Guesses just don’t cut it anymore

Northern Lights cuts job vacancy rate with workforce planning simulations

Workforce Planning: In February, the Strategic Capability Network (SCNetwork) hosted Robert Carlyle at its monthly breakfast event in Toronto. Carlyle, head of the Aon Intelligence Unit, talked about how employers can use hard data — not just gut feelings — when it comes to workforce planning. SCNetwork provides a forum for business leaders to discuss leading-edge issues in HR management. For more information, visit

Guesses just don’t cut it anymore

HR needs hard data, not gut feelings

SCNetwork’s panel of thought leaders brings decades of experience from the senior ranks of Canada’s business community. Their commentary puts HR management issues into context and looks at the practical implications of proposals and policies.

Guesses just don't cut it anymore

By Shannon Klie

With a job vacancy rate of 30 per cent, which was expected to grow to 35 per cent by 2017 if nothing was done, the Northern Lights Health Region in Alberta knew it needed to change the way it did workforce planning.

In 2007 the health region, which serves about 100,000 people in the northern one-third of Alberta, including the boom town of Fort McMurray, brought in consulting firm Aon to develop a forecasting model and test various strategies to see which ones would bring the health region’s vacancy rates down.

To keep pace with the area’s explosive population growth rate of about 10 per cent per year, the health region projected it would need to grow its staff by 10 to 15 per cent each year for the next 10 years. But the high cost of living (housing prices in Fort McMurray had doubled in four years) and the demand for workers in all industries made it hard for Northern Lights to retain workers.

“There are very few more challenging areas than Fort McMurray for managing people,” Robert Carlyle, a vice-president at Aon, told a group of senior HR practitioners at a breakfast meeting in Toronto last month.

When Aon went in, it did extensive data analysis and stakeholder consultations. The health region’s turnover rate had grown from 20.2 per cent in 2002 to 41.5 per cent in 2005. With further analysis, Aon found the majority of the turnover was happening in food services and housekeeping, which had a 105-per-cent turnover rate.

Workers in the first five years of their career also had higher turnover rates of about 40 per cent, mostly because they couldn’t afford to buy homes in Fort McMurray, said Carlyle. On the other end of the spectrum, older nurses were taking advantage of the high housing prices and selling their homes in Fort McMurray for $600,000 and buying comparable ones in Red Deer, Alta., for about $200,000.

Aon’s analysis also found new, young hires didn’t find Fort McMurray an attractive place to live and at one point, over a six-month period, 25 per cent of staff left within their first three months.

“Given the cost of recruiting, moving them up there and then having them stay for only three months, this was a financial black hole,” said Carlyle.

Using workforce simulations, Aon tested several strategic options to see which would have the most effect on vacancy rates. These included increased hiring, improved HR programs and local hiring. The latter had the strongest single effect on vacancy rates.

“The people who were most likely to stay, unsurprisingly, were people born in the community,” he said. “People who have already moved once and had no local connection in Fort McMurray rarely stayed for more than five years.”

All the strategies combined would bring the vacancy rate down to about 20 per cent. By adding a $1,000 cost-of-living adjustment, the vacancy rate would drop to 15 per cent, the lowest realistic rate given the province’s growth rate, said Carlyle.

Based on the forecasts, Northern Lights’ head of HR, head of operations and chief executive officer crafted a 10-year people strategy. The forecasts and strategy helped the health region obtain $206.4 million from Alberta’s ministry of health and wellness in 2007. Most of the money, $140 million, was for cost-of-living salary increases, $15 million was for training programs and the rest for infrastructure costs.

While Fort McMurray is experiencing a particularly tight labour market, organizations all over Canada are finding it harder and harder to meet workforce demands and when needs or situations change, organizations are left playing catch up, said Carlyle.

“Lag times to change your workforce are getting longer and longer,” he said.

With technological advances organizations can now afford to run more complex forecasting models that include data mining and simulations to prepare for what the future holds and stay one step ahead, said Carlyle.

Data mining is the process by which the workforce is broken into different segments, such as age, profession or gender, and the behaviours of these segments, such as retention and benefits choices, are analysed.

“That allows you the ability to really understand your employees the way you understand your customers,” said Carlyle.

Incorporating simulations creates a comprehensive analysis that includes the impact of business changes on staffing requirements, reflects the individual circumstances of the organization, examines the impact of employee characteristics on their choice to stay with the organization and rigorously tests the effect of alternative scenarios and strategies on the workforce.

“It’s comprehensive. There’s nothing being missed or left off the table,” said Carlyle.

These simulations can show the need for training and development, business and operational requirements for staff, total workforce costs — compensation, health-care and retirement benefits and training — and staff retention and recruitment.

“The data analysis can often show where there are very specific classes of employees that are leaving and what’s the magnitude of that and we can start to look at the cost of retention and whether it’s actually cost effective to target specific groups of employees for retention programs,” said Carlyle.

When doing workforce management, an organization should look at the kind of skills and knowledge it will need down the road, look at local estimates of workforce needs and potential talent gaps, include market-research techniques to understand the specific needs of the workforce and, most importantly, integrate workforce management with business and operational planning, said Carlyle.

“If it’s not integrated with what businesses do, it’s not going to be particularly meaningful for businesses,” he said.

Next executive series

The most recent Canadian HR Reporter/SCNetwork Executive Series breakfast was held on March 20 in Toronto. Guest speaker Michael Koscec was scheduled to talk about how to turn a toxic work environment into a healthy, productive workplace. Look for coverage of this event in the April 21 issue of Canadian HR Reporter.

