Workforce Architecture – How to Build YOUR Workforce Architecture
Planning, designing and constructing your Workforce Architecture is not a complicated issue – but it is time- and resource-consuming and needs meticulous attention to detail.
First, let us look at what constitutes a Workforce Architecture.
A Workforce Architecture consists of the following components:
- Organisation Strategy – the strategy defined by the organizations leaders to ensure sustainability and profitability into the future.
- Human Capital Strategy – the strategy that ensures that the organization will have the right people, with the right skills, in the right place, at the right time, and at the right cost so that the organization has the capacity and capability to achieve its goals.
- Structure – is the formal way in which work and jobs are grouped into defined units that allow for the efficient use of organizational resources and sets out how limited resources are allocated and co-ordinated to achieve organizational goals.
- Outcomes – The results to be attained and related deliverables. These can, and usually do, relate to divisions, team, or individuals.
- Roles – An organizational role is a distinct organizational component defined by unique outcomes and set of responsibilities.
- Role Categorisation – Categories that will define where and how limited funds will be directed, and that will form the basis for Human Capital reporting.
- Competencies – The measurable skills, abilities and personality traits that identify successful employees against defined roles within an organisation.
- Goals and KPIs – how results will be measured to ensure that the organization achieves its goals.
- Rewards – the value that people bring to the organization through their skills and knowledge and how they use them.
The primary objective of the Architecture Process is to gain and in-depth understanding of and document the current “as is” state, the desired “to be” state, in terms of all of the elements and the processes necessary to migrate from current to desired over time – which may require a number of phases. Workforce Architecture maintains the data and the processes and the moves over time for evaluation and historic purposes and as a recorded route map of the organization’s journey in terms of its workforce.
Much of this information is established in the initial Human Capital Strategy Process outlined below.
Creating the Human Capital Strategy
As always, Workforce Architecture starts with Organization Strategy – and changes as and when Organization Strategy changes to meet the needs of the marketplace. As the strategy changes, so the Workforce Architecture is updated to ensure that its currency is maintained. Changes to the Workforce Architecture will need to be approved by an Architecture Board established for this purpose.
Mapping Organizational Strategy into the Human Capital Strategy requires understanding of the Organization’s strategy in depth, and an understanding of the impact on the Human Capital environment.
Human Capital Strategy
Core Business Competencies
Human Capital Competencies
Human Capital Competencies
Core Business Competencies are translated into the required Human Capital Competencies. For instance, if “Speed to Market” is a Core Business Competence, then “Innovation”, “Continual Learning”, “Learning Agility” and “Product Development” are key Human Capital Competencies. If “Secrecy of Ingredients and/or Processes” is a Core Business Competence, then “Integrity” is a key Human Capital Competence. If “Attraction and Retention of Top Skills” is a Core Business Competence, then “Workforce Planning”, “Employee Engagement”, and “Career Planning” are, amongst others, key Human Capital Competencies.
It is a kind of “cause and effect” relationship that needs to answer the question – What Key Competencies need to be included in the Human Capital Strategy that will deliver the Core Business Competencies?
At this stage we are not concerned where the Human Capital Competencies will reside in the organisation. The key focus of this exercise is to ensure that we have identified (a) all the Core Business Competencies, and (b) all related Human Capital Competencies.
Deep Industry Knowledge is seldom required throughout an organisation. Industry Knowledge can be divided into:
- Knowledge about Customer Needs
- Knowledge about Product Development
- Knowledge about Product Distribution
- Knowledge about Customer Support.
It is important to understand what Industry Knowledge is needed for each of these categories.
This is the set of initiatives and/or projects that you plan to implement that will enable the organization to move from the current “as is” state, to desired “to be” state. These initiatives could be in any or all of the Workforce Architecture views. The current “as is” state is analysed and documented at the start of the process and the “to be” state is documented as the next state of the process. The “gap” between the two dictates how the transition will take place, and what Initiatives will be needed to drive the transition.
The move from “as is” to “to be” is likely to include one or more structure changes en route. These changes should be planned and should be incremental so that the desired “to be” state is achieved without undue stress and demotivation in the workforce. Structure change requires that all elements of structure are considered and are aligned with the change. These elements include:
- Building and maintaining the desired organizational culture during the transition
- The structure itself
- How careers are managed throughout the transition
- Job Descriptions identified in the structure
- Alignment and growth of the Core and Key Competencies needed for the next phase of the transition
- Leadership issues that need to be addressed for each stage of the transition
- Performance measures and metrics needed, both for Organizational Performance, and for the transition itself
- Any remuneration changes that are impacted by the transition
- HR Policies and Procedures to meet the changing needs from “as is” to “to be”, and
- An effective communication strategy that ensures that everyone in the organization understands the transition, and that demotivation does not settle in which could damage the end result of the transition.
