How could a strategic workforce planning process for aging ground technical staff in the international Airline business with the goal of creating a new staffing process look like, by using the example of Austrian Airlines?
In the current world, many companies cope with different types of challenges. Considering how globalization has changed and connected the whole world. On one hand, information gets shared faster; many new private, travel and business opportunities have opened-up. Although on the other hand, all business were in course of few decades forced to either start cooperate with each other or have gained a new competitor on the market. After the economic crisis in 2008, business environments got very difficult to deal with and as a consequence, it became essential for companies to focus on their future strategic goals and achieving them. But how can it be assured that an organization will reach its target? The nowadays situation has become so ambiguous and volatile that companies have to continuously adjust to their current environment. By looking at the level of competition between companies, the speed of globalization, where everything is connected to and affected by everything at the same time, it is implied that these two main factors have both great deal on working environments as well as the work-life balance of the current working world. Yet the level of uncertainty keeps rising and it has become more and more difficult for businesses to cope with these factors. Even though new technologies have a great deal on improving organizational efficiency and effectiveness – within companies – there will always be a need some sort of working force (manual and intelligence personnel) in order to push and move forward. It is commonly known that what is not moving forward or growing is deteriorating and… dying. The question is – how companies can, in such insecure times, ensure that there will be always as much personnel employed as it is needed for the company to grow and accomplish its targets. And what kind of personnel needs to be employed to fulfil the performance standards required, yet still will be able to plan ahead. In other words, how can they assure that the planning of their workforce (the workforce planning) will be aligned within the organization? What are the instant essences one needs to consider when planning ahead and setting those future targets for an organization in the current world? How is it reinforced that there is always the right number of employees within specific departments and that this number will guarantee a stable growth for the company? This master thesis will aim to answer at least some of these questions. More specifically, the thesis will focus on how can companies predict and plan the need workforce in order to achieve their strategy.
Such problematic is called by many names: Strategic workforce planning, strategic staffing, workforce planning yet they all have one definition in common. Having the right people, with the right skills, in the right place, at the right time. Strategic workforce planning is a complex subject depending on its focal points that are being assessed, particularly at the time of increasingly turbulent business environments delivering high incoherence level, which escalates the tension between the greater need for planning and increased difficulties of prediction at the same time (Louch, 2014).
The need for increased ahead planning correlates also to the complexity of industry and its markets. The more competitive industry, the greater need for planning. Although there are many interesting and complex industries for which the topic of workforce planning would be perfectly suited, the author will be focusing – within this master thesis – on the airline industry. The airline industry was chosen due to the fact that the author’s current employer is a company from the airline industry and this firm is currently tackling with the topic of workforce planning. From this point of view, it sets a perfect example since there are not many companies within the airline industry that have successfully set and implemented a workforce planning processes. To add, the importance of the success factors for setting and implementing a workforce planning process needs to be stressed as well.
Over the past years, it has been argued that companies need to develop some sort of tool to have the right people, with the right skills, in the right place, at the right time. Therefore, it comes as no surprise that companies have the necessity to develop such tools for themselves. However, Bechet (2008, p. 10) argues that even though companies do develop and implement such tool within the organization, it is usually set too generic and not problem solving oriented. As a result, over the time the whole process just gets too bureaucratic – becomes disliked by most of the company managers and employees – and fails. Yet what Bechet (2008, p. 10) also pinpoints is that it is essential for companies to have such tool, however the tool always needs to be problem specific and thus also problem solving oriented and continuously adjusted over time.
Although, it is not the only factor that is needed to create a strategic workforce planning process in a company. Also other disciplines like talent management, demographics, corporate strategy and many others do come in a role. Due to the complexity of this topic, the reason why the strategic workforce planning process needs to be problem solving oriented is obvious. Without focusing on a certain issues within firm’s departments like workforce aging, high turnaround rate, company expanding and continuous adjustment of these, the whole process becomes just a set of different bureaucratic papers and counting numbers, which have neither any meaning nor effect for the organization as a whole.
Also Kai Berendes et al. (2012, S. 9) supports the idea that “strategic workforce planning is about using the necessary personnel resources to allow a company to fulfill its business purpose and to develop coordinated HR programs and processes.” What comes in question is what are the actual challenges, prerequisites, risks, outcomes and planning steps that need to be dealt with, in order to succeed in the execution phase.
