Chapter 05 - Planning for People

SOLUTIONS MANUAL FOR MANAGING HUMAN

RESOURCES PRODUCTIVITY QUALITY OF WORK
LIFE PROFITS 9TH EDITION CASCIO 0078029171
9780078029172
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Chapter 5
Planning for People

CHAPTER LEARNING OBJECTIVES

Questions this chapter will help managers answer:

1. How can business strategy be integrated with strategic workforce planning?

2. How might job-design principles and job analysis be useful to the practicing manager?
3. What is strategic workforce planning, and how should I begin that process?
4. How can organizations balance “make” versus “buy” decisions with respect to talent?
5. How should organizations manage leadership succession?

KEY TERMS

Succession planning

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Smart objectives

Business strategy

HR strategy

Job analysis

Job design

Job description

Job specification

Competency models

Competencies

Strategic workforce planning

Workforce forecasting

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CHAPTER 5 OUTLINE

LEADERSHIP SUCCESSION—A KEY CHALLENGE FOR ALL ORGANIZATIONS

• McDonald’s Corporation is one of few companies that have used succession

planning.
• Recent data indicate that only about half of public and private corporate boards have
CEO-succession plans in place.
• Citigroup, Merrill Lynch, Pfizer, Coca-Cola, Home Depot, AIG, and Hewlett-
Packard are examples of boards that failed to build solid leadership-succession
plans.
• DuPont, ExxonMobil, Goldman Sachs, Johnson & Johnson, Kellogg, United Parcel
Service, and Pepsico, benefited enormously from building strong teams of internal
leaders, which in turn resulted in seamless transitions in executive leadership.
• Some boards did not groom internal candidates for the leadership jobs in part,
because at the heart of succession lie personality, ego, power, and, most importantly,
mortality.
• Some CEOs find the prospect of succession downright depressing. For them it
means failure or organizational death. They love the job; it is their identity. They
think of building a cohort of potential leaders, not as the path to growth and
prosperity, but as a sure route to lame-duck status.
• Some boards tend to look the other way on the succession question when the CEO
makes the numbers and is singularly focused on pleasing Wall Street the next
quarter, or when he/she purges talented subordinates rather than prepare them to
take over.
• Obstacles to leadership-succession planning: poor dynamics between the board and
the CEO; the lack of a well-defined process; poorly defined ownership of
succession-planning responsibilities; scarcity of internal, CEO-ready talent; inability
to assess objectively any potential internal candidates.
• Ideally, careful succession planning grooms people internally, which maintains the
intellectual capital of an organization, and also motivates senior-level executives to
stay and to excel because they might get to lead the company someday.
• Boards that hire outsiders to be CEOs feel that change is more important than
continuity, particularly so in situations where things have not been going well.

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Challenge Questions

1. If planning for leadership succession is so important, why don’t more

organizations do it?

At the heart of succession lie personality, ego, power, and, most importantly,
mortality. Some CEOs find the prospect of succession downright depressing.
For them it means failure or organizational death. Moreover, some boards
tend to look the other way on the succession question when the CEO makes
the numbers and is singularly focused on pleasing Wall Street the next
quarter, or when he/she purges talented subordinates rather than prepare them
to take over. Several other, more concrete, obstacles to leadership-succession
planning: poor dynamics between the board and the CEO; the lack of a well-
defined process; poorly defined ownership of succession-planning
responsibilities; scarcity of internal, CEO-ready talent; inability to assess
objectively any potential internal candidates. There are also sound reasons
why a company might look to an outside successor. Boards that hire outsiders
to be CEOs feel that change is more important than continuity, particularly so
in situations where things have not been going well. When there is a major
failure in performance, then you do not want to promote the person you have
groomed, even if you have done great succession planning. You want
somebody with a fresh perspective.

2. What sort of leadership-development process would you recommend?

Student answers will vary. Ensure that the sitting CEO understands the
importance of the task and makes it a priority. Focus on an organization’s
future needs, not past accomplishments. Encourage differences of opinion.
Give rising stars room to disagree with management decisions. Provide broad
exposure. Allow rising stars to rotate through jobs, changing responsibilities
every three to five years. Provide access to the Board. Let up-and-comers
make presentations to the Board of Directors. Managers get a sense of what
matters to directors, and directors get to see the talent in the pipeline.