Once the “to be” structure is approved, it needs to be reviewed in terms of career pathing. In the world today, and particularly in industries with skills shortages such as IT, the average tenure is between 24 and 30 months in any one position.
The Career Paths need to take this into account as well as:
- The time it takes to grow the necessary Competencies needed for growth in the Career Path
- The time it takes for the learning to be applied for the benefit of the organisation
- The criticality of the job to organization performance
- The difficulty in replacing the skills and competencies should an incumbent leave the organization
Growth should be mapped on a well-structured “ladder” that is able to link authentically into the organization’s grading system.
Typically, incumbents are given six months from starting a new position to being assessed as competent for the role. Thereafter, the organization is able to use these skills and competencies to add value to the organization. At around eighteen months in a job, the incumbent can start on a development path to a new role. In this way the company benefits from the value added to its workforce, and incumbent benefit by being on a continual development path.
It is worth noting that, in modern times with flattened organization structures and limited career opportunities UP the organization from a management perspective, two additional elements need to be considered with Career Pathing:
- The concept of Dual Career Paths. That is, incumbents can elect to develop up the organization either in a managerial role, or in further developing their technical skills where they take on Leadership roles from a technical perspective. An example is Enterprise Architecture.
- The concept of Lateral Growth. Incumbents are moved laterally through an organisation gaining skills and competencies in different areas of the business, but at substantially the same “level”. This is an excellent way of developing future managers for the organization.
Once the Career Structure is in place, the Competencies can be mapped against the different jobs so that Competency Development can take place in an organised and coherent way to ensure that the organization has the skills and competencies needed at the time and place that they are needed.
At TalentAlign we create a Matrix, with Job Titles down the left axis and Competencies across the top axis. The TalentAlign Competency Framework is a 4-level framework, so at each relevant intersection, we put the level of competency expected for the job. In this way we are able to ensure that development is articulated in line with expected growth and development of incumbents, and as needed by the organisation.
This Competency Matrix is valuable for a number of purposes:
- To ensure that training programs are developed that meet workforce growth needs
- To identify which jobs have the Core and Critical competencies needed by the organisation
- To manage Competency Development in a well-structured and coherent manner.
Jobs are the cornerstone of any organizational structure. At the highest level of definition, jobs are described in terms of:
- Purpose of the Job
- Areas of Responsibility (in broad terms, NOT KRAs as we traditionally know them)
- Outcomes (or Deliverables)
- Success Measurables (or KPIs)
It is the task of the team responsible for any structure change to define all identified jobs in terms of these four variables at the minimum.
Once the structure and job titles are finalised, the Job Descriptions need to be fleshed out to include:
- Job Title
- Title of the Job to which this position Reports
- Job Purpose
- Areas of Responsibility
- Any special character traits needed for the position, e.g. attention to detail (NOT competencies)
- Tasks that need to be performed – linked to Areas of Responsibility or not
- Competencies Needed to Achieve the Outcomes
- Functional (relevant to the specific function of the job)
- Professional (relevant to the business and professional requirements of the job)
- Qualifications needed
- Previous experience relevant to the job
- Prior Knowledge, generally experiential knowledge, needed to be able to perform the required role.
Workforce Management today requires Line Management to decide where and how they are going to invest their scarce financial resources to produce optimum productivity and performance from their team. People costs can be up to 70% or more of a typical Line Management budget today. This means that Line Management needs to have better ways of allocating spend that still produces the productivity needed for organizational performance. Line Management needs to understand which jobs groups (or job families) provide the best return on investment, how to manage the “Core” and “Critical” roles in the organisation, .
What is obvious is, Line Management need to invest more in jobs that are Core and Critical to organization performance, and less on jobs that are not. This requires “Categorisation” of jobs. But there are a number of elements to “Core” and “Critical” jobs for effective and objective categorisation. Key considerations may include:
- Do incumbents in the job interface with customers?
- Is the role Revenue Producing?
- Is the role Revenue Protecting?
- Are incumbents important to new product development?
- Does the job incorporate competencies that are “Core” and “Critical” to organization performance?
- Other criteria which may be specific to an organisation, or a stage in the transition from “as is” to “to be”.
