From Business Plan to Business Performance: Creating the Right Workforce Strategy

HCI White Paper
By HCI Analyst February 8, 2008

WHAT IS A WORKFORCE STRATEGY? Workforce strategy translates business needs into strategic people priorities. Its essential elements include a foundation built on pivotal insights about the business and workforce; a set of clear, long-term business and people-related goals; and explicit direction for change. In a February 8 Human Capital Institute Webcast, Judy Nygard, a Towers Perrin Principal, and Samira Kaderali, a senior consultant, discussed the importance of a workforce strategy and key steps for developing one. EXECUTIVE SUMMARY WHY A WORKFORCE STRATEGY? A workforce strategy aligns an organization's people - and their actions and behaviors - with its

overarching business goals. An effective workforce strategy provides the structure necessary to design workforce programs and processes that increase employee engagement and ensure that employees understand what they need to do, in what areas, to maximize their contributions to business results. Employee engagement defined as employees' willingness to expend sustained discretionary effort on the job coupled with clear line of sight from individual actions to business goals, drive better financial and operational results. WHAT IS A WORKFORCE STRATEGY? In brief, a workforce strategy translates a business strategy into organizational capabilities. It establishes an understanding of how the workforce creates value and differentiates the business from competitors, at both an enterprise and a businessunit level. It becomes the organization's road map for sourcing, deploying, engaging, rewarding and

EXHIBIT 1 - A Workforce Strategy Helps Translate the Business Plan Into Action

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developing employees to meet the specific needs of the business. Think of it as a three- to five-year people agenda focused on meeting business objectives that is jointly owned by HR and business leaders. With a clear workforce strategy, management has a solid foundation from which to make decisions and trade-offs about the magnitude and focus of workforce investments both monetary and nonmonetary. These decisions include: o o how much to invest in the workforce where the investment should be directed; in other words, which programs and processes how the investment should be deployed; that is, across which segments of the workforce when the investment should be made.

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Deployment: How does the organization staff and move people across the organization - whether in business units or geographies? Development: What developmental processes and procedures are in place, with what impact? Engagement: How does the organization measure and manage employee engage ment? Rewards: What reward programs, both monetary and non-monetary, are in place, and are they appropriately segmented and aligned with business needs?

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HOW IS A WORKFORCE STRATEGY CREATED? The multi-step process begins by setting workforce strategy objectives based on current business, workforce, and cultural drivers. Then, the strategy team (generally made up of representatives from HR and the organization's business or division leaders) reviews the organization's current organizational capabilities, strengths and weaknesses in five areas: o Sourcing: How does the organization find and bring in employees?

Through this assessment, the team can quickly see gaps between current state and end state so it can begin to develop transformational goals. At the same time, the team should consider future organizational capabilities that may be needed, develop implementation plans and priorities, and identify success measures. Translating the business strategy into a workforce strategy requires a deep understanding of both customer and employee behaviors. In our work with clients, we use Towers Perrin's linkage framework (Exhibit 2) to help translate the business plan into specific strategies and employee behaviors, which help lay the foundation for identifying specific actions and investments for the workforce.

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EXHIBIT 2 Towers Perrin Linkage Framework
Business Plan Workforce Strategy Employee Behavior
Attraction Retention Engagement Required organization capabilities Critical positions and value relationships Strategic objectives Alignment: Source, deploy, engage, reward, develop Prioritization and change plan Human capital metrics

Business Performance
Measurable outcomes Efficiency Quality Innovation Customer service Brand/image Financial performance Revenue COGS Operating margin TSR

Financial commitments and key value drivers Strategic priorities Efficiency Quality Innovation Customer service Brand/image Business transformation Acquisitions/alliances Business model change Divestitures/downsizing

Customer Behavior
Attraction Retention Engagement

Business Strategy

Another way to look at the linkage framework is from right to left, beginning with a focus on the business outcomes that are most important and the factors that will define success. For instance: What customer behaviors are required to achieve the key business outcomes? And what employee actions, in turn, will lead to those customer behaviors? To drive those specific employee EXHIBIT 3 - Strategic Priorities

behaviors, what workforce strategy is necessary? And how does that strategy support the business plan and business priorities? Exhibit 3 shows the workforce strategy considerations that typically underpin specific business priorities and outcomes.