3. As Board Chairperson, how might you overcome the resistance of a CEO to plan
for succession?

Some CEOs are reluctant to move away for the next line of leaders. Ego could be at
the root of this resistance. As a Board Chairperson, one can assign the responsibility
of finding a successor, to the existing CEO. Some companies have implemented this
practice where the CEO dedicates a portion of his time with senior managers to
identify talent and report to the board. Offering this responsibility could help
overcome the resistance of the CEO.

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BUSINESS STRATEGY—FOUNDATION FOR ALL ORGANIZATIONAL

DECISIONS

• Strategy formulation answers the basic question, “How will we compete?”

• It is a vital role of senior leaders within an organization, and it typically considers
the external environment, customer trends, competitive positioning, and internal
strengths and weaknesses.
• Strategy formulation may be quite formal and last over long periods, or it may be
highly dynamic and adaptive.
• Strategy analysis defines the crucial elements for the strategy’s success.
• Leaders at all levels can help ensure that all resources, including people, are
deployed and managed in relation to their importance to strategic success and that
allows an organization to sustain its competitive advantages.
• In strategy implementation, firms take the necessary actions to implement their
strategies.
• Strategy implementation makes the intended strategy real.
• How firms compete with each other and how they attain and sustain competitive
advantage is known as strategic management.

Ensuring Coherence in Strategic Direction

• Organizations are more likely to be successful if everyone from the mailroom to the
boardroom is striving for common goals and objectives.
• An organization’s vision should be “massively inspiring, overarching, and long
term.” Emotionally driven, it is a fundamental statement of an organization’s values,
aspirations, and goals.
• A mission statement includes both the purpose of the company as well as the basis
of competition and competitive advantage.
• SMART objectives - Specific, Measurable, Appropriate (consistent with the vision
and mission), Realistic (challenging but doable), and Timely.
• SMART objectives have several advantages:
 They help to channel the efforts of all employees toward common goals.
 They can motivate and inspire employees to higher levels of commitment and
effort.
 They can provide a yardstick to measure performance, and thus the distribution of
rewards and incentives.
• The biggest benefit of strategic planning is its emphasis on growth, for it encourages
managers to look for new opportunities rather than simply cutting more workers.

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• The danger of strategic planning is that it may lock companies into a particular
vision of the future.
• The answer is to make the planning process more democratic; it needs to include a
wide range of people, from line managers to customers to suppliers.
• Business strategy provides an overall direction and focus for the organization as a
whole, including for each functional area of the business.
• HR strategy is specific with respect to the selection, deployment, and management
of that talent.

RELATIONSHIP OF HR STRATEGY TO BUSINESS STRATEGY

• Human resource (HR) strategy parallels and facilitates implementation of the
strategic business plan.
 HR strategy is the set of priorities a firm uses to align its resources, policies, and
programs with its strategic business plan.
• It requires a focus on planned major changes in the business and on critical issues
such as the following:
 What are the HR implications of the proposed business strategies?
 What are the possible external constraints and requirements?
 What are the implications for management practices, management development,
and management succession?
 What can be done in the short term to prepare for longer-term needs?
• Planning proceeds top-down, while execution proceeds bottom-up.
• To manage and motivate employees to strive for high performance, the right
competencies, incentives, and work practices must be in place.
• As a rule, high-performance work practices include such workplace features as the
following:
✓ Worker empowerment, participation, and autonomy
✓ The use of self-managed and cross-functional teams
✓ Commitment to superior product and service quality
✓ Flat organizational structures
✓ Use of contingent workers
✓ Flexible or enriched design of work that is defined by roles, processes, output
requirements, and distal criteria (e.g., customer satisfaction), rather than (or in
addition to) rigidly prescribed job-specific requirements
✓ Rigorous staffing and performance management practices, and
✓ Various worker- and family-friendly HR policies that reward employee
development, continuous learning, and support work-life fit
• HR metrics should reflect the key drivers of individual, team, and organizational
performance. When they do, the organization is measuring what really matters.

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Strategic Workforce Plans

• Strategic workforce plans must flow from, and be consistent with, the overall
business and HR strategies.
• Workforce planning focuses on firm-level responses to people-related business
issues over multiple time horizons.
• Realistically, HR concerns become business concerns and are dealt with only when
they affect the line manager’s ability to function effectively.
• On the other hand, people-related business issues such as workforce diversity,
changing requirements for managerial skills, no-growth assumptions, mergers,
retraining needs, and health and safety are issues that relate directly organizational
competitiveness and threaten its ability to survive.

