Workforce Planning: Data Analysis to Solutions

Presenter: Henry E. Noey, Jr.

Senior Consultant and Account Manager W W W . W A T S O N W Y A T T . C O M

Session Objectives



About Watson Wyatt



A framework for workforce planning



10 questions a workforce plan should answer



Keys to success

–

Workforce planning in practice – 2 case studies

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Gap analysis



Keys to success



Q&A

About Watson Wyatt 6,000 associates 30 countries 88 offices

We’re Everywhere You Do Business

 Consult to 70% of Fortune 100  Advisors to half of the top 100 corporate pension funds in the United Kingdom  Dominant presence in many markets in Europe and Latin America  First firm in our industry to open an office in China and the first approved to serve pension funds in Japan

We’re Everywhere You Do Business

 Provide actuarial services for more than twice as many of the world’s 300 largest pension funds than our nearest competitor  Comprehensive research for multinational clients  Global 50 Remuneration Planning Report – preferred reference work for international HR practitioners  Human Capital Index ® – includes results from more than 2,000 companies around the globe

We Turn Research Into Results



Our advice is grounded in the most extensive and respected research in the business

 First to investigate the management impact of changing demographics, the shift from traditional pensions to hybrid plans and emerging trends in phased retirement

1994

“U.S. Retirement Policy: The Sleeping Giant Awakens”

1996

“From Baby Boom to Elder Boom: Providing Health Care for an Aging Population”

1999

“Phased Retirement: Reshaping the End of Work”

1999

“Global Aging The Challenge of the New Millennium”

2000

“The Unfolding of a Predictable Surprise: An Analysis of the Shift from Traditional Pensions to Hybrid Plans”

Workforce Planning in Oil & Gas

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Workforce Planning Roundtable

– – Platform for networking Open forum re: common issues & solutions  Workforce analysis  Sources of talent  Availability of global data Apache Baker Hughes ConocoPhillips Devon Energy Exxon Mobil Marathon Oil Key Energy Schlumberger Transocean BP ChevronPhillips Cooper Cameron Duke Energy Halliburton Kerr-McGee Noble Energy Shell UNOCAL

Workforce Planning Defined

     

Translate

business strategy into human capital needs

Analyze

– Current demographics – Current and projected staffing levels – – – – – Current and projected skill mix Turnover trends Retirement risk Assumed growth Available external workforce supply and demand

Assess

current people practices relative to internal and external workforce situation

Identify

short- and long-term risks in attracting and retaining critical talent

Recommend

recruiting and retention programs to close the risk gap and protect intellectual capital

Prioritize

programs/solutions by ROI

Finding The Right Answers Ensuring an available pool of talent

 

Internal labor supply External labor market

 

Optimizing human capital investments Reducing the cost of turnover Targeting investments in recruitment and retention



Protecting intellectual capital Addressing the impact of an aging workforce



Facilitating the transfer of knowledge

Key Workforce Planning Components

Outcomes

• Labor Pool • Lifestyle Shifts • Economic and Regulatory Environment

Supply Workforce Levers Recruiting Invest Well High Customer Satisfaction

The right number & right mix of workers at the right time

Demand

• Business Requirements • Internal Demographics • “Employment Deal”

Leadership Talent Management Total Rewards Employee & Labor Relations Training & Development Reduce Costs Increase Shareholder Value Execute Business Strategy

10 Questions A Workforce Plan Should Answer…

Demand

 What does my current and projected overall workforce profile look like?

  What is the demographic profile of my top 5 to 10 critical positions?

Where are we at risk due to unnecessary turnover and/or impending retirements?

Root Causes of Behavior

 What are the root causes and/or correlations to undesirable turnover?

   What are the characteristics of employees who stay and succeed?

What motivates and retains our top performers and/or critical talent?

What HR practices are getting in the way of or helping with attraction and retention of desired talent?

Supply

 What and where is the supply of talent for our most critical positions, short and long term?

 What is the external market perception of us as an employer?

Outcomes

 What are the characteristics of workforce models that produce the best outcomes (e.g., productivity, financial outcomes, customer satisfaction)?

