My colleague, Nick Garbis, shared with me a McKinsey article that is now about a year old. Ignoring the pathetic coincidence that I flagged it last year and it’s still in my e-reading pile, I enjoyed the interview with strategist Hugh Courtney for several reasons. Entertainment came from the relatively fresh perspective on the clear crash in the economy (much less recession-weary than today’s news), and real stimulation came from the discussion’s focus on uncertainty within strategic planning. I realized that workforce planning can drive industry leadership for organizations that plan despite high levels of uncertainty about the future.
To frame, Courtney developed a framework that identifies four “Levels of Residual Uncertainty” – ranging from a clear future (1) to true uncertainty (4), which does not even allow for a range of possible outcomes, or scenarios within which to plan. My first reaction when viewing the model was to presume that level four is irrelevant for business strategy. Why bother planning for a perfectly unpredictable future? But Courtney’s case is that, 1) the most important strategic decisions are made within a context at level three (in which there is a range of possible outcomes) and level four; and 2) that a disciplined approach can be performed even in the least certain of situations, easing decision making.
The way I see it, developing an ability to make sound strategic decisions without comfort of probability should be a clear motivator to plan against uncertainty, and there are plenty of opportunities to do that in the current economy. And Courtney highlights that having many more level three and four situations also allows business strategic planners to rethink entirely how strategy is devised and decisions are made. He states that Scenario Planning is underutilized as a tool, and I tend to agree, although I and my peers are working with many organizations leveraging scenarios as a part of their workforce planning process (sometimes evolving the process to a level that seems to be more advanced than the enterprise strategic planning process!).
In most cases, it’s tough to establish scenarios around external forces on businesses’ futures, but that’s not true for planning the future of a firm with internal forces. To be sure, uncertainty itself is a factor that should be a significant component of both internal and external scenario planning for both the workforce and the company strategy as a whole. The outcomes of the workforce plan are strategies that shape how a firm sources, structures, manages, and develops its talent. These need to go hand-in-glove with the company’s product and service strategies. On the revenue and growth side of the business, companies can clearly shape themselves via strategic changes to product and service through innovation and bold plays, although most organizations are financially limited – they “just don’t have the degrees of freedom to think about fundamental changes in their strategy.”
Companies that make bold plays, such as the introduction of the iPhone a couple years ago, can also shape the industry. Courtney identifies the most likely candidates to pioneer as “a lot of high-tech companies and service businesses in general, which tend to scale up through people.” See the connection? Companies that innovate and seek to lead their markets regardless of unclear strategic factors can actually affect industry dynamics by strategically planning their workforce in alignment with their overall organizational strategies. It’s not as far-fetched as it may sound; in Infohrm’s 2009 Global Workforce Planning Survey, it has been found that leading edge companies achieve a competitive advantage through workforce planning. In the end, human capital intensive companies should actually depend on the outcomes of successful workforce planning to drive their market leadership.