He laid off 50 percent of his workforce.
Matt Clark, CEO of the business education website Amazing.com, laid off 32 of his 62 employees in an effort to get Amazing Academy to the proper size. Many of these employees were recent hires.
Clark was crucified on social media.
When readers heard the details about the mass layoffs, they were outraged. Employees were let go via email, no in-person discussion. Clark was out of the office when the mass layoffs took place. The office chef was spared from the culling.
He was presented as a clueless, useless, and uncaring leader as employees and readers attempted to savage his reputation.
Workforce planning could have prevented this disaster
Here is the reason Clark gave for his mass layoffs.
"I read countless books that gave me that advice, but when in the trenches of growth, I made the mistake of rushing hiring and forcing growth," he wrote. "It’s easy to hire people. It’s horrible to fire people."
What does this tell us?
As far as strategic workforce planning was concerned, it doesn't sound as if there was much done. With workforce planning, Clark would have a clear sense of what was needed and when. He would be less likely to rush or force growth, choosing instead to pull on other levers to stimulate growth.
Can strategic workforce planning accomplish all this?
Absolutely. With workforce planning, your organization can scale appropriately for the future. You can hire the right people (with the right skills), utilizing their talents at the right time, in the right place. This is how organizations move consistently toward their goals.
But it all starts with a clear understanding of workforce planning.
What is Workforce Planning?
Workforce planning is a continuous optimization process organizations use to align their goals and needs with the goals and needs of their workforce. It is an iterative process that relies on a partnership with human resources and the financial side of the organization.
Workforce planning is future-focused.
It is a systematic analysis of the organization's needs (in the short and long term) focusing on five components of their workforce.
- Size. How many employees will we need to hit these KPIs? Will we need them immediately or is a phased implementation of our plan more reasonable? Where will these employees come from?
- Type. What type of employees will we need? Software engineers? A group of salespeople? More copywriters?
- Experience. Are you looking for inexperienced employees you can train to do things your way? Experienced employees who can begin producing on day one?
- Knowledge. Let's say you're looking to hire 15 to 20 software engineers in the next six months. What knowledge are you looking for? Are you looking for LAMP stack developers who are familiar with Hadoop? High level programmers familiar with Microsoft Azure?
- Skills. Knowledge, on its own, can be theoretical. When we describe skills, we're talking about working knowledge. Employees who can produce the results needed and who also have a deeper knowledge of why things work the way they do or how to address any problems or obstacles that appear.
Think of these factors as knobs on a radio. Adjusting one changes the outcomes of another detail somewhere else. If you require that software engineers have five years experience with Java and Apache Struts, this automatically produces an increase in knowledge, skills, expense, and location.
How does workforce planning work?
Workforce planning typically relies on a five-step model. This model is the starting point that defines the elements involved in effective workforce planning.
1. Strategic direction
Setting the strategic direction for your workforce plan means your organization understands the essential goals, objectives, and KPIs leadership has set. This also means your organization has a clear understanding of the workforce changes that need to be made to meet those goals.
What exactly does this mean?
- Projected cash flow stability over the next one to seven years, including your organization's ability to survive change (e.g., a decrease in demand, budget cuts, or strategic changes).
- Your organization is aware of or monitoring relevant economic or political trends in the market (e.g., recession, decline in demand, industry disruptors, etc.).
- You're aware of the short and long-term impact your workforce strategy will have on the organization and its position in the marketplace.
- Current or projected strengths and benefits, challenges, and barriers, that may impede growth or negatively affect organizational stability.
Your strategic direction plays off organizational goals and objectives. It's an iterative process that continues to evolve over time. While it is possible to analyze the data manually, it's easier and faster to rely on tools and resources.
Here are a few tools you can use to analyze your organization's current workforce capabilities and projected needs.
- The 9-Box grid which I cover below
- Compensation, benefits, and incentives analysis provides you with the compensation data you need to attract, convert and retain the workforce you need. You're looking to underpay poor performers and overpay top performers. This provides you with the cash flow, productivity and systems you need to keep top talent and remove poor performers
- HR dashboarding serves three important functions. Analytics monitoring, performance management, and management intel are three key functions of HR dashboarding. Software tools like Microsoft Power BI, Sisense, Datapine, Smartsheet, Gusto, and other providers
- Scenario planning. Imagining the worst-case scenarios and the impact these scenarios would have on your organization. Here's a short primer on scenario planning
This mix of software, tools, and resources means you're able to set and achieve your organization's strategic plans accurately.
2. Workforce/supply analysis
A workforce analysis evaluates the workforce resources (labor + skills) that are available to your organization now and in the future. It also analyzes how these resources will change over time.
A good workforce analysis provides your organization with the numbers needed to develop accurate specifications. Specifications include the number, type, amount, and level of experience of the workers and managers the organization will need to achieve the strategic requirements.
Supply analysis is concerned with sourcing talent under the right conditions. This analysis identifies a variety of factors: The number of workers or managers at each level of the organization. The where, why and how of positions that are difficult to fill. Reliable recruitment and talent acquisition sources (e.g., employee networks, head hunters, specialist agencies, job boards, etc.) and the distribution of service across workers and managers.
Here's a breakdown of the data you'll need to evaluate:
- Existing employee data, e.g., pay rates of employees, job locations, and worker/manager ratios
- Termination reports, e.g., the number of employees who have been laid off, terminated or transferred
- Recruitment data including referral sources segmented by worker quality, qualifications and experience, and the recruitment strategies used to attract and retain talent
Your workforce/supply analysis should focus on both the quality and quantity of your workforce. Why would quality be an important concern?
