Personnel Quantity. In addressing the first lever—personnel quantity—HR must ensure that the company has the right number of employees in the right roles and under the right employment conditions (such as full-time, part-time, or flex-time). This is not a static situation. Best-in-class HR departments can project forward and assess how the organization’s business strategy will translate to specific workforce needs. These HR functions also understand external factors that might shape the supply of talent, such as changes in the education landscape, demographic shifts, and other trends. Finally, leading HR functions have planning processes to address potential imbalances between supply and demand, including finding the right balance between developing internal talent and hiring from external sources.
Personnel Costs. The second lever, personnel costs, considers the financial implications of the workforce. Top-performing HR functions are able to give a highly detailed accounting of the company’s current employment costs (in both wages and total compensation). They can also assess the implications of various scenarios, map those scenarios to budget targets, and accurately forecast future personnel costs regardless of market shifts. Critically, the cost lever also requires a consistent compensation strategy—including how benefits fit into the overall value offering to potential employees—which in turn means understanding the current market for labor and management, and the degree to which the company can use compensation to recruit and retain talent.
Personnel Quality. In addition to the quantity of employees, HR must assess and develop the workforce’s skills and competencies. This third lever entails defining the tasks and required certifications for all current job categories, assessing how well the company is meeting those objectives, and determining how employees will need to develop over time to meet future business goals. Top-performing HR functions have strong talent-management and training-and-development programs, with priorities for how to allocate resources and generate the largest payoff in terms of new skills, capabilities, and certifications. Last, they understand how recruiting and diversity initiatives fit into the larger HR strategy. (BCG research has established that talent management is one of the most urgent priorities for HR functions across industries worldwide. See Creating People Advantage 2014–2015: How to Set Up Great HR Functions; Connect, Prioritize, Impact, BCG report, December 2014.)
Across all three levers—personnel quantity, costs, and quality—scenario planning is crucial. As the business environment becomes more volatile, the ability to react fast to changes and plan human-capital needs several years ahead, across a wide range of potential situations, will become a key differentiator for companies. HR departments that can accurately predict and plan for future needs will keep their companies ahead of the curve, while those that cannot will be repeatedly surprised by events—and consistently behind in reacting to them.
Transformation and Management. The fourth lever is managing the process of change—both within the HR organization and, more broadly, across the entire company. This lever is essential if HR is to take on a more innovative and strategic role and thus successfully support company-wide transformations, reorganizations, and efficiency programs. Companies need to establish processes and rules by which HR can centrally plan the workforce using objective criteria. Furthermore, these criteria have to be linked to the company’s overall business strategy and financial objectives, and they must be clearly communicated and accepted by all managers. This requires a significant change at many companies, especially in the HR function itself. People will have to change the way they work, with new roles and responsibilities, different objectives, and different metrics to gauge performance.