Workforce Planning: Keys to Success



Don’t assume you know your workforce:

There are typically “hidden” behavior patterns not readily apparent 

Take a focused approach:

Zero in on critical jobs and segmentation for actionable findings 

Apply quantitative methods:

Establishes ability to model behaviors and determine cost and ROI drivers 

Be open minded and flexible:

A “one-size-fits-all” strategy of the past may not work for the future 

Develop an integrated strategy:

are total package Rewards and benefits

Case Study #1: Aging Workforce

   Problem: – – – Significantly aging workforce in key field supervisory jobs Limited documentation of processes Recruiting has been primarily from college graduates and then OJT Hypothesis: – – – – Hiring needs driven from both aging and internal movement Recruiting “net” will need to be broadened Knowledge transfer processes will be critical to meet business demand for talent Problem more/less severe from location to location Actions: – – Multi-faceted Focused on employee life cycle

Executive Summary

Current Population Employee Count 814 New Entrant Average Age (Promotion) Average Age (Internal Move) 32.0

36.8

Average Age Average Service 43.9

17.9

Retirements/Turnover Average Age (Ret) 59.1

Average Age (Int/Ext)* Turnover (Int/Ext) 43.4 / 37.9

4% / 3% % over 50 % Retirement Eligible 36% 15% 2007** Hiring Needs 143 2010** 2012** 369 527 18% 45% 65% * Average age of turnover ** Column 3 represents the # of cumulative hires as a percentage of current employees



Projected Hiring Needs

Over the next 7 years: - 527 need to be hired to maintain current population (cumulative) - 20% of the current population will be gone due to retirements 1,000 900

34 45

800 700

21 2

61 39

41 7

92 55

64 14

124

23

156 81 189 92 223 600 68

86

102

109

500

133 157

400

814 743

300

677 614 557 502

200

449 401

100 0 2005 2006 2007 2008 2009 2010 2011 2012

Year * Internal Attrition includes employees moving from Exempt to Union as well as to other non-operations positions New Hire Turnover Internal Attrition* Withdrawals Retirements Current EEs

Objectives

60% 50% 40% 30% 20% 10%

Employee Retirement Distribution

0% 0-5 yrs 5-10 yrs 10-15 yrs 15-20 yrs 20-25 yrs 25-30 yrs

Years to Retirement

30+ yrs

#1 Objective

– Optimize costs associated with acquiring employees subject to appropriate mix of job skills/ competencies required to meet the projected demand for XYZ’s services

#2 Objective

– Reinforce and solidify relations with current employees to ensure effective future workforce staffing required to meet projected demand for XYZ’s services

Outcomes 10-15 Years to Retirement Group Job Group #A Job Group #B Job Group #C Job Group #D Job Group #E Internal Labor Market Sources to Fill the Gap

A.

B.

C.

Maximize retention of current high-performing employees Transition employees from other parts of the organization Implement phased retirement program D.

External Labor Market

E.

Acquire new hires at entry level and professionally develop employees Acquire mid-career professionals seeking a change in employment

Workforce Planning Resulted in Data-Driven Investments…

Business Strategy & Human Capital Implications Demand Analysis

 Projected Key Talent Needs     Geography Turnover Workforce Aging Retirement Rates

Supply Analysis

 Labor Forecasts – New Graduates  – Competitor sources Industry Influences

Gap Analysis

 Programs& Practices  Employee Satisfaction   Employee Demographics Talent Sourcing

Attract

    

Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work Arrangements Recruit

    

Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits Invest

    

New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation Retain

    

Employee Satisfaction Work/Life Balance Compensation and Benefits Work Environment Leadership Retire

    

Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer

Employee Life Cycle Immediate Solutions

Attract

    

Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work Arrangements Recruit

    

Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits Invest

    

New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation Retain

    

Employee Satisfaction Work/Life Balance Compensation and Benefits Work Environment Leadership Retire

    

Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer

Attract:

How can we become an employer of choice to the desired talent to support the business?

– Robust and compelling employer brand

Recruit:

How do we ensure that our recruiting approach and tools are as efficient and effective as possible to get the talent we need when we need it?

– Enhanced mid-career hiring program – Measurement processes for sources of talent and success rate

Attract

Employee Life Cycle Immediate Solutions

    

Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work Arrangements Recruit

    

Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits Invest

    

New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation Retain

    

Employee Satisfaction Work/Life Balance Compensation and Benefits Work Environment Leadership Retire

    

Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer

Invest:

What are the optimal investments in developing and managing talent? – – Training and development processes and programs revised to decrease the time to proficiency Recognition for knowledge transfer

Retain:

people?

How do we ensure that we are retaining the right – Employee development integrated into leader performance evaluation – Robust communications for understanding and appreciation of total rewards and opportunities

Employee Life Cycle Solutions

Attract

    

Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work Arrangements Recruit

    

Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits Invest

    

New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation Retain

    

Employee Satisfaction Work/Life Balance Compensation and Benefits Work Environment Leadership Retire

    

Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer

Retire:

How can we best manage the exit of our workforce and intellectual capital?