Derek de Solla Price, noted physicist and information scientist, discovered that 50 percent of the work, in any organization or domain, is done by the square root of the total number of people who participate in the work. It's a variant of the Pareto distribution.
What does this mean exactly?
Productivity and value creation is asymmetrical.
If you have 100 employees, 10 of them do 50 percent of the work. If your organization has 10,000 employees, 100 of them do half the work.
This is why quality matters.
The 9 Box is a grid that's used to assess the quality of talent within and across the organization. As the name implies, it has nine boxes, and it looks a bit like this.
The 9 box grid is something managers can use during performance evaluations.
This enables you to (1.) map employee performance and potential (2.) accurately gauge your organization's ability to meet the strategic goals leadership has laid out. You may have the workforce required, but that does not mean you have the quality needed to produce said results.
Hiring methodologies like Topgrading can be used to objectively assess the quality of individual employees, providing organizations with the intel they need to rate each employee accurately.
What about quantity?
Assessing the quantity of your team requires a personnel flow matrix. This matrix measures the quantity of the organization's workforce. This matrix uses G.H.M Evers' work and is adapted from the matrix used here. It discusses employee turnover, hires, internal promotions.
The turnover rate with management and middle management and support teams needs to be addressed. These turnover rates signify a problem which means you should do some digging. Why are turnover rates so high? Charts like these provide you with the tools and resources you need to assess the quality and quantity of your campaigns.
HR professionals can utilize workforce planning tools, analytics, and HR dashboards, and scenario planning to ensure their organization makes the right decisions.
3. Demand and gap analysis
With a demand analysis organizations are focused on requirements, current workforce requirements (which are demand-driven) and requirements placed on your organization in the future. Demand analysis maps the number of workers and managers needed to deliver a product or service at a specific level of performance or predetermined standard.
Demand analysis focuses on details like:
- Current and projected needs in the future
- Essential jobs or positions, the number of workers and managers needed to perform a specific function or role
- Reorganization opportunities to improve efficiency and performance
- Activities your organization can end, eliminate, improve or modify to achieve better results
What about a gap analysis?
A gap analysis is somewhat self-explanatory. Simply put, it's identifying the gaps that exist between your current and projected (future) workforce needs. This assessment enables you to prioritize which gaps are more urgent or will have the greatest impact on your organization's strategic plan.
It's the gap between where you are now and where you'd like to be. This gap analysis focuses on:
- Talent, skill or competency gaps in your workforce
- The skills you will need in your workforce
- An employee shortage or deficiency in a particular department or area of expertise
- Jobs, roles or positions that will no longer be required in the future
- Areas that require difficult or hard-to-find skills, knowledge or expertise
- Positions that are inherently difficult to fill (e.g., application software developer, construction laborers, truck drivers, etc.) due to specific factors (e.g., location, training requirements)
- Diversity gaps in the workforce or department
The data from your gaps analysis should mirror your demand analysis, provided that you match the data to your supply results. If there's a mismatch, it may be an indicator that there's a deficit somewhere, an unmet need that needs to be addressed.
Here's an example of what that analysis might look like for web developers:
Workforce Planning Action Plan & Solution Implementation
Creating a workforce plan involves a list of strategies and tactics that are designed to:
- Close gaps between your organization' current circumstances and projected (future) goals outlined in your strategic plan
- Identify the workforce requirements needed to achieve the goals, objectives and KPI's you've laid out in strategic plan outlined by your organization's leadership team
- Improve performance via strategies like recruiting, hiring and promoting, training and retraining, corporate restructuring, contracting and other strategies designed to improve efficiency and productivity
- Outline the workforce and financial resources needed to take your organization from where it is now, to your projected outcome. Your plan should also cover the roles of each employee whether it's a worker, manager or executive that's responsible for a particular task
You will want to consider the finer details of your workforce plan before it's time to implement your workforce plan, details like conveying the benefits of your workforce plan.
The reason? Buy-in.
Your organization needs a chance to buy into the plan. But you'll need to give them a chance to weigh-in before they will buy-in. Patrick Lencioni, legendary management consultant, explains why.
Getting buy-in from your team doesn't require consensus. It just requires a tiebreaker, a chance for the employees in your organization to weigh-in on the workforce decisions being made around your organization's strategic plan.
Here are some important questions you want to ask before making your pitch.
- What's the clearest and most credible way to communicate the benefits of workforce planning?
- How can managers use performance data to improve workforce planning?
- Which metrics and key performance indicators should be tracked?
- Which type of metrics and KPIs should be tracked?
- Which workforce planning activity is my organization currently prepared for?
Implementing your workforce plan requires that all the details mentioned above are ready.
Monitor, Evaluate & Iterate On Your Plan
Once you have implemented your workforce plan, it's time to measure performance. Check workforce growth and performance against milestones and KPIs. Work to iterate consistently. Search for ways to move your workforce towards your performance goals. Address workforce issues as they appear.
- Verify that workforce gaps are addressed as expected
- Analyze your metrics and KPIs to ensure you are still making progress
- Assess changes and trends. Track these changes, verifying that your strategy does not need refinement
- Set deadlines and timeframes for each of the KPIs and metrics you've set
The goal here is simple.
You're looking to maximize the effectiveness of your workforce. Update your strategy as your workforce, demand, gaps, and circumstances change over time.
Conclusion: Workforce Planning Prevents Disasters
Readers were outraged by the details surrounding Amazing.com's mass layoffs. Their CEO was vilified and abused by the public. His heartache could have been avoided.
Clark's major mistake?
He attempted to force growth without a plan. He brought employees on board before he had a plan in place to help them. With strategic workforce planning, Clark would have had a clear sense of the who, what, how and why.
His mistake was avoidable.
Is your organization's approach to workforce planning different? Share your tips in the comments below.