THE END OF THE JOB?

• In the mid-1990s books and magazines proclaimed “The End of the Job.”
 Post-job workers would likely be self-employed contract workers, hired to work
on projects or teams.
 At firms that organize work around projects, people will work on 6 to 10 projects,
perhaps for different employers at the same time. That may come to pass some
day, but not yet.
• The Internet revolution happened. Any company’s Web site invites applications for
jobs.
• Employees may work on 6 to 10 projects at once, but only for one employer.
• The concept of work is changing, sometimes at a dizzying pace because fluid
organizations fighting to stay competitive require their people to adapt constantly.

ALTERNATIVE PERSPECTIVES ON JOBS

• Jobs are important to both individuals and organizations.

• The following questions can help you get people to work efficiently:
 Who specifies the content of each job?
 Who decides how many jobs are necessary?
 How are the interrelationships among jobs determined and communicated?
 Has anyone looked at the number, design, and content of jobs from the
perspective of the entire organization, the “big picture”?
 What are the minimum qualifications for each job?

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 What should training programs stress?

 How should performance on each job be measured?
 How much is each job worth?

Job Design
• The term job analysis describes the process of obtaining information about jobs.
 It usually includes information about the tasks to be done on the job, as well as
the personal characteristics necessary to do the tasks
• Job design focuses on the processes and outcomes of how work is structured,
organized, experienced, and enacted.

Scientific Management — “One Best Way”

• The dominant approach to job design in the industrial society of the 20th century.
• Time-and-motion studies were key elements.
 Frederick W. Taylor believed that once the best way to perform work was
identified, workers should be selected on the basis of their ability to do the job,
trained in the standard way to perform the job, and offered monetary incentives to
motivate them to do their best.
• This approach is fully consistent with a cost-leadership business strategy.
To counter some of the more unpleasant consequences of jobs designed solely to
maximize efficiency, researchers turned to job rotation, job enlargement, and job
enrichment.
Job Design Today
• As we consider the changing nature of work in contemporary organizations, it is
useful to begin by considering some important outcomes that organizations seek to
achieve in the design of jobs and work. Those outcomes may be near-term
(proximal), such as motivation, satisfaction, and learning; or they may be longer-
term (distal), such as effective performance, minimizing withdrawal behaviors (e.g.,
absenteeism, turnover) and stress, or maximizing creativity and employee health and
well being.
• To achieve those objectives, jobs and work must, of necessity, differ along a
number of dimensions.
• Jobs and work also differ in the extent of their knowledge, social, and physical
characteristics, as well as in skill and ability requirements, time pressures, time
horizons, workday cycles, and virtual versus co-located work.
• In any given situation, the Work Design Questionnaire can help assess the task,
physical, knowledge, and social requirements of jobs.
• At the same time, not all individuals will experience work in the same way. Rather,
the ability to achieve both proximal and distal outcomes will be affected by several
important conditions.

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Identifying the Work To Be Done and the Personal Characteristics Needed To

Do the Work
 An overall written summary of task requirements is called a job description.
 An overall written summary of worker requirements is called a job specification.
• Today, some organizations are beginning to develop behavioral job descriptions or
specifications of work-role requirements. These tend to be more stable, even as
technologies and customer needs change.
• Behavioral job descriptions incorporate broader behavioral statements, such as
actively listens, builds trust, and adapts his/her style and tactics to fit the audience.
 These behaviors will not change, even as the means of executing them evolve
with technology.
• Job specifications should reflect minimally acceptable qualifications for job
incumbents. Frequently they reflect instead a profile of the ideal job holder.
 Job specifications are set by consensus among experts. Such a procedure is
professionally acceptable, but care must be taken to distinguish between required
and desirable qualifications.
JOB ANALYSIS AND THE AMERICANS WITH DISABILITIES ACT OF 1990

• Job analyses are not legally required under the ADA, but sound professional
practice suggests that they be done for three reasons.
 The law makes it clear that job applicants must be able to understand what the
essential functions of a job.
 Existing job analyses may need to be updated to reflect additional dimensions of
jobs.
 A written job description may result in some candidates self-selecting out. This
can minimize the likelihood of a legal challenge.
• To ensure job-relatedness, employers must be able to link required knowledge,
skills, abilities, and other characteristics to essential job functions.
 Under the ADA it is imperative to distinguish “essential” from “nonessential”
functions prior to announcing a job or interviewing applicants.
• If a candidate with a disability can perform the essential functions of a job and is
hired, the employer must be willing to make reasonable accommodations to enable
the person to work.

