Local Needs with Global Solutions
The final enhancement to our strategic planning process emerged out of our involvement in country-level planning. At PepsiCo, our approach of working with country-level business and HR leaders allowed us to understand the local dynamics and plan appropriately. However, it also provided a global perspective on common talent and skill gaps. For very specific gaps, solutions are generated and implemented locally. For common skill gaps that have a “build” solution, it makes sense to develop solutions on a global scale.
Strategic workforce planning approaches can vary from company to company, depending on talent needs, the nature of the business, and the sophistication of data analytics. Our experience after six years of conducting these projects showed us that guiding business and HR partners, using as much data from as many sources as makes sense, and speaking in a language they recognize helps them see the future of their talent needs much more readily.
| Differences Between Traditional and Evolving SW
|Talent Diversity and Scarcity
- Primary focus internally on talent gaps
- Traditional build/buy/borrow strategies
- Greater use of external data sources to assess market availability
- Using skill adjacencies to address gaps
|New Digital Technologies and Ways of Working
- Gap solutions = people
- Jobs to be filled
- Gap solutions = people plus new technologies
- Jobs eliminated and jobs to be filled
|Broadening Set of Stakeholders
- Audiences are primarily HR and business leaders
- Audiences are C-suite and investors
General SWP Best Practices
Our recommendations below can help you if you are just getting started or if you have been conducting strategic workforce planning for several years and need a refresh.
- Ensure you have business and HR leadership buy-in before you start. Trying to push a workforce planning process on your own never gets the sustained buy-in you need from your partners to execute the plan into the future. You need to have the team that will execute aligned right from the start.
- Plan talent the same way you plan the business. Adopt your business planning process (steps, terminology, and timing) for your workforce plan. This makes it easy for your partners to see the connection between planning talent and their everyday roles, to speed up their understanding and adoption.
- Plan at a level with the authority to decide and act. The level at which you should plan varies from company to company. You need to find the spot where your leaders have the authority and resources to help you design, commit to, and execute the plan you create. Aiming too high or low will lessen the buy-in and follow-through.
- Tell them what needs to happen vs. asking what they want. You need to have a fact-based point of view to guide the work and set the targets. Know what the key drivers of performance really are and where your business should focus their priorities.
- Deploy new data streams to reduce ambiguity. Infuse real-time facts into your initial planning effort and the ongoing monitoring to help proactively steer your partners’ efforts. There are many new data streams available that bring blind spots of the past into focus (e.g., what training programs are most in-demand today).
- Have a “right-to-win” vs. your talent competitors. Defining a strategy is all about setting priorities and choices. Just as your business won’t launch a product that is destined to fail, you should not launch a talent plan that is either. Design your talent strategies in areas where you can beat the competition by offering recruits and existing employees something better than others can. If you can’t make the claim that you are better, start over or choose not to play.
- Verify your talent investments have a competitive ROI to other business investments. Value your talent investments the same way other parts of the business value their investments. Will that training program generate an ROI bigger than a new machine or digital tool? If you don’t know, you need to find out.
- Test-and-learn before deploying at scale. HR still loves to deploy big programs everywhere. A better, more agile approach is to test and learn first. If your short-term pilot works, scale it up.
- Link your plan goals and targets to senior and HR leaders’ personal objectives. Strategic workforce planning is a long-term play with incremental steps along the away. Ensure your leaders have an ongoing incentive to see the vision come to life and will be held accountable for committing and driving the resources to make it happen.
- Constantly track your plan’s progress and update it as necessary. As is often said, what gets measured gets managed. Have a method to track progress on at least a quarterly basis and refine your targets with new updated information as necessary. In the dynamic environment that organizations operate in today, plans can and do change and your workforce plan should change with them.
|Signs Your Strategic Workforce Planning Process Is Successful
|Leaders who have not previously been involved are asking to be a part of the process.
|The plans you put in place are executed and deliver the results you envisioned.
|The plans are stable over time and they stay in place even after a leadership change.
SWP Success Story
Unlike the 90 percent of companies cited by Deloitte that are unsure how to reskill their workforce in the Fourth Industrial Revolution, each of our regional businesses can articulate their plan with precision and confidence. They know what capabilities and roles they will need, which jobs will remain stable, which will be created, which will be eliminated, which roles employees can realistically be reskilled for, and how the reskilling approach is connected to market and organizational needs. They have achieved this level of clarity because they were early adopters of strategic workforce planning. They realized its value by executing evidence-based plans, tracked results and adjusted when needed, and incorporated it into their ongoing business planning process. This is an example of how to do it the right way and is the ultimate promise of strategic workforce planning for both HR and business leaders.
Beverly Tarulli, Ph.D., is Vice President, Human Capital Strategy and Advanced Workforce Analytics, PepsiCo. She can be reached at firstname.lastname@example.org.
Damien DeLuca is Senior Director, Advanced Workforce Analytics, PepsiCo. He can be reached at Damien.Deluca@pepsico.com.
1 86 percent and 10 percent statistics from “2019 Global Human Capital Trends report, Learning in the Flow of Life,” Deloitte Insights, 2019; 40 percent figure from “Future of Jobs Survey 2018,” World Economic Forum.
2 BlackRock Investment Stewardship Commentary, January 2019; State Street Global Investors, 2019 Proxy Letter—Aligning Corporate Culture with Long-Term Strategy, January 15, 2019.
3 Gartner, Discussing Corporate Culture with the Street, 2018.
4 For example, see Crook, T.R., Todd, S.Y., Combs, J.G., Woehr, D.J., & Ketchen, D.J., Does Human Capital Matter? A Meta-Analysis of the Relationship Between Human Capital and Firm Performance. Journal of Applied Psychology, 2011.