One of the biggest value additions that come with thorough, competent strategic workforce planning programs is competent change management. In the 21st century, the operating environment for businesses is more volatile than ever, with geopolitical, technological, and myriad other forces creating unpredictable and sometimes chaotic landscapes.
Consequently, anticipating and adjusting for shifts in key macro variables is critical to maintaining the competitive advantages that drive successful companies to meet and exceed their goals. There are a multitude of different factors that employers must monitor, analyze, and plan around when creating a workforce that will meet the present and future needs of a business.
Business Owners Should Plan for Changes in the Economy
One macro variable is the macroeconomic environment and how changes in key metrics can affect a business’s status quo. For instance, what are the implications if the economy takes a downward turn?
Generally, this trend is accompanied by many comorbid symptoms, including drops in the stock market, spikes in unemployment and significant reductions in average levels of disposable income. But these circumstances mean different things to different businesses in different settings.
For example, imagine that you own a hospitality business, such as a hotel, restaurant, casino, theme park or nightclub. A downturn in the economy is terrifying and understandably so.
Why? That’s because your entire revenue base is usually predicated on consumers’ disposable income – the leftover money consumers use to enjoy life after paying their bills. But when the economy tanks, those funds tend to shrivel up quickly.
On the other hand, what if you’re a grocery store? For these businesses, an economic downturn might mean business as usual.
Why? People still need to eat. To be fair, consumers might be more price-conscious in tougher times when their buying power is reduced, so grocery store managers might need to sharpen their pencils a bit to remain competitive.
But such businesses probably don’t have to fear closure. In fact, business volume might even go up a bit, since consumers who can no longer afford to eat out at restaurants may instead shift more of their food budgets to groceries for cheaper, home-cooked meals.
Similarly, what if you’re a college or university? Interestingly, the higher education industry tends to be inversely correlated with economic prosperity, meaning that economic slumps actually have positive effects on enrollments and registrations.
Why? When people are either laid off or fear being laid off during recessions and depressions, they often elect to go back to school, learn new skills and trades, and prepare for alternate career options as a contingency. Inversely, when the economy is thriving, unemployment is low, and most people are in stable, comfortable, and well-paying jobs, fewer people enroll in college because there isn’t the same perceived looming threat to survival.
Depending on a company’s private versus public ownership status, a drop in the stock market may or may not be a big deal. Publicly-held companies need to worry about stock market downturns, because trading prices determine market caps and available equity for generating or borrowing capital as needed. Private companies don’t necessarily have the same concerns, but they may be limited by a lack of access to capital from investors.
The Employment Environment Should Also Be a Factor in Workforce Planning
Likewise, high unemployment rates may mean different things for different employers. On one hand, a high unemployment rate usually means a larger labor pool of available candidates to fill vacancies, so businesses can be choosier about hiring candidates with the very best skills and experience. They might also be able to reduce wages and benefits a bit, because otherwise unemployed workers may be desperate enough to take whatever they can get.
However, there’s a flip side to that mentality. First, businesses must be mindful of compensation floors that are largely determined by unemployment benefits – the alternative for laid-off workers who might rather stay at home and collect social welfare checks than work for menial wages.
Second, businesses need to realize that if they hire well-qualified or overqualified workers for minimal pay during economic valleys, those workers will very likely leave as soon as their circumstances change and they are able to find better-paying jobs. Ultimately, short-term gains might result in long-term losses due to heavy turnover and wasted investments in training and development.
Technological Evolution and Workforce Planning
Another major change consideration for all businesses is technological evolution. Moore’s Law – the principle that technology tends to double in processing speed and capacity every two years or so – has held largely true for several decades now. Consequently, the rate of technological evolution is riding on an exponential curve, so predicting what technology can and should be doing tomorrow is a very difficult task.
Smart companies invest heavily in their technological infrastructure, including research and development. This is, incidentally, why many large companies have added Chief Technology Officers to their executive boards in recent years.
Staying ahead of the technological curve and at least at the same pace with competitors is crucial to business survival, especially given the tremendous return on investment that is often experienced though technologies that augment or flat-out replace human labor.
The Role of Politics
Yet another important change variable is politics at virtually every level. Prevailing winds in each election cycle generally tend to shift power a bit between conservative and progressive parties in the United States.
Changes in the political climate have huge implications for private-sector businesses insofar as they are affected by legislative policy and regulatory oversight. Changes in laws around wages, overtime, unionization, discrimination, whistleblower protections, health insurance, medical leave, taxation, and a whole host of other topics can have dramatic effects on workforce management.
All business owners should follow what is happening at local, state and national levels of politics, so that they can be well prepared for changes that can be anticipated on the horizon. These changes can be forecast based on which way the political winds are blowing.
However, the largest businesses and industries may also try to get ahead of the curve and influence the direction of those winds through leveraging politicians. Campaign funding and lobbying efforts can go a long way toward manipulating the pace and course of legislation. As a result, businesses that want to and can afford to be proactive rather than reactive frequently engage in these practices at all levels of bureaucracy.
It Is Vital for Businesses to Plan for Both the Predictable and the Unpredictable
Ideally, businesses must think ahead with respect to workforce planning for effective change management. That strategy will help them to retain vital talent and prevent them from being left in the dust by their competitors.