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HR needs hard data, not gut feelings

SCNetwork’s panel of thought leaders brings decades of experience from the senior ranks of Canada’s business community. Their commentary puts HR management issues into context and looks at the practical implications of proposals and policies.

Everything old is new again

By Barry Barnes

Once upon a time, the world was more stable, business was more stable and workforce planning was developed with models that had the built-in premise that tomorrow would look much like today. But business became much more volatile and stable environments disappeared in the age of globalization, Internet and e-commerce. Workforce planning fell by the wayside for all but a handful of large organizations, mostly governments or para-governmental organizations.

With that change came a need for organizations to protect one competitive advantage, investments in human capital. Robert Carlyle and his group at Aon Consulting have seized the opportunity to combine expertise developed in market research with advanced modelling made easier through increased computer power — and created a methodology to help plan for risk. Carlyle succinctly asked why we can’t “understand our workforce as well as we understand our clients.”

No major marketing decision is made without adequate research. No new product is launched without adequate research. Yet we continue to launch HR initiatives, from compensation schemes to recruiting, often ignorant of the facts. Too much HR strategy is based on anecdotal evidence rather than hard data.

If HR is to move to the next level, expert advice and quality decisions will be made with the most reliable data available. Carlyle’s work and models demonstrate how proven techniques can be informed by reasonable data to assist in forecasting scenarios and making decisions based on reducing risk and the greatest likelihood of success.

Larger organizations are in an excellent position to move in this direction immediately. One would hope the underlying costs of research are developed together with increasingly rigorous statistical models to allow the concepts to be applied economically for small- and medium-sized enterprises. If this were the case, I forecast a future where government may require agencies to use such models to forecast human capital needs and justify grants.

Barry Barnes is SCNetwork's lead commentator on organizational effectiveness. He is executive vice-president of ESOP Builders, a firm that develops employee-share ownership plans for private Canadian enterprises. He is also president of The Crystalpines Group. He can be reached at [email protected] or [email protected].

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How leaders lead better

By Dave Crisp

Robert Carlyle takes us a long way toward HR expert John Boudreau’s concept that HR should become a decision science like finance or marketing, as he outlined at SCNetwork last summer and in his book Beyond HR.

Carlyle’s data analysts have tamed the advanced statistical techniques organizations need to simulate detailed evolution of HR environments stretching years into the future: What if you change business lines and need specially trained recruits a few years down the road? What if you don’t, but find your staff is aging out of the workforce and new hires are turning over fast because you don’t offer the right programs?

How bad will it get? Where should you invest? Where’s the biggest payback? Now you can predict with various levels of probability not previously available. Just like marketing and finance, HR can now pinpoint what investments will pay off, how to solve specific problems and the probabilities that those problems will arise.

In the past, without solid numbers, HR was last in line for budget. It’s startling, therefore, that Carlyle was able to convince the Alberta government in a single session that its data wasn’t as good as his and it should cough up $207 million to address HR issues in its northern health care district. It took two years, but clearly it paid off. You can see a version of the output here at

CEOs are also figuring out their future isn’t limited by finance or marketing concerns, but by people — the availability of properly trained, developed, acculturated staff who want to stay around long enough to make a difference. What a company needs varies depending on its business goals, the kind of people those goals require and the varying wants and needs of different demographics.

In the past some of this was figured out by guesswork and personal judgment, but even Aon itself was astonished to find how and where it got its best people — from clerical staff. Suddenly keeping clerks happy took on far greater importance.

You can’t easily lead what you can’t see. Once you do see, strategy becomes far easier to discuss, justify and sort out. Once these techniques become widely known, we’re going to see a dramatic difference in how effectively HR is able to operate.

Dave Crisp is SCNetwork's lead commentator on leadership in action. He shows clients how to improve results with better HR management and leadership. He has a wealth of experience, including 14 years leading HR at Hudson Bay Co., where he took the 70,000-employee retailer to “best company to work for” status. For more information, visit

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Forecasting: Art or science?

By Matt Hemmingsen

It is an age-old question. Is planning for future human capital needs “an art or a science?” Carlyle leads us to value and appreciate both perspectives. It is a needed partnership of both the qualitative and the quantitative. The benefit is having a full and proper focus on, and alignment with, business and people issues.

The recognition and integration of the “people” element in strategic planning is critical. But this shouldn’t always be an intuitive process. From mergers and acquisitions, new go-to-market strategies, outsourcing, globalization, massive demographic changes and competition, organizations without the proper consideration and due diligence for key qualitative data will “grow like Topsy” — without plans, without direction and without structure.

While business leaders acknowledge the human element in strategic planning, the issue is to what degree HR contributes at the critical business level. For many organizations, it is simply one of compliance or transaction. Others feel the contribution is limited to the identification and development of people-related processes to support the business. For the very few, it is a consultative approach and full integration with the totality of the strategic parameters — both the hard and soft data.

Any organization in any sector can benefit from a more rigorous approach. Regardless of its size and complexities, valuable qualitative and quantitative information can easily be incorporated into a strategic planning process. A thorough understanding of the context within which an organization exists — customers, competitors, the regulatory environment, the value add, workforce demographics and human costs — better positions an organization to plan for its future.

Forward-thinking organizations are creating a holistic system that drives business results and integrates all aspects and all processes. This ensures the people are in the right roles at the right time. It also ensures the right development opportunities exist to develop leadership capability for future challenges. That is neither an art nor a science — it is just good business sense.

Matt Hemmingsen is SCNetwork's lead commentator on strategic capability. He has held senior HR leadership roles in global corporations. He is a managing partner with Personal Strengths Canada, a member of an international company focused on improving business performance through relationship awareness. For more information, visit or e-mail [email protected].

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