Use Labor Market Insights to Manage People-Related Costs

We are in a humanitarian crisis affecting everyone on the planet, one that requires us to focus on social distancing and safeguarding our health, families and communities. So it’s hard — and may even seem insensitive — to be planning our workforce needs, but HR leaders must be prepared to make decisions that will potentially be life-altering for employees and could change the trajectory of their organization.  

If economies stay closed, some of the hardest decisions for leaders still lie ahead, and yet most leaders lack the data they need to make informed decisions about their workforce. 

For many HR leaders, any talent strategy they had before the crisis is no longer relevant, so what comes next amid constrained budgets and unknown business performance? 

Watch webinar: Reengineer Workforce Planning for Cost Savings and Transformation

Even before this crisis, CFOs told Gartner that their cost-structure problems were essentially people problems. Two out of their top three cost-structure concerns related directly to talent:

• 75% of CFOs agreed that competition for talent in core geographies is a cost-structure concern. 
• 66% of CFOs agreed that the cost of people is outpacing productivity gains.

In short, the location of and competition for talent, and especially for certain skills, inflates costs and constrains overall productivity for organizations everywhere. And that was before COVID-19 upended the whole productivity equation.

Read more: HR Under Pressure to Cut Costs? Know How to Protect What’s Important

Separate the cost of skills from “talent”

To untangle this vicious cycle of costs, TalentNeuron has long posited that HR leaders must be able to disaggregate their “talent” needs into skill needs — so they can proactively and efficiently pursue skills that are critical to business needs and performance. 

The head of talent management at one financial institution summed up the challenge recently, telling me: “When we looked at our labor force through the skills lens, we found that we had two-thirds of our skills wrong. We were headed for disaster.”

As organizations move through the phases of the current coronavirus crisis — from the initial immediacy through midterm sustenance and eventual recovery — the skills-based approach provides a more rigorous and cost-effective way to identify, locate, employ and compete for critical hires you might otherwise overlook, and who might otherwise be underemployed. 

How labor market analytics help 

HR leaders are on the frontlines, marshalling business heads to make smart, cost-efficient workforce decisions so the organization can weather the current storm, sustain through the crisis and eventually recover. But what ammunition do they have?

To me, their most powerful weapon is labor market analytics. And here’s how to use them.

Buy and build the right skills 

You can’t keep hiring and building skills to execute last year’s plans; focus on skills that set your organization up for success for the long haul, even during high levels of volatility. 

It is highly cost-effective to upskill and redeploy talent you already have. To do that effectively, and avoid costly and unnecessary layoffs, first use labor-market analytics to:

• Identify the future skills and capabilities your organization will need and assess emerging roles and skills in key functions.
• Assess the impact of digital technologies on your workforce.
• Identify adjacent roles and skills that already exist in your workforce as a source of key talent.

Learn more: Do More With Data to Close Critical Skill Gaps

Location, location, relocation 

Whether you are looking at the costs of your existing locations or considering others (for relocation or expansion), labor market intelligence can save you millions in the short term and ensure your survival in the long term. 

Leverage location intelligence to:

• Account for the direct and indirect cost of geopolitical and security risks.
• Compare the total costs (not just base compensation) of one location over another to demonstrate the realities to a CFO, CEO or board looking for lower-cost alternatives. 
• Equip business leaders to determine the best locations within your footprint to grow, maintain or reduce head count based on supply, cost and competition. 
• Embed optimal future locations for innovation, market expansion or cost optimization into strategic plans.

Compete for talent

The pandemic is changing the global playing field for talent. Many organizations have imposed hiring freezes; some are still hiring for pivotal roles, and some have gone on the offensive and stepped up hiring. A few are taking a long-term view and recategorizing the skills they deem critical. 

Whether you are hiring now or want to be prepared for the recovery phase — when you will want to protect your own critical talent from being poached or you may be hiring — you can use competitive intelligence to: 

• Analyze which organizations are hiring for the roles you deem critical.
• Challenge business leader assumptions about who your biggest competitors are in this dynamic market.  
• Tailor your retention strategies to the degree and nature of the competitive risk in the market.
• Understand the areas of growth/decline in skill sets key industry competitors are eyeing.

I know everyone is under pressure right now, and it is natural to second-guess ourselves or be struck by decision paralysis. Labor market insights will help you tackle complex decisions and avoid costly errors. Don’t go it alone without them. 

Scott Engler is VP, Advisory for CFO/CHRO, Evangelist for TalentNeuron and host of the Talent Angle podcast. Scott works with companies to predict the future of the workforce and help them plan for the capabilities that will give them a competitive advantage as AI, massive skill changes and the gig economy come on line. He also works with CFOs and CHROs on strategy, board relations, talent planning, business performance management, analytics and leadership.