Strategic workforce planning in the age of GenAI
How technology can take this critical organizational process to the next level
Human resources has traditionally been tasked with headcount planning—that is, deciding the kind and number of jobs a company needed to fill. Those decisions were made independently, without visibility into finance’s spending plans or expected operational requirements.
Times have changed. Companies need new skills. And employees have new demands, such as scheduling agility and the flexibility to work from home. On top of those issues, generative artificial intelligence (GenAI) has changed the workforce playing field when it comes to the need for technological know-how across the workforce and automation of routine tasks.
In this new environment, organizations can’t rely on headcount planning alone. Instead, strategic workforce planning (SWP) can help them put the emphasis on determining the most salient tasks, the skills needed to achieve their goals, and the most appropriate sources for the capabilities they need.
What is strategic workforce planning?
SWP is a strategic organizational process that requires collaboration between stakeholders from finance, HR, and business operations to ensure that an organization's workforce capabilities align with strategic objectives and operational needs. The approach involves the systematic identification, recruiting, development, and deployment of talent resources to optimize performance and achieve long-term sustainability. Through SWP, organizations can ensure they have access to the right capabilities and the right workforce size, in the right locations, at the right times, and for the right cost.
Many organizations report that SWP initiatives generate cost savings of an average of 10 percent of their annual labor budget through minimized turnover, optimized staffing, and improved resource allocation.1
1Source: Creating the path for continuous strategic workforce planning, KPMG, 2023.
A skills-based talent strategy
SWP enables organizations to look beyond job descriptions and fill talent gaps based on skills rather than the specific roles employees held previously. However, such efforts necessitate an understanding of requisite skills based on business drivers (e.g., new products and expanded locations) and differentiating between the skills that already exist internally versus the skills that need to be acquired.
Following these analyses, the organization can determine how to obtain the skills it needs. Typically, there will be several options—namely, buy, build, borrow, base, or bot. In other words, should you hire new talent? Develop current talent? Engage more part-timers or freelancers? Outsource the process? Or deploy AI and automation?
Each option offers its own benefits.
Allows the company to hire external talent for skills that may be difficult or time consuming to develop while also gaining fresh perspectives.
Fosters opportunities for employee career growth, gaining loyalty, and enhancing engagement.
Allows organizations to quickly scale the workforce up or down as needed and can provide specialized skills for short-term projects—without the long-term commitment of a full-time hire
Gaining currency, although companies should remember that, at this point on the technology curve, AI technologies still need to be managed by human beings.
Factors to consider
A company’s decision on which talent option to take is dependent on several factors.
1
Budget
Is it more cost-effective to hire people who already have needed skills? Or is it more prudent to train current employees? Consider a company making a strategic shift to a product-based operating model. Clearly, it will need individuals proficient in agile project management. If its current project managers lack this expertise, should the company invest in upskilling its existing project managers, hire externally, or rely on contract labor to meet this demand?
2
Timing
Training and upskilling take time. Can the company afford the time to train its staff? Or does it need these skills right away? An organization that is already understaffed will likely opt to invest in new hires and use contract labor. On the other hand, if the organization has a propensity for long tenure and investment in current employees makes sense, it will likely opt for internal training.
3
The labor market
In industries with high workforce demand and a low supply of workers, such as healthcare, it is more likely that the organization will opt for expensive contract workers to fill gaps. The alternative would be to risk overburdening full-time staff, resulting in overtime costs, burnout, and potential turnover. However, by employing SWP, organizations can gain timely insight into workforce requirements and gaps to proactively secure the right coverage at the right time to meet evolving needs.
Strategic workforce planning and GenAI
Although companies have been integrating advanced technology and automation into their processes for some time, the rise of GenAI and machine learning (ML) has upped the ante and added new variables to the equation of worker supply and demand.
GenAI has the potential to change how strategic workforce planning is performed. For example, organizations will need technological staff with advanced AI skills, such as developing algorithms and large language models. Nontechnical employees will also need to know how to use GenAI to streamline routine tasks. And finally, GenAI is replacing many transactional tasks that involved skills that were once needed but are now obsolete. That means, an organization may have workers with antiquated skill sets, creating a scenario of low demand but high supply. What do you do with these employees? Retain them, but at what cost? Does the organization reskill them in other areas more valuable to the business? Or is it more cost-effective to hire AI-savvy talent instead?
GenAI can also modernize SWP when it comes to centralizing an organization’s skills, predicting skills that will be needed in the future, and aligning supply and demand. Further, predictive analytics and scenario planning can establish the right balance between human and AI workers, optimizing productivity and resource allocation.
Implementing strategic workforce planning
Organizations looking to implement SWP should consider three imperatives:
1
Match technology to maturity
Simply selecting an SWP technology solution won’t solve your workforce needs. Before implementing SWP technology, ensure you have in place a clean job architecture, skills ecosystem, and workforce strategy to enable a future-ready workforce.
2
Anticipate organizational changes from GenAI
GenAI has the potential to drive growth and enable groundbreaking creativity and productivity by helping employees create innovative products, personalize customer experiences, automate content creation, improve data quality, and enhance fraud detection capabilities. At the same time, rapid changes in the organization driven by GenAI mean it will be critical for SWP to be conducted in concert with finance and operations. Finance needs to keep an eye on whether workforce changes enabled by GenAI support the organization’s growth objectives. And HR departments need to adopt a growth mindset as GenAI plays a larger role in real-time workforce planning.
3
Leadership alignment and education
SWP should be used as a continuous process that can be influenced by many variables that require organization-wide buy-in and collaboration. For SWP to be truly impactful, leaders need to cascade organizational goals and strategic objectives into the SWP process so that the workforce decisions support and reflect their vision.
SWP is essential in today's rapidly changing business environment with GenAI as both a driver and a critical tool in the process. Traditional headcount planning is no longer sufficient, as companies need to focus on evolving tasks and skills as the technology becomes more and more prevalent. To get the most value from SWP, organizations should ensure they have alignment with stakeholders from finance, HR, and business operations—and buy-in from leadership—so workforce decisions align with strategic objectives, operational needs, and the growth imperative.
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