Layoffs and Strategic Workforce Planning
Four-part SWP discussion from eQ8
eQ8 recently launched a fireside chat-style Q&A session discussing the challenges organizations face in today’s disruptive climate and how strategic workforce planning and dynamic scenario modeling are key to an organization’s ability to stay competitive in a tight market. eQ8 co-founders Alicia Roach and Chris Hare were joined by industry veteran Ian Bailie for a frank and insightful examination of HR’s role in championing SWP as well as the broader impact on the organization. In this first installment of our four-part series, we discuss:
the impact of the recent mass layoffs in the technology sector
the role strategic workforce planning should play in organizational planning
how leaders can use different strategies to mitigate the risks to their organization’s long-term goals
Strategic Workforce Planning is not a crystal ball
Responsibility for planning sits with business leaders
SWP and efficiency and productivity
Revenue implications of poor planning
This transcript has been lightly edited for clarity. If you’d like to watch the full discussion, jump to the video.
Let’s talk about layoffs
Ian Bailie: I wanted to kick things off by talking about layoffs. We've seen a lot of layoffs happening lately. Unfortunately, a lot of big tech companies and other companies as well, have recently announced layoffs. Meta announced a second round of layoffs last week, and yesterday Amazon also announced another round of layoffs.
And what we've heard when these companies been announcing these cuts is a lot of the CEOs, like Mark Zuckerberg like Sundar Pichai, at Alphabet, and Daniel Ek at Spotify they've been saying that they take full responsibility for these layoffs. And when we've looked at the data of what's been going on at many of these companies, we can see that many of them have fired significantly over the last couple of years or so. Maybe they've over-hired, and now they're kind of doing a course correct. I guess we'd love to turn to you and say, how could some of these companies have better planned for these disruptions? Is this somewhere workforce planning could have helped them, or could it help them avoid getting here again in the future?
Alicia Roach: Yeah, absolutely. I think it's an interesting question, because sometimes there's a lot of rhetoric around strategic workforce planning (SWP), and the fact that it would eliminate redundancy and the need for that and let me be very clear. SWP's goal is not necessarily to eliminate redundancies. Sometimes those reductions can be valid and necessary, and indeed one of our Bs at eQ8 is bounce. There'll always be activities that we stop doing or shape and shift in a different way.
Strategic Workforce Planning is Not a Crystal Ball
We can't predict the future. As I always say, strategic workforce planning is not a crystal ball. So, we never know when the next Covid or Silicon Valley Bank collapse will happen. But what SWP does give us is that context. So that when these things invariably do happen, we have that line in the sand so we can coherently and holistically understand the delta and make conscious and effective decisions around those tradeoffs.
We have the big picture, longer-term views, and we can balance those with the people and commercial impacts of all this change.
SWP really enables that fundamental alignment of workforce to the organization's activity drivers. So, with all this crisis, we hear the over-hiring cited as the reason and then the sudden workforce reductions.
What I really find interesting is that none of those seem to be linked to actual activity, but rather just outcomes of dollar swings. “We have a bunch of money. Let's hire. Okay. We don't have as much money. Let's fire.”
It's rare that we see in any of these announcements a direct correlation to specific activity changes in any of these organizations that would be more along the lines of what we'd get from SWP.
That would sort of go to we've had an X% downturn in our customers in this part of our business, which unfortunately means we need 200 less people. However, we're reskilling 50 of those into this other department where we've got this transformation initiative happening, and another 60 of those we're holding, as we think this is going to be a short-term swing that would partially rebound in 12 months.
That's a different conversation. That's a different level of understanding and foresight, and I think so much better for the employee experience so much better for the organization and what it's trying to achieve, and that's what SWP really gives us. It gives us that bigger picture and that holistic decisioning rather than the reactivity and the knee-jerk that we're seeing going on now.
Responsibility for planning sits with business leaders
Chris Hare: Yes, and you said something there in the question, Ian, around the fact that leaders have said that they're taking some responsibility for this, and indeed they should.
The challenge that I see with some of these large companies, and you've kind of noted it yourself, this isn't a one off. “Hey? We're shedding 10,000 workers.” This has been a rolling set of decisions. And the question I would have is, how much clarity do they have on where this will stop?
Or what would trigger the next set of redundancies, and how clear are they with their own workforce?
My suspicion is to your question around SWP, what it would enable is some of their clarity around what the drivers are that will cause them to have to keep shifting and the ability to share that clear clarity with workers. My suspicion is, they don't have it.
They're not using a strategic workforce planning principle. They're relying on fast-react, and at most they’re kind of broadly hoping, as Alicia said, for the bag of money to either show up or not show up, and then to fast-react again.
It's just not good enough. So, they do have to take accountability for this, but they also need to think about how they're going to do something different, and I think the difference is that leaders must plan.