– Revised retirement and retiree medical plans to drive the desired retirement behaviors

Longer-Term Solutions

 Program to identify current feeder pool employees earlier in their career to develop into these positions  Alternative work arrangements for work/life balance  Phased retirement alternatives for selected individuals  Processes, tools and mentoring program for knowledge transfer

Case Study #2: Recruitment & Retention

   Problem: – – – Significant retention issues at key career points Very competitive recruiting/talent market Diversity does not match customer base Hypothesis: – Employees need different “deals” at different stages of life – Employer of choice brand will make a difference in recruiting the necessary talent – Reward dollars can be allocated more effectively to reduce turnover and recruiting “ramp up” costs Actions: – Restructure of rewards to align with life stages

Lifecycle Rewards A first step is to improve the employment deal with customized recruiting and retention tools

The challenge is to keep rewards efficient for the Company and relevant for every employee

EXECUTIVES $ ASSOC.

1-3 years SR. ASSOC.

4-6 years $ EXPERT/MANAGER 7-9 years $ $ SR. MANAGER 10-12 years

A more responsive reward program can begin to improve the overall work experience Annual Turnover

Life Stage

Lifecycle Rewards Lifecycle Rewards lets employees make choices that influence their decision to stay and remain motivated…

Picture of young professional woman Picture of minority with family

Profile

 Julio, age 22, Engineer  $23,500 in college loans  Low to modest medical coverage needs   Going to work for the first time “Work hard, play hard”  Corinne, age 38, Sr. Engineer  Recently married  Purchasing first home  Evaluating career and family options  Paul, age 45, Engineering Manager  Married, two children  Considering larger home  Planning for college and retirement

Lifecycle Rewards

Julio’s Lifecycle Rewards

 Catastrophic healthcare coverage only  Lowest dental coverage  No vision coverage  Purchase 4 additional PTO days  No 401(k) participation     Base salary Bonus Base healthcare and security benefits Eligibility for retirement plan

Corinne’s Lifecycle Rewards

 Opts out of medical in favor of spouse’s plan  Purchases additional life and other security coverage  Takes balance of flex credits in cash  Milestone Award payment goes to down payment on home  Modest 401(k) participation     Base salary Bonus Base healthcare and security benefits Eligibility for retirement plan

Paul’s Lifecycle Rewards

 Family PPO, dental, and vision  Pending Milestone Award earmarked to fund a 529 plan  Maximum security elections  No additional PTO days purchased  Maximum participation in 401(k)

Customized Benefits

    Base salary Bonus Base healthcare and security benefits Eligibility for retirement plan

Base Program

Lifecycle Rewards …and helps manage compensation and benefits for employees throughout their career

This is not just about “choice” – its also about being responsive and understanding your employees

Year 8: Second Milestone Award is paid, family purchases new home Year 11: Promoted to Engineering Manager. Third Milestone Award is paid into Retirement Account Year 1: Cathy is hired as an Associate Engineer Year 5: Pays down her remaining college debt with her first Milestone Award Year 3: Cathy is married and adds her husband as part of her healthcare coverage Year 9: Uses three weeks from Leave Bank to be with ailing parent Year 6: Little Kelly is born, 7 pounds, 6 ounces. Cathy is promoted to Senior Engineer

The core objective is to make it compelling for individuals to join and stay

Estimated savings associated with increased retention

~$560 Million in cost savings over the next ten years + possible productivity gains among existing employees

Direct rewards will not solve all the issues…

Current Focus Lifecycle Rewards

 Near-Term (1/1/06) – Milestone Account – Enhanced Match  Medium-Term (1/1/07) – Flexible Benefits – Leave Bank

Other Areas of Focus Work/Life & Career Management

 Job Sharing  Job Rotations  Reduced Hours  Job Posting Technology   Interest-based Competency-based  Management Training  Formal Mentor Program

Sourcing & Recruiting

 Capacity Planning  Diversity  Sourcing Strategies  Screening & Profiling  Offer Management

Lifecycle Rewards is not the “silver bullet”, there are other critical issues to address

Workforce Planning: Keys to Success



Don’t assume you know your workforce:

There are typically “hidden” behavior patterns not readily apparent 

Take a focused approach:

Zero in on critical jobs and segmentation for actionable findings 

Apply quantitative methods:

Establishes ability to model behaviors and determine cost and ROI drivers 

Be open minded and flexible:

A “one-size-fits-all” strategy of the past may not work for the future 

Develop an integrated strategy:

are total package Rewards and benefits

Where are the gaps?



Lack of employee data, global systems and analytical tools



Majority focus on period costs – limited longer term thinking



Limited connection between business strategy and future employee needs



‘Silo’ approach to rewards

Closer than most…..



The major E&P companies



Larger Oilfield service firms

Questions:

Workforce Planning: Data Analysis to Solutions

W W W . W A T S O N W Y A T T . C O M