Regarding this master thesis, its primer focus is how to deal with the aging workforce in the airline industry and how to set such tool which will allow a company to plan ahead in order to avoid any future inconsistency within their staff. As already mentioned, a perfect example came in from an airline company which will be soon coping with such challenge. So what comes next is that airline needs to put into action a process on how their staff will be planned in order to achieve the future strategic goals of the company (Dye & Sibony, 2007). Therefore the pinpoint of this thesis is researching the circumstances of why does the example company not have such process in place yet and will elaborate on finding out how could these upcoming problems be pro-actively solved. Thus the research question for this paper is stated as:
“How could a strategic workforce planning process for aging ground technical staff in the international Airline business with the goal of creating a new staffing process look like, by using the example of Austrian Airlines?”
Hence the focus on strategic workforce planning process in airline industry will be essential part of this paper. In further detail, the main emphasis will be put in researching topics of strategic workforce planning process for Austrian Airline Company – Austrian Airlines AG. Thus topics as talent management, economics, strategy, talent management, demographics, planning and the aviation industry in Austrian market will be reviewed as well.
1.1. Scientific relevance of the research topic
As the literature points out “the link between human resource planning and business strategic planning is vital if personnel programs and systems are to be attuned to the changing needs of an organization” (Burack & Mathys, 1985). This fact has been on the discussion table in various organizations that have struggled with organizing, planning and retention of their employees. Yet some organization still lack to acknowledge the nature of this issue and rather keep over-hiring or dismissing their personnel, when the real problem could be solved by having workforce planning process that are aligned with the corporate strategy in place.
To demonstrate the importance and synergy of aligning the workforce planning processes with corporate strategy, this master thesis takes as its purpose to observe and monitor the process of designing and creating strategic workforce planning process by using Austrian Airlines AG as an example. However, this process design shall not be used as consulting project for Austrian Airlines AG. On the contrary, it is supposed to illustrate what are the prerequisites, success factors, risks, challenges and other issues for international airline companies while creating such or similar process for themselves.
1.2. Outlining the master thesis
In order to thoroughly understand the discussed problematic, this master thesis will as first cover the theoretical part, where it will illustrate and describe the basic terms needed for a creation of strategic workforce planning processes. The first chapter of the theoretical part will cover the problematic of demand and supply and will provide information about how does it fit to the context of creating strategic workforce planning process. The second chapter will define the term strategic workforce planning and outline the Bechet’s staffing model, which will be used in calculation that will follow in the empirical part of this paper. The third chapter will reflect on the previously discussed topic and continue with explanation on how talent management fits into the concept of strategic workforce planning and what is its importance in the daily business. The next chapter of the theoretical part will briefly discuss and show the concept of job families, which also cannot go forgotten in the creation of strategic workforce planning process. Chapter five will connect the dots and present some of the major issues and provide explanation to why is workforce planning such a powerful tool for businesses. The last chapter of the theoretical part will introduce and portray the aviation industry and will further elaborate on the description and current challenges of airline industry.
Continuing, the thesis will present its research methodology and there draw the reason for choosing its particular research method.
The next milestone of this thesis will be the empirical part. The empirical part of this paper will cover the introduction of the particular business case, as well as thorough analysis of the research findings, which will be further discussed in the discussion section of this paper. Advancing, the discussion part will present the outcomes of the research and will depict the suggested strategic workforce planning process structure for Austrian Airlines. This part of the paper will reveal the major lessons learnt and know-how gain for the industry. Following the resulted structure will be compared to other airlines in order to set the example.
Last but not least, the paper will conclude the research with some general future outlook for business areas, which could be possibly coping with the same or similar problem in the future and try to provide some advice. In the appendix, the paper will provide all interview guidelines and transcripts.
2 Theoretical Part
The main focus of the theoretical part of this research paper is to provide comprehensive overview about the literature and in it contained theory, which will serve as the theoretical base for this paper and be needed to understand the content of the research. Thus before it is further elaborated on what strategic workforce planning is and how is it used, some key terms will be defined.
2.1. Supply & Demand Framework – finding the gap
One of the very primer theories to cover in this thesis is the supply and demand concept, which basically occurs in all aspects. The whole market orients itself around demand and supply. The labor market as well. Economically speaking, demand is defined as “the amount that consumers plan to buy during a given time period at a particular price” (Parkin, Powell, Matthews, 2005, p. 55). And in contrary, supply is defined as “the amount of good or service that producers plan to sell during a given time period at a particular price” (Parkin, Powell, Matthews, 2005, p. 60). Such principle applies for all goods, services and resources available on the market.