Yes, it's a particularly uncertain environment. But that calls for even more planning, not less. There are a lot of moving parts in any business. They are still going to have customers that they need to serve. How are they going to span that juxtaposition of a volatile, decreasing market, with a value creation that they still intend to have with their customer base, and they need to tie that to the workforce. And then they need to be clear with the workforce around the metrics that they're looking at, and what that means for people's jobs.
Ultimately, as individuals living in society, it's very difficult for us to plan. If we're sitting in one of those large organizations, and we've watched half of our office go away overnight, and none of our managers can talk to us and tell us what the next 6 months look like for us, it's highly destabilizing.
So, I think we must do better, and I think that SWP is a clear avenue and a mechanism to bring these things together.
SWP and effeciency and productivity
Ian Bailie: Yeah, absolutely. And I want to pick up on a couple of things you just talked about. I think, Alicia, you mentioned the activity. What's the detail beyond just this kind of cost-cutting rhetoric? And then, Chris, you were talking as well about the metrics, right? What are the metrics that they are looking at? And so, I want to just explore that area a little bit more. We've heard Mark Zuckerberg talking about this year of efficiency. Were they not looking at efficiency enough during the good times? And that's why they were hiring so much. We often hear people think about productivity as well. Do we have the right metrics in place to look at things like efficiency, productivity, and activity. Is that featuring enough in planning?
Alicia Roach: In my opinion, I think it's rare where you see an organization that's got a clear understanding of how the workforce links to the activities it needs to carry out. Whether that's business as usual, or its core operating activities and how that creates a need for a different workforce segment or set of skills. Overlaying the step changes that every organization is going through the transformation, the digitization, you know, consolidation, whatever they've got going on. It's rare that an organization has that nuanced understanding of how changes to customer volume, for example affects different workforce segments.
It's crazy to me, because really what we're doing is something so fundamental to every organization. I say this often, but answering that most fundamental question, “what's our purpose? What are we trying to achieve as an organization, and how we going to achieve it?”
And the answer to that second part of the question is through the workforce. It is the execution vehicle, and so that requires the creation of that inherent link of the activities that are required across the value chain.
Then, once you've got that link, it's very easy to dynamically model and go, "This is happening. This is delaying a year. This is coming forward 6 months. This is doubling. This is going to 0.”
Strategic workforce planning provides that nuanced understanding of what all these different moving parts mean for the workforce. And as Chris said, that's a different muscle for organizations to move. But it's critical because these are people that we're talking about. These are humans. And this impacts people so significantly. And it's also the largest cost for most organizations. So, understanding this impact should be a no brainer.
But really, getting this right goes to the heart of every organization and answering that most fundamental question and creating that nexus.
Instead, what we see organizations doing is much simpler and not actually aligned at all with the activity. “Our revenue is going up by 10%, so we’ll increase our workforce by 10%. Or we've got cost pressure, so we'll cut our workforce by X percent, and it's just very generic.
There's no focus on skills at all in all of this. It's just a numbers game. It becomes just how we are getting dollars and fixed-term employees out. That skills criticality that we're really seeing as being top of mind with HR and CEOs, it’s missing. This is where this stuff gets lost, and organizations lose their competitive advantage. Their sustainability really gets damaged, irreparably sometimes.
Chris Hare: Definitely. And I think picking up on that thread, in decades past, the workforce was just seen as a cost. And then we kind of hit this period, particularly since the global financial crisis. Organizations have been in a skills frenzy, and they've highly valued skills. But as you've said, we've hit a bit of a wall, and so efficiency and productivity are back on the front burner. I think those things are important.
Why business leaders need SWP
That's part of where strategic workforce planning comes in. How do you think about revenue increases and revenue decreases? How do we maintain an optimal workforce through that? But what's happened now is, people have gotten nervous, and so they've hit the piggy bank of workforce costs, and they've gone. Let's just slash. I think it's a large mistake.
The leaders need to understand the linkage between their workforce and customer value.
I think that it is right that we've got to revisit efficiency and productivity continuously. But we need to have that as an iterative conversation, and we need to see the workforce as a delivery mechanism of customer value, not a cost base. And I think that's a shift.
When years were good and we focused on skills and our employee value propositions, but now that we've hit the hard times, we've lurched at the easy lever, and I think we saw this very clearly in the travel industry during Covid.
Revenue Implications of poor planning
A lot of airlines quickly hit that lever, and they weren't ready when people came back and decided they really wanted to start traveling again. There were a few airlines that are still trying to catch back up. They lost revenue. They lost revenue on the day that they couldn't take people where they wanted to go, and they lost customers, and loyalty and future travel. I think there's a risk that our large companies in Tech will be feeling that pinch in a year or two.
When they really want to catch back up and get moving, they’re going to find they've shed the wrong skills.
We’ll pick back up next time with a detailed discussion on skills and their importance to an organization’s ability to meet their purpose.