Competency Models
• Competency models identify variables related to overall organizational fit and
identify personality characteristics consistent with the organization’s vision and
mission.

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• These models focus on the full range of knowledge, abilities, skills, and other
characteristics that are needed for effective performance on the job and that
characterize exceptional performers.
• Competency models are not a substitute for job analysis.
 No single type of description of work content (competencies, KSAOs, work
activities, performance standards) is appropriate for all purposes.

How Do We Study Job Requirements?

• Five common methods of job analysis:
 Job performance
 Observation
 Interview
 Critical incidents
 Structured questionnaires
• The PAQ is a behavior-oriented job analysis questionnaire. It consists of 187 items
that fall into these categories:
 Information input
 Mental processes
 Work output
 Relationships with other persons
 Job context
 Other job characteristics
• While structured job analysis questionnaires are growing in popularity, the newest
applications are Web-based.
• Regardless of the method used, the workers who provide information to the analyst
must be experienced and knowledgeable about the jobs in question.
• Trained analysts tend to provide the highest levels of agreement about the
components of jobs.
• However, incumbents tend to provide higher ratings of abilities required in a job
than do supervisors or trained job analysts.
• The most popular job analysis methods today are:
 Observation
 Interviews
 Structured questionnaires

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Job Analysis: Relating Method to Purpose

• The combination of methods to use is the one that best fits the purpose of the job
analysis research.

FROM JOB ANALYSIS TO STRATEGIC WORKFORCE PLANNING

• Having identified the behavior requirements of jobs, the organization is in a position

to identify the numbers of employees and the skills required to do those jobs.
• Further, an understanding of available competencies is necessary to allow the
organization to plan for the changes to new jobs required by corporate goals.
• This process is known as strategic workforce planning (SWP) -the formal process
that connects business strategy to human resource strategy and practices, and
ensures that a company has the right people, in the right place, at the right time, and
at the right cost.
• In the past, workforce planning tended to be a reactive process.
• The arrows in Figure 5-6 show what happens as SWP matures and business leaders
understand its value. No longer is SWP simply driven by business strategy. It also
becomes an input to business strategy, providing data, analytics, and insights to
inform, and sometimes challenge, executive decision -making.

Strategic Workforce-Planning Systems

• The ultimate objective of workforce planning is the most effective use of scarce
talent in the interests of the worker and the organization.

• Specific, interrelated activities comprise a SWP system:

 A talent inventory
 A workforce forecast
 Action plans
 Control and evaluation

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TALENT INVENTORY

• A talent inventory is an organized database of the existing skills, abilities, career

interests, and experience of current workers.
• Prior to data collection, these strategic questions must be addressed:
 Who should be included in the inventory?
 What specific information must be included for each individual?
 How can this information best be obtained?
 What is the most effective way to record such information?
 How can inventory results be reported to decision makers?
 How often must this information be updated?
 How can the security of this information be protected?
• When a talent inventory is linked to other databases, the set of such information
enables an optimal workforce strategy and integrated supply chain for resources and
talent management.
• Information typically included in a profile:
 Current position information
 Previous positions in the company
 Other significant work experience
 Education
 Language skills and relevant international experience
 Training and development programs attended
 Community or industry leadership responsibilities
 Current and past performance appraisal data
 Disciplinary actions
 Awards received
• Some common uses of a talent inventory include:
 Identification of candidates for promotion
 Succession planning
 Assignments to special projects
 Transfer
 Training

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 Workforce-diversity planning and reporting

 Compensation planning
 Career planning
 Organizational analysis
• Talent inventories and workforce forecasts must complement each other.
 An inventory of talent is not particularly useful for planning purposes unless it
can be analyzed in terms of future workforce requirements.
 A forecast of workforce requirements is useless unless it can be evaluated relative
to the current and projected future supply of workers available internally.