In regards to this topic Trost (2014, p. 39) shows very suitable example of talent availability in the market and talent seeking companies. The below provided graphic illustrates the situation:
Figure 1: Talent Portfolio (Trost, 2014, p. 39)
There Trost (2014, p. 39) draws the importance of a talent available on the labor market and its strategic relevance for organizational success. What is talent and its definition will be provided in chapter 2.3.
For companies, knowing what is the actual supply and demand of the workforce is one of the crucial variables in creating future strategic staffing plans. In general, it needs to be known, how many employees are among the company’s workforce in a specific department. It is also needed to know how many employees will, within that specific department leave in a future (i.e. going on maternity leave, pension, switching job within or outside of the company, etc.). This creates the so called staff turnover rate. The staff turnover rate is “the parameter ´employees leaving company’ that includes all employees leaving the company due to natural turnover, termination initiated for operational reasons or voluntary termination. The turnover figure shows the ratio of employees leaving the company to the average number of employees. Target value <5% good, <10% cause for concern.” (Berendes et al., 2012, pp. 54-56). Another important aspect in knowing the supply and demand is the overall costs. As costs are usually one of the most discussed and planned factors, one needs to be perfectly aware of how much is everything worth. For example: how much does it cost to have one full time equivalent employee (FTE) in the company; what are the development costs of this employee when he/she undertakes trainings, workshops, etc…; what will it cost the company in case this employee wants pay-rise, leaves (dismissal costs) or is redeployed and what will be the knowledge cost; and last but not least, if the employee leaves how much will it cost to find a new one. What are the cost of recruiting (e.g. considering the fact that for some specific positions the opening position needs to be advertised through special channels which can cost triple as much as normal advertising) and what are the costs of training this new employee? All these aspects need to be considered while reviewing the overall cost of one employee and then be multiplied by the number of employees in the particular department. Last but not least, it is also crucial to know what time horizon for planning is needed. Is it planned within this and next year, or will it be needed to establish more long-term plan?
Summarizing, to allocate the actual supply and demand of the company’s workforce, the following information is necessary:
• Which department is facing future problematic (the business case)
• How many employees are there
• How many employees are affected by this problem
• What are the overall costs of it
• How long in the future does it need to be predicted
Once all the above mentioned variables have been allocated, it can be established what is the company’s today’s supply in the workforce and what demands will it rise in the future established period. Hereby, the very first base of workforce planning has been set and it can be seen where the current gaps and surpluses within the actual workforce are. How to develop this plan even further will be discussed in the following chapter.
2.2. Strategic Workforce Planning
In the previous chapter, the base for creating a strategic workforce has been outlined. In this chapter, more in depth definitions and overview on strategic workforce planning will follow.
As already mentioned, one of the broadest and yet the most precise definitions of strategic workforce planning is: Making the necessary personnel available at the right time, in the right place and with the right qualification in an efficient manner. Explaining, strategic workforce planning is about using the necessary personnel resources to allow a company to fulfill its business purpose and developing coordinated HR programs (Berendes et al., 2012, p. 9). Some examples of such coordinated HR programs are talent management, which is highly embedded into workforce planning, knowledge management, retention, etc. Some companies implement their workforce planning according to their current gaps and surpluses in staffing and this tool then helps to identify challenges connected with it as well as to avoid these problems in the future.
On the other hand, Bechet (2008, p. 43) defines workforce planning as the short-term, tactical plans that describe what an organization will do in the near term in order to address immediate workforce gaps and surpluses. Staffing plans describe specifically what the organization will do in a given planning period to support the implementation of their chosen staffing strategies. The basic building bricks for creating and calculating such strategic workforce planning model are current staff supply, future supply and future demand. Parkin, Powell, Matthews (2005, p. 68) describe that supply is more than just having the resources and the technology to produce something. These are the constraints that limit what is possible. Whereas demand is the unlimited desire and/or wish that people have for goods and services.
In strategic workforce planning, there is a model, which was described by Thomas P. Bechet (2008, p. 43). This model is able to define and calculate the future workforce, consisting of four main process steps. Also other literature agrees upon similar steps that need to be undertaken while creating a strategic workforce planning process. Introducing them in general, these are:
1. Identify challenges
2. Derive and assess options for action
3. Formulate measures
More detailed explanation of these four steps will be provided in chapters 2.2.1 to 2.2.4 by using Bechet’s process model (2008, pp. 41 – 76).
