Improve Workforce Planning by Applying Labor Market Context

Roy Maurer By Roy Maurer January 11, 2017

The workforce planning process needs to shift from an inward focus on business needs to an outward perspective on what's available and likely in the relevant labor markets, experts say.

"You can better identify critical skills and analyze the supply and demand for those skills by tracking and modeling data on your company and the economy at large," said Rosemary Haefner, chief human resources officer for CareerBuilder, a human capital management firm based in Chicago. "In the long term, this helps your company minimize turnover."

Dion Love, a principal executive advisor at CEB, a business management consultancy based in Arlington, Va., argues that the traditional workforce planning approach is hampered by rapidly changing and evolving skills and roles; hypercompetition for talent; and the lack of readily available, detailed and reliable external labor market data.

[SHRM members-only toolkit: Practicing Workforce Planning]

"Without good data, organizations overlook labor market demand and underestimate market saturation of particular skills," he said. "Forty percent of the S&P 100 job postings in 2015 were for just 21 roles. In this environment, it's common to overfocus on talent supply while underestimating market saturation and the intense competition for scarce skills. Related to this, employers are telling us they are seeing a higher time-to-fill, which leads to higher talent acquisition costs."

You're Doing It Wrong

Love explained that typical workforce planning begins with the business strategy and its implications for future talent needs. Workforce planners locate internal pipeline gaps and then determine how to fill those gaps. "This process is rational enough, but it gets bogged down at several steps along the way," he said. For example, organizations and roles are changing so rapidly that workforce planners struggle to keep up and accurately forecast skills requirements.

"The average organization has undergone five enterprise changes in the last three years, and 70 percent of key people say their jobs change substantially every two to three years," Love said, citing CEB research.

"In order to fill vacancies, organizations have tended to take an inward-focused approach about what the business needs, instead of an external approach accounting for what's going on outside the organization in the labor market and how that labor market is changing rapidly," he said.

Put another way, Love said, employers need to move from "Here's what we need, now go get it," and "Here's what we are going to need, lets plan for it" to the more-informed "Here's what we can get, here's what we're likely to get, and here's a better place to get it."

It is critical to embed labor market context at every stage of the strategic workforce planning process, Love said. Using labor market data will help HR better understand trends in new role creation and evolution, assess the sustainability of the talent supply by location, and provide critical market intelligence on competitiveness and wages.

"I often hear from employers that they get labor market intelligence when it's already too late," he said. Being able to forecast trends gives businesses a heads up when disruptive skills are on the horizon or alternative talent pools become available. Talent market analytics also aid companies in developing realistic attraction and hiring plans, exploring expansion into another location, or considering an acquisition.

Identify New Roles, Skills

New roles emerge as technology evolves. "There are new job titles that didn't even exist a few years ago across a wide variety of industries," Love said. Take machine learning, for example. "In 2011, just five years ago, no focused roles related to machine learning. Machine learning was a specialized skill that was part of the data engineer or software engineer role in a few companies here and there. Today, there are jobs entirely dedicated to this skill. Further, several roles have already grown from this skill area."

HR professionals need to know if new skills are becoming critical for existing roles, how roles are changing and what entirely new roles are emerging. With a combination of current, historical and predictive data, employers can see which skills are in high demand and how that demand may shift in the future. Planners can determine if a critical talent segment is in short supply or more costly in certain locations.

They could also figure out which location is best from a skills and talent standpoint, Love said. This finding can then be considered in the planning mix, along with the company's existing business plans, operational plans and real estate inventory.

Minimize Talent Gaps

The key to minimizing talent gaps is being prepared for them, not just reacting to unanticipated shortages. "Companies can use labor market data to find out more about the skills in demand, how skills match up with the local workforce and where to allocate job training resources," Haefner said.

Love recommended sourcing from "original and unexpected" locations and talent pools, including from community colleges and among longer-distance commuters and telecommuters.

"Suppose you're looking for data scientist talent for a major metropolitan location," he said. "You should look at how many people have the needed skills within a 25-mile radius, a 50-mile radius or a 75-mile radius."

Looking for new skills does not necessarily mean looking for new people. "Titles change as frequently as functions change and merge and morph," he said. "Data scientists were once known as data engineers or data architects."

Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.



Hire the best HR talent or advance your own career.

Discover what’s trending in HR

Search and download FREE white papers from industry experts.

Search and download FREE white papers from industry experts.



HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.