WORKFORCE FORECASTS

• The purpose of workforce forecasting is to estimate labor requirements at some

future time period.
• Such forecasts are of two types:
 The external and internal supply of labor
 The aggregate external and internal demand for labor
• Both internal and external demand forecasts depend primarily on the behavior of
some business factor to which human resource needs can be related.
• Unlike internal and external supply forecasts, demand forecasts are subject to many
uncertainties.

Forecasting External Workforce Supply

• The recruiting and hiring of new employees are essential activities for virtually all
firms.
• Several agencies regularly make projections of external labor market conditions and
estimates of the supply of labor to be available in general categories.
• Organizations are finding such projections helpful in preventing surpluses or deficits
of employees.

Forecasting Internal Workforce Supply

• A reasonable starting point for projecting a firm’s future supply of labor is its
current supply of labor.
• The simplest type of internal supply forecast is the succession plan, which may be
developed for management employees, non-management employees, or both.
• The overall objective is to ensure the availability of competent executive talent
either immediately or at some time in the future.

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Leadership-Succession Planning
• This is the one activity that is pervasive, well accepted, and integrated with strategic
business planning among firms that do SWP.
• Succession planning is considered by many firms to be the sum and substance of
SWP.
• The brief review of leadership-succession processes at leading companies suggests
five key lessons:
 The CEO must drive the talent agenda.
 Identify and communicate a common set of leadership attributes to serve as a
“road map” for people in leadership positions, and for all other employees.
 Use candid, comprehensive performance reviews as the building block for
assessment, development, and management consensus about performance and
potential.
 Keep to a regular schedule for performance reviews, broader talent reviews
outside one’s functional area, and the identification of talent pools for critical
positions.
 Link all decisions about talent to the strategy of the organization.

Forecasting Workforce Demand

 Demand forecasting is beset with multiple uncertainties, such as changes in
technologies, consumer attitudes and buying patterns, economies, and so on.
 Consequently, forecasts of workforce demand are often more subjective than
quantitative, although in practice a combination of the two is often used.

Identify Pivotal Talent

• Begin the process by identifying pivotal jobs, those that drive strategy and revenue,
and differentiate your organization in the marketplace.

Assessing Future Workforce Demand

• To develop a reasonable estimate of the numbers and skills mix of people needed
over some future time period, it is important to tap into the collective wisdom of
managers by asking them questions such as:
 What are our key business goals and objectives for the next two years?
 What are the top three priorities we must execute well in order to reach our goals
over that time period?
 What are the most critical workforce issues we currently face?

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 What are the three to five core capabilities we need to win in our markets?
 What are the required knowledge, skills, and abilities needed to execute the
strategy?
 What types of positions will be required? What types will no longer be needed?
 Which types of skills should we have internally versus buy versus rent?
 What actions are necessary to align our resources with priorities?
 How will we know if we are effectively executing our workforce plan and staying
on track?

How Accurate Is Accurate?

• Accuracy in forecasting the demand for labor varies considerably by firm and by
industry type: roughly from 5 to 35 percent error factor.
• At the same time, SWP is not a static process. Evidence indicates that as it matures,
four things happen. (1) Organizational boundaries disappear or become less
important so talent and skills can be utilized as a shared resource and managed more
efficiently. (2) SWP gains broader support and ownership. (3) It incorporates tools
from other functions and frameworks (e.g., finance, marketing, supply-chain
management). (4) It becomes increasingly data driven, for example, modeling the
feasibility and cost of executing alternative business scenarios.

Integrating Supply and Demand Forecasts

• If forecasts are to prove genuinely useful to managers, they must result in an end
product that is understandable and meaningful.

Make or Buy?
• Is it better to select workers who already have developed the skills necessary to
perform competently or to select workers who do not have the skills immediately
but who can be trained to perform competently?
 As a general principle, to avoid mismatch costs, balance “make” and “buy.” Here
are some guidelines for determining when “buying” is more effective than
“making.”
▪ How accurate is your forecast of demand? If not accurate, do more buying.
▪ Do you have the “scale” to develop? If not, do more buying.
▪ Is there a job ladder to pull talent through? If not long, do more buying.
▪ How long will the talent be needed? If not long, do more buying.
▪ Do you want to change culture/direction? If yes, do more buying.
 In today’s fast-paced business environment, “deep benches” of candidates waiting
for opportunity represent inventory.