These criteria are statistically mapped to identify which jobs will create the greatest return on investment for the organisation. These are the jobs that will attract a higher level of investment – in training, development, stretch goals, innovative projects, etc.
There are three areas of Performance that need to be taken into account for modern-day, 21st Century Performance Management.
At the most basic level, the Competency of incumbents needs to be assessed to ensure that they have the capabilities to actually DO the job.
The next level of performance assesses the Productivity of an incumbent in the job. People operate at different levels of productivity, for a variety of reasons, some personal, some motivational, and some to do with ability. It is important for an organization to understand how Productivity translates in each job grouping, and to be able to measure that Productivity to understand Average, High and Poor Performance. This is critical information for Human Capital Analytics and Reporting.
For example, in a productivity study[i] of computer programmers, above-average performers were 320% more productive than average programmers, and top performers were 1,272% more productive than poor performers, adding economic value over 11 times their salary.
And the top level of performance is achievement of goals that lead to the achievement of Organization Strategy.
What then is “high performance”? Performance needs to be defined against all three of these levels, and communicated to the workforce so that they are enabled to judge for themselves where there level of current performance is situated, and what they need to do to improve – an integral element of modern-day Performance Management.
This is a far cry from the traditional “Performance Appraisals” that we all remember with varying levels of disdain and uncertainty.
Having this Performance Management architecture in place also makes a “mobile” or “off site” workforce easier to manage, key for the workforce of the future – because Line Management is managing output – not attendance!
As an organization moves from “as is” to “to be”, jobs change, roles change and people can change jobs and roles. This can have some key considerations when it comes to managing Remuneration Strategy during the transition process and in the “to be” state.
There are a number of elements that define a “remuneration band” for different jobs.
- Job Evaluation (Grading) systems all have some form of “levels” based on criteria such as:
- Level of Autonomy
- Level of Authority
- Scope of Decision-making
- Span of Control
- Amount of Budget
- Scarcity of Skills – in today’s market, the cost of “buying in” skills (recruitment costs, loss of productivity, etc.) are taken into account when establishing actual remuneration for specific jobs
- Grade “creep” – as skills become scarce, so the market forces of supply and demand come into effect and jobs get “graded” at higher and higher levels just to be able to meet the remuneration demands of the supply channel.
Organizations today need to plan for this and weigh the costs of developing the skills off against escalating remuneration costs.
HR Policies ,Processes and Procedures
HR Policies, Processes and Procedures guide the Employee Life Cycle Management and include policies, processes and procedures for:
- Industrial Relations
- Staff attraction and selection
- Career Management
- Training and Development
- Performance feedback and management
- Employee Administration
- Remuneration and Benefits
These Policies, Processes and Procedures need to support the transition from “as is” to “to be”, and need to ensure that appropriate Policies, Processes and Procedures are in place at the end of the transition cycle.
An important consideration from a Workforce Architecture viewpoint is, there is a need to attract, develop and retain people whose individual and collective capabilities can support the transition, and yet who are flexible enough to be refocused and redeployed when that direction changes.
A new organization structure means new ways of working together – whether transitional or final. Making these processes explicit and building the capability that enables people to work together effectives is an essential Initiative.
It is fairly usual that vertical processes are developed as they tend to be part of a reporting structure. Lateral processes, that is, processes that move between roles, teams and reporting structures are seldom formally developed or specified.
Lateral processes augment the vertical processes by:
- Relating to the “white spaces” between the boxes on the structure chart and across organizational boundaries
- Allowing people to interact and communicate directly to enable work to get done at the level it occurs
- Bringing people together with the right perspectives to solve problem, make decisions and co-ordinate work.
These HR Policies, Processes and Procedures are also likely to go through changes in the transition period, so it needs to be included in the list of responsibilities when planning the transition.
For each of the initiatives identified in these categories you need to ask the following questions:
- How well does the initiative support the strategy?
- Does it fit within the intended environment(s)?
- Does it integrate as intended with other Initiatives?
- Is the integration consistent with the company’s operating model?
- What key infrastructure elements are affected (e.g., capabilities, value streams, information, resources)?
- What are the risks?
- How well does the Human Capital Strategy align with the Business Strategy?
An estimate of staffing needs over the next six to twelve months is NOT a Workforce Plan! Workforce Planning is a discipline and a process that is now also included in the standards of the American National Standards Institute (ANSI). Workforce Planning is also a “Core Competence” for Line Management and organizational leaders in the field of Human Capital Management.