2.2.1. Define critical staffing issues and areas of focus
As previously discussed, this is the kick-off point where a company needs to ask itself. Where the challenges in terms of our workforce lie and what issues will we cope with in the near and distant future. In order to be able to identify the future focus point, the company HR needs to consider quite a few aspects to clearly set the future area of focus:
Understand the long-term business context
Some people would under the term long-term business context imagine the corporate’s strategy or vision. But in fact it is more than that. When considering the long-term business context, all aspects need to be included. Meaning, business objectives and plans, projects, business vision and mission, but the key really is well-defined business strategy. With well-defined and communicated business strategy, the company has much clearer image of what is going to happen and towards what direction is the business leaning to. Thus it becomes obvious that for pinpointing any future staffing issues one needs to not only be expert in the workforce planning field, but also must have deep understanding of the business and business area the company is in. Therefore is the overall plan called strategic workforce planning, as it not only introduces the workforce plan but it actively builds on the business strategy.
Identify staffing issues raised by business plans
Once the business strategy had been clearly identified, the company has to have a look at what parameters of this strategy can cause any future issues in the workforce. To be precise, any key business initiatives, plans, actions and projects need to be assessed in order to find out any potential significant workforce issue these might cause. This creates an awareness of all personnel obstacles in the business plans. In the next step, it needs to be decided to which critical job categories it is needed to pay special attention to and what staffing issues they will cause. These could be represented by any types of business mergers, introduction of new technologies, new business expansion projects, repositioning of the job families, market repositioning, etc. For instance, if the analysis shows that one of the several future bottlenecks lies in the changes of operational technology, the possible staffing challenges it may cause could be: aroused need to hire new more skilled staff; reallocate the current employees within the specific business area and/or provide for them some training; and also the possibility to have to reduce or redeploy all employees whose current skills and qualifications are phased out.
Identify other potential staffing issues
When there is a plan A, there is also plan B. Having a plan B means addressing any possible workforce issues that are not directly connected to the certain area of a business plan. Assessing and developing such a plan B helps to identify and lower any possible risks that could dramatically hinder the upcoming primer business plan and with it connect strategic workforce plan. These could be all kinds of widen company issues like, retirements or other kinds of changes and challenges in the personnel. An example of such issue could be deciding to assign three months project to the almost retired financial manager instead of his successor. Despite the successor having much certain attitude, the current manager may have other sets of skills that are needed specifically for the project and thus take a different approach. In that way the successor could use the opportunity to “look over the mentor’s shoulder” and even expand the learning outcomes that are going to be passed on him/her in the future. Also the company benefits from it, as in that way it will be secure that the project has lower risk of failing due the combined approach of skilled senior and out of the box attitude successor.
Select the staffing issues you will address
Once it has been identified what are the bottlenecks of the new business strategy and what are the indirect obstacles, it becomes obvious that if there is one too many problems it will not be possible to solve all of them. Therefore, it needs to be decided to which issues will be put focus on. This depends purely on the business case, whether the issues will be prioritized based on risk levels or necessity levels and be addressed in particular timing sequence or according to the need.
2.2.2. Define staffing gaps and surpluses
After learning what the company should focus on, the model leans into its next step where it looks at the burning areas and identifies what are the staffing gaps and surpluses in the overall demand and supply of the workforce.
Define your overall workforce model process
The definition of the workforce planning process requires a projection of staff availability and the calculation of specific gaps and surpluses for defined planning period. It is essential to define how much personnel is needed (demand) and how many high-potentials are there currently in the positions (supply). Once it is known how many employees the company currently has (in terms of headcount as well as position types) and what is the turnover rate, it can be calculated what is the exact number of people which will be needed in the given time period. This creates the supply. Afterwards, the supply needs to be compared to the future demand, which shows any gaps and/or surpluses in the personnel. These are the so called „net needs“. Now that the net needs became visible, the staffing actions in term terms of filling-in positions with the right and skilled workforce have to be planed. See the overview of this model process on the graphic below:
Figure 2: Strategic Workforce Planning Model (Bechet, 2008, p. 53)
Create detailed workforce model and define the parameters
Once the framework has been created, now it has to be looked at the specifics. Meaning, in this process part all critical staffing issues need to be reviewed, the exact amount of gaps and surpluses calculated and actions developed. It is crucial to keep in mind that each staffing issue (each business case) needs its own specific workforce model process. To further develop this workforce model, outside of the essential direct parameters one needs to include also the indirect parameters:
• Planning horizon
Time frame parameter is split into two main components. Planning horizon, meaning how far in the future it will be planed. And planning period, which describes how often will the plan be reviewed.