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 Inventory in talent often “walks” for jobs elsewhere, and that represents the
biggest loss possible.
 In forecasting the demand for labor, therefore, it is often better to underestimate
the numbers of people needed because overestimation is now too expensive.
 Use outside hiring to fill in gaps, but recognize that the other extreme (hiring only
from the outside) can also be harmful because doing so yields no unique skills,
and no unique culture.

CONTROL AND EVALUATION OF SWP SYSTEMS

• The purpose of control and evaluation is to guide SWP activities, identifying

deviations from the plan and their causes. For this reason, we need yardsticks to
measure performance.
 Quantitative objectives make the control and evaluation process more objective
and measure deviations from desired performance more precisely.
 In newly instituted SWP systems, evaluation is likely to be more qualitative than
quantitative, with little emphasis placed on control. This is because supply-and-
demand forecasts are likely to be based more on “hunches” and subjective
opinions than on hard data.
 Under these circumstances, workforce planners should attempt to assess the
following:
▪ The extent to which they are tuned in to workforce problems and
opportunities, and the extent to which their priorities are sound.
▪ The quality of their working relationships with staff specialists and line
managers who supply data and use SWP results.
▪ The extent to which decision makers, from line managers who hire employees
to top managers who develop long-term business strategy, are making use of
SWP forecasts, action plans, and recommendations.
▪ The perceived value of SWP among decision makers.
 In more established SWP systems, key comparisons might include the following:
▪ Actual staffing levels against forecast staffing requirements.
▪ Actual levels of labor productivity against anticipated levels of labor
productivity.
▪ Action programs implemented against action programs planned.
▪ The actual results of the action programs implemented against the expected
results.
▪ Labor and action-program costs against budgets.
▪ Ratios of action-program benefits to action-program costs.

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 The advantage of quantitative information is that it highlights potential problem

areas and can provide the basis for constructive discussion of the issues.

LEADERSHIP SUCCESSION—A KEY CHALLENGE FOR ALL ORGANIZATIONS

• Research shows that planning for CEO succession should be part and parcel of the
way a company is managed.
• Developing leaders with strategic vision, and those who can implement strategy
successfully, are two critical challenges for every chief executive.
• The best organizations are consciously strategic in their leadership planning and
they tie HR development activities directly to the business strategy, and ask what
business issue each developmental activity is designed to address.
• They view financial results as a lagging indicator of organizational success, while
people development is a leading indicator. Consequently, people development is
becoming an important part of the assessment of executive performance.
• To avoid a future crisis in leadership succession, here are some key steps to take.
 Ensure that the sitting CEO understand the importance of this task and makes it a
priority.
 Focus on an organization’s future needs, not past accomplishments.
 Encourage differences of opinion.
 Provide broad exposure.
 Provide access to the Board.

SUMMARY

• Careful attention needs to be paid to the linkages between strategic business

planning, HR strategy, and strategic workforce planning.
• Business strategy provides an overall direction and focus for the organization as a
whole, including for each functional area of the business.
• HR strategy parallels and facilitates implementation of the strategic business plan.
• HR strategy is the set of priorities a firm uses to align its resources, policies, and
programs with its strategic business plan.
• Strategic workforce planning is the formal process that connects business strategy to
Human Resource strategy and practices.
• The purpose of job analysis is to identify the work to be done and the personal
characteristics necessary to do the work.

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• A written summary of the task requirements for a particular job is called a job
description, and a written summary of people requirements is called a job
specification. Together they compose a job analysis.
• Some combination of available job analysis methods (job performance, observation,
interviews, critical incidents, structured questionnaires) should be used, for all have
both advantages and disadvantages.
• Key considerations in the choice of methods are the method-purpose fit, cost,
practicality, and an overall judgment of the appropriateness of the methods for the
situation in question.
• Competency models:
 Are a form of job analysis that focuses on broader characteristics of individuals
and on using these characteristics to inform HR practices.
 Focus on the full range of knowledge, abilities, skills, and other characteristics
that are needed for effective job performance and exceptional performance.
• An integrated SWP system includes (1) an inventory of talent currently on hand,
(2) forecasts of labor supply and demand over short- and long-term periods, (3)
action plans such as training or job transfer to meet forecasted HR needs, and (4)
control and evaluation procedures.
ANSWERS TO DISCUSSION QUESTIONS

5-1. How are workforce plans related to business and HR strategies?