Strategic Priorities Efficiency Quality Innovation Customer Service Company Image

Organizational capabilities* by strategy in financially high-performing companies

Create structure/ process efficiency through clarity of roles and responsibilities Focus on continuous learning and skill improvement Facilitate teamwork Focus on data to drive decision making Ongoing performance management cycle

Facilitate teamwork Create best practice sharing/knowledge management Commit to quality improvement Focus on delivering quality through process Empower decision making and change

Support diversity of thought Create good supervisor relations Create environment that stimulates innovation Share information openly Facilitate collaboration and teamwork

Develop long-term career focus Create line of sight through performance management Provide local flexibility Enable a supportive service orientation/ environment to focus on customer Understand customer needs

Create a shared understanding of company direction/ brand Ensure shared values/pride Create a focus on integrity Develop leaders that create open, honest, transparent culture Create a strong employee belief in products and services

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Consider, for example, a company with a strong customer service orientation that depends on customer loyalty for its success. Its workforce strategy must, among other considerations, enable a supportive service orientation and give employees the ability and flexibility to focus on customers and address their needs quickly and effectively. From a practical perspective, this might mean freeing salespeople from spending too much time restocking merchandise so they could, instead, devote more time to helping customers. Or it might include expanding the breadth of customer-oriented decisions that individual salespeople are allowed to make without supervisor approval (such as providing a discount coupon to a customer who has had to wait for help). PUTTING IT ALL TOGETHER

about business issues, new opportunities and directions - to frame the strategic philosophy, principles and objectives that lead to transformational change (Exhibit 4). Developing these pivotal insights requires comprehensive research and analysis from both HR and business leadership to answer questions like these: o How well does current performance match up to the organization's priorities and business plan? How do current and desired levels of workforce engagement and performance differ? How do current programs and processes stack up against industry trends and best practices? What are the most pressing workforce/ performance issues? What are leadership's culture and performance goals?

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o Designing a clear and effective workforce strategy demands input from multiple sources and allows consolidation of the resulting pivotal insights o

EXHIBIT 4 Developing Pivotal Insights to Build a Workforce Strategy

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Clearly, each organization's workforce strategy is heavily dependent on such factors as its unique set of business goals, its competitive position and business model, its culture and structure, its geographical footprint and so on. For example, a company may aspire to expanding its reputation as an industry leader in its home country to a more global position. What are the workforce implications of that goal? What initiatives may be required in terms of sourcing, deployment, development, engagement and rewards? And what workforce solutions make the most sense? The strategy, for example, may include finding and exploiting new geographic markets through a combination of organic growth and targeted acquisitions. From a workforce perspective, this would require rapid and effective identification and deployment of talent in these new areas, and optimal retention and assimilation of employees added through acquisition. Designing an integrated three-year implementation plan might include the following initiatives: o Implementing an external labor scan to gauge labor availability in emerging or critical markets Establishing HR capabilities to help efficiently and consistently assess acquisition targets, integrate new operations, compare cultures and assimilate acquired employees Evaluating fluctuations in capacity needs and cost of contract/outsourced labor to develop an approach to contingent workers

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Implementing training and coaching programs Aligning rewards.

Transformational goals: Drawing the road map In executing these kinds of transformational goals, the five stages of the workforce life cycle are paving stones that show the way. For example, the journey often begins with sourcing: assessing, buying or building the talent to meet projected growth in a new market. Or talent may be shifted - redeployed - on a global or enterprise-wide basis to meet a goal. In a change environment, workforce engagement usually requires more individualized performance management along with changes in manager responsibilities. Rewards help secure positive change by significantly differentiating between high and low employee performance. In this environment, skill and professional development, as well as succession planning, take on new importance. APPLYING CHANGE MANAGEMENT A systematic approach to change management (Exhibit 5), calls upon six fundamental elements: o Leadership is key - Inspiration and vision are essential to creating and maintaining a culture of high engagement and performance. Involvement is about making employees part of transformational change initiatives, helping them get engaged, rather than feeling overwhelmed by new processes and programs.

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Communication informs people of the "what" and the "why" of change. Learning can feel forced unless communicated as part of systematic change and becomes an engaging opportunity for people to build new (required) skills and competencies. Measurement is what people focus on and value - a sure indication of their progress, performance and success. Reinforcement sustains the momentum of behavior change over time.

the purpose and objectives of insights related to your current business, workforce and cultural drivers. It also comprises an overview of current-state capabilities and lists the company's strengths and weaknesses as well as priorities to be addressed. The right workforce strategy is aligned with your business vision, mission and guiding principles. It clearly defines program components that support your strategy (e.g., sourcing and acquisition, workforce deployment, talent development, workforce engagement), as well as requirements that support future business needs, such as organizational capabilities, mission-critical roles and HR programs and processes. Short- and long-term implementation priorities are outlined in a compelling workforce strategy document, including an implementation strategy

THE RIGHT WORKFORCE STRATEGY There are many permutations and combinations, but the "right" workforce strategy emerges from your business plan as a new set of organizational capabilities and details plans for achieving success. Your strategy document should set out EXHIBIT 5 Building Change Readiness

Launch the Project Team

Analyze Change Needs

Leadership Involvement Communication

Sustain the Momentum

Build Change Readiness

Design the Game Plan Execute the Game Plan

Learning Measurement Reinforcement

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and road map that address the business case for change, HR and implementation activities, and a change management plan. Finally, the document incorporates success measures by which the workforce strategy and programs can, and will be, assessed. A winning workforce strategy for your company translates your business needs into a set of actions and behaviors that aim people's talents, strengths and competencies toward supporting high performance in the directions dictated by your company's vision for the future.

