5 Questions for Paul Hamerman on Financial and Workforce Planning

Paul D. Hamerman is vice president, principal analyst at Forrester, where he focuses on human resources management and financial applications, as well as trends and directions in the overall market for enterprise applications. Hamerman, who was our guest speaker in a July 18 webinar, answers five key questions that we believe organizations should consider when exploring workforce and financial planning approaches in today’s business world.

There are several established use cases for workforce planning and modeling capabilities. As one example, organizations frequently use workforce planning to forecast or budget headcount and related costs. This is typically a detailed model at the employee level that plans for the salary, contingent labor, bonus, equity, benefits, and related costs for technology and office space. This planning model generally needs to feed or integrate with the financial planning and budgeting processes.

At a more strategic level, companies are using workforce planning solutions for growth and transformation. Long-range or strategic workforce planning creates a model of the talent needs of an organization as it expands into new markets or geographies, considering the availability of specific skills, salary and wage levels, seasonality, and other factors. Other important use cases for workforce planning are mergers and acquisitions and reductions in force, where an organization needs to optimize staffing levels based on transitional strategies.

People costs are a key factor in the overall cost structure of most businesses, but especially people-centric organizations, such as professional services firms, where people directly drive revenue. Planning for people costs at a detailed level should tie to financial plans and budgets for the overall organization. Even more importantly, in businesses where the production and customer service capacity of the business is highly dependent on people, workforce planning is essential to understand capacity constraints and enhance revenue predictability. Planning, budgeting, and forecasting should integrate finance and human resources planning activities with the operations, customer support, marketing, and sales aspects of the business to get a complete picture of where the business is headed.

Traditional enterprise performance management (EPM) applications utilize transactional and summarized data supplied by core business applications, including HR, customer relationship management, and finance/enterprise resource planning solutions. Migrating this data into the EPM application for planning and reporting is typically a batch process using data migration tools or file transfers.

There is another approach where an application can read live data from the source transactional system. This is advantageous because it transforms the data refresh process, and because information is available in real-time the plan can be updated more frequently. It also enables the planning application to mirror the organization structures, reporting periods, and business dimensions automatically, without having to recreate these structures in the planning system. Comparing plans to actual results becomes much easier, enabling the business to rapidly identify problems and reforecast with greater accuracy and agility.

Collaboration is an important characteristic of modern enterprise planning systems. Collaboration enables more frequent participation by a variety of business stakeholders, both within the finance organization and across the enterprise. In a collaborative planning system, tasks can be assigned to business stakeholders who have the most knowledge of an aspect of the business, and their participation can be managed to expedite completion of a given planning activity. Collaboration also extends to the conversations that surround the planning process: threaded discussions, messaging, notifications, and embedded annotations, and systems need to support these capabilities to provide better transparency, accountability, and consensus in planning and forecasting processes. Participants can update collaborative plans more frequently, enabling plans to evolve as business assumptions and conditions change.

The three pillars of a planning solution are reporting, analysis, and planning—reflecting the time dimensions of the past, present, and future. Dashboards, scorecards, and performance measures reflect the analysis component, which allows graphical insights to be embedded in the solution and updated on the fly, reflecting what is happening now in the business. Executive stakeholders should be inclined to use visual dashboards daily to understand business performance at a glance and explore underlying details where necessary.

The discipline of performance management is driven by identifying the key performance indicators (KPIs) that drive the business and designing scorecards to progress towards achieving KPIs. KPIs and performance measures need to be selected carefully not only for relevance and alignment with strategic business outcomes but also to encourage positive behaviors on the part of those held accountable for the results. Dashboards and scorecards are now being enhanced with predictive analytics to understand how business results will play out in the future and are also benefitting from machine learning, which will enable the planning system to provide prescriptive guidance on the business results.