Business planning has three basic levels: strategic planning, operational planning, and
budgeting. Strategic planning impacts workforce planning because it triggers research
into such issues as business needs, external factors, internal supply analysis, and
management implications. Operational planning triggers the need for forecasting
requirements studies, such as staffing levels, staffing mix, and organizational/job
design. Budgeting directly impacts workforce action plans, such as staffing and
authorizations, recruitment, promotions, training, and compensation.

5-2. Discuss the similarities and differences between job analysis and competency
models.

A job analysis includes information about the tasks to be done on the job, as well as
the personal characteristics necessary to do the tasks. A written summary of the task
requirements is called a job description; a written summary of worker requirements is
called a job specification.

A competency model, on the other hand, attempts to identify variables related to

overall organizational fit and those personality characteristics that are needed for
effective performance on the job, and that characterize exceptional performers..

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A rigorous comparison concluded that competency approaches typically include a

fairly substantial effort to understand an organization’s business context and
competitive strategy and to establish some direct line-of-sight between individual
competency requirements and the broader goals of the organization. Job analysis, on
the other hand, does not typically make this connection, although the level of rigor
and documentation are more likely to enable the organization to withstand a legal
challenge. Therefore, competency modeling is not a substitute or replacement for job
analysis.

5-3. For purposes of succession planning, what information would you want in order
to evaluate “potential”?

Succession planning generally consists of a planning horizon, identification of

replacements for key positions, assessment of current performance and readiness for
promotion, identification of career development needs, and integration of individual
career goals with company needs. The identification and measurement of “potential”
relates directly to most of these steps. In order to evaluate potential, a planner would
want ratings of present performance and future potential as viewed from several
perspectives. For example, supervisors, peers, and subordinates could provide ratings
of present performance and assessment centers could be utilized to measure potential
and suggest developmental programs. A planner would also want information from
the candidate’s themselves—career aspirations, self-ratings of performance and
potential, and so forth.

5-4. Why are forecasts of workforce demand more uncertain than forecasts of
workforce supply?

Forecasts of workforce demand are more uncertain because they are beset with
uncertainties, many of which are unpredictable. For instance, changes in technology,
consumer attitudes and buying patterns, economy fluctuation, types of contracts won
or lost, and government regulations, just to name a few.

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5-5. When is it more cost effective to “buy” or to “make” competent employees?

Assuming a firm has a choice, is it better to select workers who already have
developed the skills necessary to perform competently or to select workers who do
not have the skills immediately but who can be trained to perform competently? This
is the same type of “make-or-buy” decision that managers often face in so many other
areas of business. As a general principle, to avoid mismatch costs, balance “make”
and buy.” Here are some guidelines for determining when “buying” is more effective
than “making.” How accurate is your forecast of demand? If not accurate, do more
buying. Do you have the “scale” to develop? If not, do more buying. Is there a job
ladder to pull talent through? If not long, do more buying. How long will the talent be
needed? If not long, do more buying. Do you want to change culture/direction? If yes,
do more buying. In today’s fast-paced business environment, “deep benches” of
candidates waiting for opportunity represent inventory. Inventory in talent often
“walks” for jobs elsewhere, and that represents the biggest loss possible. In
forecasting the demand for labor, therefore, it is often better to underestimate the
numbers of people needed because overestimation is now too expensive. Use outside
hiring to fill in gaps, but recognize that the other extreme (hiring only from the
outside) can also be harmful because doing so yields no unique skills, and no unique
culture.

5-6. Why should the output from forecasting models be tempered with the judgment
of experienced line managers?

There are two answers to this question: one theoretical, and one practical. On the
theoretical side, there is no way that quantitative models can incorporate all the
subtleties and organizational complexities necessary in making a “foolproof” human
resource forecast. Therefore, the output from such models ought to be considered as a
starting point for making forecasts. On the practical side of the issue, line managers
are likely to ignore quantitative forecasts completely unless they are allowed to tinker
with the results. Therefore, unless HR professionals want to be ignored by top
management, they need to allow room for executive judgment in the forecasting
process.

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5.7 The chairperson of the board of directors at your firm asks for advice on SWP.
What would you say?