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Based on the Human Capital Institute webcast, From Business Plan to Business Performance: Creating the Right Workforce Strategy, presented on February 8, 2008 PRESENTERS Samira Kaderali Senior Consultant Towers Perrin Samira has been with Towers Perrin since 1998 and has spent time in both the Chicago and Toronto offices. She currently provides a variety of strategic and technical consulting, as well as project management services, to her clients. Samira has experience with clients in a variety of industries in Canada and the U.S. focusing on workforce effectiveness. Over the past few years, she has focused in the area of rewards optimization, strategic workforce planning, and people strategy development. Samira works with clients to guide them through the process of taking a holistic view of their current people and reward program performance and its impact on employee attraction, retention and engagement. Samira provides clients with comprehensive assessments of their current talent strategies and programs by identifying the factors that drive costs, risks and employee engagement; evaluating the organizational climate for change by assessing employee attitudes and behaviors; and making recommendations around specific program strengths and actions/opportunities for improvement. Samira has worked with several national and global organizations including American Express, PepsiCo, The Royal Bank of Canada, MasterCard, Eli Lilly, Lancaster General, Astrazeneca, IKON

Office Solutions, Bruce Power, LVMH Fashion Groups, George Weston Loblaws, and Sears Roebuck. Samira earned a masters in public health from Yale University and a bachelor of science degree in biology and psychology from McMaster University. Judy Nygard, C.P.A. Global Practice Leader Global Consulting Group Judy is a leader in the Workforce Effectiveness Practice with a focus on helping clients define their workforce needs, deliver better financial results and ensure the optimal performance of leaders, managers and employees. Judy has a wealth of experience working with large, complex global organizations. She assists clients with HR strategy, practices and design and implementation of Total Rewards programs. With nearly 20 years of consulting experience, Judy is a recognized expert in workforce strategy and planning, and managing human capital issues across geographic and organizational boundaries. She works with clients on all aspects of global HR, including strategy, structure, program design, implementation, legal, valuation, equity and competitive market alignment. The premier global companies Judy has worked with span various industries, including Pharmaceutical, Biotech, Consumer Goods, Technology and Financial Services. She is an author and frequent speaker on global HR practices. Her recent speaking engagements include global HR conferences in Europe and Asia, the Conference Board Conferences and leading global industry forums. Prior to joining Towers Perrin, Judy was a principal and practice leader for an

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international consulting firm where she managed the global consulting business and advised major multinational organizations on global HR strategies, practices and programs. This followed her tenure as Vice President of a financial services firm. Judy is a Certified Public Accountant (CPA). She has a B.S. in accounting from the University of Illinois and a certificate in arts and sciences from Northwestern University. MODERATOR Joy Kosta Senior Director of Talent Communities Human Capital Institute As Director of the Talent Development Community at The Human Capital Institute, Joy brings twenty-five years of experience in multiple facets of organizational development, human resources and business management with an emphasis in customer satisfaction, service quality, process improvement, and applying the Malcolm Baldrige Criteria for Performance Excellence. As founder and President of Performance Partners in Health Care, a company dedicated to building better patient experiences, she has authored several curriculums in leadership and staff development, and co-authored with Harold Bursztajn, MD Senior Clinical Faculty member, Harvard Medical School, Building a Treatment Alliance with Patients and Families. ACKNOWLEDGEMENTS This White Paper is made possible by Towers Perrin, sponsor of HCI's Workforce Effectvnessg Track.

ABOUT TOWERS PERRIN

Towers Perrin is a global professional services firm that helps organizations around the world optimize performance through effective people, risk and financial management. The firm provides innovative solutions to client issues in the areas of human resource strategy, design and management; actuarial and management consulting to the financial services industry; and reinsurance intermediary services. The firm has served large organizations in both the private and public sectors for over 70 years. Our clients include three-quarters of the world's 500 largest companies and three-quarters of the Fortune 1000 U.S. companies. ABOUT THE HUMAN CAPITAL INSTITUTE

The Human Capital Institute is a catalyst for innovative new thinking in talent acquisition, development and deployment. Through research and collaboration, our programs collect original, creative ideas from a field of top executives and the brightest thought leaders in strategic HR and talent management. Those ideas are then transformed into measurable, real-world strategies that help our members attract and retain the best talent, build a diverse, inclusive workplace, and leverage individual and team performance throughout the enterprise.

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