Talent management requires scenario planning, the transcript

Posted by: Joel Capperella

The transcript of my interview with Dr. Peter Cappelli, keynote speaker at this year’s HRO Today Summit is now available for your reading pleasure. Dr. Cappelli is well known for being among the first to combine supply chain techniques with talent management, and our discussion was very much focused on the benefits of scenario planning for an organization developing its strategic workforce plan.

Dr. Cappelli calls on leaders to identify the most likely scenarios the business could encounter, and evaluate how prepared the organization and workforce is to respond to each of those scenarios. Recognizing these possibilities and developing a road map to address them in advance will help the organization respond and meet the talent demands associated with each should they occur.

In our conversation, Dr. Cappelli goes on to explain how scenario planning can be applied whether handling acquisition internally or utilizing a supplier. Read below or download and print the transcript to take with you on the road.

Joel: I’m very fortunate to catch up with a keynote speaker at the HRO Today Summit, Dr. Peter Cappelli, a professor at Wharton at the University of Pennsylvania in Philadelphia. Dr. Cappelli has done plenty of research on the notion of adopting a supply chain mentality to approach talent needs and demands, and his work is fantastic. The book again, Dr. Cappelli is?

Dr. Cappelli: “Talent On Demand.”

Joel: “Talent On Demand,” I recommend you pick it up. We actually had Dr. Cappelli in to speak a year or so ago about the book, and clients love it. Today, you spoke a lot about some of the nuanced realities of the talent supply chain when it comes to the fact that the tangible metrics might be something that are a fool’s errand to chase. Can you kind of talk about those nuanced elements that you discussed with the crowd today?

Dr. Cappelli: I think it’s particularly around workforce planning sorts of issues. So everybody understands the need to anticipate what your talent needs will be in the future. That’s fundamental. That’s what talent management is about. The question is whether we try to have false assumption of certainty that we know.

We look at our forecasts and we say, “Ah, it’ll be 5 percent this year in these areas, and 6 percent in those.” When we know we’re just guessing, and those estimates are really poor. So what do we do instead? There’s a lot of people that say you just have to take your best guess and go with it, but the answer is no. People who deal with supply chains deal with the issues of managing uncertainty all the time.

There are two responses to that. One response is to say that there are many possible outcomes. Let’s get a sense of what they look like. Scenario planning is a way to do that. Not just what’s the best guess, but what’s the second and third best guess. And then the second thing to do is to really worry about responsiveness afterwards in terms of dealing with the uncertainty when it occurs.

There a number ways to do that. One is—we talked about this a little bit—mismatched costs. Mismatched costs really focus on what happens when we’re wrong. Is it worse to have too much talent? Is it worse to have to not enough? You deal with that in part by understanding what your options are. If you’ve got a good vendor who can supply your talent needs on a short, just-in- time basis, then the risk of falling short is pretty small.

On the other hand, you also want to be able to look at your own capabilities and be able to say, “Can we train people internally? Can we grow talent within? Is that really an option for us?”

If it is, you really ought to be trying to do at least some of it. And then I think we also have to worry about responsiveness, because our estimates are almost surely going to be wrong. So we’re talking about the Army’s motto that no battle plan ever survives the initial contact with the enemy. That is, you’re pretty sure that whatever your plan is, you’re going to have adjust it a bit. And given that, what does your responsiveness look like? Can you get new skills, at least some of them, if you need it at the last minute? Can you adapt, move the people around? That’s the real capability for the future.

Joel: So let me follow up on that. This notion of scenario planning, I think that’s what a lot of the attendees today really grabbed a hold of—the reality that it is a worthy exercise to scenario plan with a certain level of detail, so I can respond and react properly to the unforeseen changes, the uncertainty. What prohibits organizations from adopting the need to scenario plan, in your opinion?

Dr. Cappelli: Well, if you think about it, really nothing, except that in many places there is an infrastructure and an inertia around the old forecasting-based models. Right? We have a forecasting business, a forecasting department. They do forecasts, and so therefore, that’s what we do in workforce planning. But scenario planning is easy to do.

The simplest way to do it is simply to take the business plan people give you from the strategy group and say, “OK, let’s think about the key assumptions behind this plan. Give me the three key assumptions. What happens if each of these is wrong?”

If you do that, then you’ve got a little map that actually will give you three different forecasts. There’s a forecast if the first assumption is true and if the first assumption is false; if the second one is true or the second one is false. Then you start to get a map, and you can see what that map looks like. If you’re lucky, there will be a big grouping that among the six possible outcomes, there were three that really hang together, and maybe that’s where we want to place most of our bets. But we don’t want to place all our bets on one very specific forecast, because the odds in being wrong are so great.

Joel: Is there an organization you’ve come across that you could name that does this well?

Dr. Cappelli: In India, there are a number of companies that seem to be doing this pretty well. I think the reason is that the people doing these jobs came out of engineering. People doing the sort of forecasting work came out of engineering. They had no legacy systems to worry about. They had never seen traditional forecasting models or workforce planning models. They did it the way engineers and operations research would do it, and so they’re pretty good at doing it.

There are a lot of companies that are famous for scenario planning—Royal Dutch Shell in particular, has done it in the business arena for about two decades or so. And I think it’s making a comeback in the strategy world in general, so maybe it’ll get easier to do in human resource world, once it starts to be done at the board level.

Joel: OK, last question. I’m going to be maybe a little bit self-serving, since Yoh is in the business of providing workforce solutions in the contingent space and the outsource space. Is this something, if you’re using a supplier to help you with your talent demand and supply, that you ought to expect other suppliers to be able to provide you their input on some of these scenarios?

Dr. Cappelli: Well, I think it’s a good idea. It’s a good question, and I think it’s a useful thing for HR practitioners to push back on, partly because inside the organization, they don’t have enough of this capability themselves. It’s hard to grow it. They’re vendors, who are likely to see this question a lot, ought to have a way to think about and ought to be able to give you some guidance as to how to deal with these questions. So I think we’re expecting more thought leadership from the vendor community, and this is a good example.

Joel: Dr. Cappelli, thanks so much. Again, we’ve been talking with Dr. Cappelli, who was the keynote today at the HRO Today Forum. His book is “Talent Demand,” and I would really encourage you to go ahead and check it out and check him out. Thanks very much for your time.

Dr. Cappelli: Thank you.

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