Strategic workforce planning (SWP) refers to planning for people who will do the
organization’s work but who may not be its employees. These are “make-versus-buy”
decisions that have become more important in firms as a result of globalization,
outsourcing, employee leasing, new technologies, organizational restructuring, and
diversity in the workforce. All of these factors produce uncertainty—and because it is
difficult to be efficient in an uncertain environment, firms develop business and
workforce plans to reduce the impact of uncertainty. The plans may be short-term or
long-term in nature, but to have a meaningful impact on future operations, it is
important to link the business and workforce plans tightly to each other. Today, major
changes in business, economic, and social environments are forcing organizations to
integrate business planning with SWP and to adopt a longer-term, proactive
perspective. The insights and knowledge gained from strategic workforce planning
can help organizations decide, where to locate new plants and offices, how to invest
training resources, and whether to outsource certain work to meet business needs.
They also give HR a deeper understanding of workforce dynamics so that talent can
be managed proactively to ensure that future business goals are met. The ultimate
objective of SWP is to make the most effective use of scarce talent in the interests of
the worker and the organization.

CASE 5-1: Leadership-Succession Planning—Successes And Failures

The case compares and contrasts the failure of Merrill Lynch and Citigroup versus the
success of Procter & Gamble and Johnson & Johnson in terms of leadership-succession
planning.

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Case Questions
The case describes the succession planning experiences and practices in four different
companies; Merrill Lynch, Citigroup, Procter & Gamble, and Johnson & Johnson.

1. What key differences seem to distinguish successful from unsuccessful

leadership-succession processes?

From the case, it follows that CEOs following a successful leadership-succession

process dedicate a portion of their time to working with senior managers in different
divisions to identify promising talent and to report these candidates to the board.
Board members, in turn, visit these individuals to become familiar with them, and to
let them know that they are being groomed as key players. As a result, board
members are well versed on key successors, the CEO shares information with these
individuals to promote their continued growth, HR knows about these selections, and
there are checks and balances in the entire process. A high level of trust exists among
the CEO, successors, and board members.
Some firms maintain a Covenant of Corporate Governance which includes a section
on leadership-succession planning, which makes quite clear that the CEO is
responsible for reviewing the succession plans of all key executives with the
Nominating and Corporate Governing Committee of the Board of Directors. The
Committee has oversight of the plan, and the CEO is responsible for presenting the
plan to the board at least once a year. The board will then evaluate all successors
presented in the plan, and the annual review of the plan will be an integral part of the
performance review of the CEO.
In the case of firms who did not follow leadership-succession planning, it follows that
had there been any form of leadership-succession planning in place, a knowledgeable
replacement would have been available. Instead, the company risked going without a
real leader for several months, at a time when tough decisions would likely determine
how quickly it might recover from the credit crisis.

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2. If you were advising a firm on how to proceed in this area, what steps and
priorities would you recommend?

One option is, the CEO should dedicate a portion of his time to working with senior
managers in different divisions to identify promising talent and to report these
candidates to the board. Board members, in turn, should visit these individuals to
become familiar with them, and to let them know that they are being groomed as key
players. As a result, board members will be well versed on key successors, the CEO
will share information with these individuals to promote their continued growth, HR
will know about these selections, and there will be checks and balances in the entire
process. A high level of trust will exist among the CEO, successors, and board
members.
Another option is to have a Covenant of Corporate Governance which would include
a section on leadership-succession planning, making quite clear that the CEO will be
responsible for reviewing the succession plans of all key executives with the
Nominating and Corporate Governing Committee of the Board of Directors. The
Committee will have oversight of the plan, and the CEO will be responsible for
presenting the plan to the board at least once a year. The board will then evaluate all
successors presented in the plan, and the annual review of the plan will be an integral
part of the performance review of the CEO.

3. If leadership succession is so important, how come more companies don’t do a

better job of it?

At the heart of succession lie personality, ego, power, and, most importantly,
mortality. Some CEOs find the prospect of succession downright depressing. For
them it means failure or organizational death. Moreover, some boards tend to look the
other way on the succession question when the CEO makes the numbers and is
singularly focused on pleasing Wall Street the next quarter, or when he/she purges
talented subordinates rather than prepare them to take over.
Some of the other, more concrete, obstacles to leadership-succession planning: poor
dynamics between the board and the CEO; the lack of a well-defined process; poorly
defined ownership of succession-planning responsibilities; scarcity of internal, CEO-
ready talent; inability to assess objectively any potential internal candidates. Boards
that hire outsiders to be CEOs feel that change is more important than continuity,
particularly so in situations where things have not been going well.

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