Workforce Planning includes process, data, metrics and governance that may be adopted by organizations wanting to develop Workforce Planning capabilities. The aim of Strategic Workforce Planning is to reduce business strategy execution risks 169 associated with workforce capacity, capability, and flexibility. It is:
- An ongoing process to identify the workforce needs for the future
- Identification of the gap between demand and supply for staff – workforce numbers, job roles and skills – and the resultant degree of business risk
- A critical part of corporate planning and a driver for high impact HR strategy
- A PLAN to inform business decision-making (action and accountability)
Strategic Workforce Planning is taking the steps today to ensure we have the:
- The RIGHT people
- With the RIGHT skills
- In the RIGHT place
- At the RIGHT time, and
- For the RIGHT cost.
At its essence, Strategic Workforce Planning consists of:
Demand Analysis – Demand analysis identifies what type of workforce will be needed to be able to deliver on business goals. The focus of this step should include functions that an organization must perform and not just on the people. For example, if we know where we want to take the business (e.g. grow revenue by 25%) how many and what type of employees will we need?
Supply Analysis and Forecasting – Understanding your workforce profile is critical for strategic workforce planning:
- In order to identify and mitigate the workforce risks of the future it is critical to understand the current composition of your workforce and trends within it as they align with the organization strategy
- Whatever the goals of the organization, it is important to know whether or not the current workforce will have the capacity and capability to deliver on the organization’s future strategy
Gap Analysis – The gap (supply minus demand) assists in identifying the key workforce risks for both capacity (numbers) and capability. This focuses on the questions:
- Where are the surpluses/shortages?
- What is driving the shortage/surplus? (Growth, resignations or retirements)
- Is the gap bigger when you consider skill changes?
Data provides the fundamental starting point for Workforce Planning and it is critical to effective Workforce Planning to have accurate, consistent and timely data available
Total Cost of Workforce
Today’s economy has finance professionals and CFOs in organizations large and small focused on efficiencies and costs. When revenue growth flattens or even declines, profit maintenance and increases must come from cost efficiencies. In most organizations total human capital costs, also known as total cost of workforce, average nearly 70% of operating expenses. While an organization’s total cost of workforce percentage may vary, with few exceptions these costs remain the single biggest organizational expense. Given their fluid and rapidly changing nature, workforce costs are extremely difficult costs to manage and control.
The accurate measurement and effective control of these costs is an essential element of Human Capital Management.
The Total Cost of Workforce is a measure that was introduced by the Human Capital Management Institute, and is now being widely used for internal and public financial reporting.
Total Cost of Workforce (TCOW) is defined as the total costs of all salaries, wages direct and indirect cash or equity compensation for all employees. TCOW includes:
- All costs for contingent temporary or contract workers whenever the organization primarily directs the work of such labour. For example, offshore employees who work in a separate legal entity that is 50% or greater controlled by the organization should be included in the Total Cost of Workforce.
- All company provided or paid employee benefits, perks and rewards. Such costs also include all company retirement related costs for both current and former employees.
- All enterprise training costs provided to employees and or contingent labour.
- All recruiting costs not already included incurred as workforce acquisition costs.
- All employee relations, severance and legal settlements paid to current and former employees or contingent labour.
Total Cost of Workforce (TCOW) has proven to be superior to headcount metrics (i.e., FTE) – See our Special Offer for a summary of this research. When explaining stock price changes, revenue and profit-per-FTE metrics are good, but TCOW is significantly better to quantify productivity and explain stock price changes.
At TalentAlign we incorporate both FTE and TCOW metrics to get a broader view of organizational performance.
From “As Is” to “To Be”
The information for the “as is”, the “to be”, and the transition phases of Workforce Architecture is collected together and documented in a respository in the categories of:
- Organization Strategy
- Human Capital Strategy
- Roles and Role Outcomes
- Role Categorisation
- Competency Frameworks
- Goals and KPIs
Once established, the Workforce Archtecture is “sacrosanct”. All processes, must use the repository of information that makes up the Architecture, and it cannot be changed except by the same holistic and inclusive process and approved by an Executive.
Most organizations these days have an Architecture Board. This Board is responsible for all Architectures in the organization, and instigates and/or approves any changes to a previously approved architecture. They are also the custodians of the repository, but they are not responsible for the maintenance and access to repository information. This would normally be the responsibility of an Architect, in this case a Workforce Architect.
To learn more about creating a Workforce Architecture for your organisation …
[i] Spencer, “The Economic Value of Emotional Intelligence Competencies and EIC-Based HR Programs,” Chapter 4.