This parameter defines exactly which jobs and personnel should be included in the plan. It looks thoroughly at three main groups: the target population where all the position openings are, the sources of the talents that fill-in opened positions as well as the potential internal sources which could potentially use the talent of just filled-in positions.
• Model structure
This more like tool serves to help to keep the “big-picture” of the overall process. This matrix also helps to keep track of changes and adjustments.
Define Staffing Requirements
In this process step it needs to be, once again, looked closely at the demand. Upon elaborating whom will you need, it has to be precisely distinguished which functions and roles will be mostly affected by the process plan, what are the competency models of the company and what kind of skills and qualifications are absolutely necessary for those affected functions. To keep the overall picture, all roles and their detailed descriptions can be fit into a matrix, which will be filled-in as the process goes. As a result of the assessment, the complex definition of the critical capabilities and required staffing levels should be created.
Forecast staffing availability
This specific measure focuses on the next process step after analyzing the demand which is the supply. To begin with, all involved job categories need to be defined by analyzing the currently availably number and types of employees. This can be achieved by simply looking at the company’s Human Resources Informational System (HRIS). Following, the overall existing capabilities within each job category need to be documented in order to provide comprehensive description and identification of each job cell. Bechet (2008) points out the fact that once the specific number of currently available employees had been calculated “supply now”, the “supply then” – future supply – needs to be identified as well. While calculating the future supply, one needs to consider two types of staffing actions:
• Uncontrollable actions occur independently of any staffing strategies and/or plan (i.e. any kinds of unexpected employee leaves)
• Controllable actions appear when they are defined and executed as a part of any staffing strategy and/or plan, in any case these actions are always expected
This leads to the next point of “supply then” or “future supply” calculation:
Supply then = Supply now – all future leaves
Future supply (demand) equals to the current supply (demand) minus all potential future leaves (e.g. Voluntary turnover, Retirements etc.). The calculated figure shows the estimated employee leaves. In general, it is essential to consider the future retirements, turnover rates, promotions and already planned new hires. These all also add up to the overall calculation of supply then.
2.2.3. Developing staffing strategies
As the name suggests, staffing strategies do focus on the specifically set personnel targets in big picture, over certain long-term horizon.
These strategies are the direction a company chooses to take after careful consideration and specific analysis of the company’s workforce challenges and needs. While setting the staffing strategy, it is essential to keep in mind whether the actual needs and issues of the working personnel are being addressed .Add some various appropriate and different channels that need to be addressed to find the relevant staff!!!!
2.2.4. Define staffing plans
The purpose of staffing plans is to define the sequence of the set staffing actions during each planned period over time. They are ought to serve as a consistent tool supporting the set staffing strategies. To be able to follow-through, the staffing plans must be defined after the strategy has been set in stone. The plans can include: redeployment, promotions, hiring, contractor use, etc. After the plans had been fixed, the staffing actions can be defined. Staffing actions are the precise To-Dos of the staffing plans.
As the next step, all necessary staffing plans as well as any supporting actions need to be documented to provide comprehensive and transparent follow-through of the overall workforce planning process. In order to complete the time frame in time, accountable persons have to be appointed.
Following, it needs to be assured that the correct number of recruiters is on hand for the planned hired personnel. One of the last important steps while creating staffing plans is to set plan revision frames and analyze the progress during each revision.
However, it is not only about filling the gaps. Having the wrong person appointed, promoted or redeployed to a certain position could cause as much damage to the company as not having the strategic workforce planning process in place at all. This is why it is essential for organizations to fully align their strategic workforce planning to their talent management.
2.3. Talent Management
Knowing your talents within the workforce is one of the essential steps forward on how to meet the set staffing strategy and how to minimize its costs. As Janice Caplan (2011, p. 1) pinpoints, the ultimate aim of talent management is to create a high-performing organization that survives and prospers in a business environment that is undergoing unprecedented structural change. That applies whether the structural change within the company or within the company’s workforce is discussed. They both are equally important. Being able to identify someone to fill a role quickly or take on a completely new challenge or move into untried waters is a major aim of talent management. Rothwell (2011, p. 120) defines talent management as a process of attracting, developing, retaining and deploying people. Also Pellant (2011, p. 318) describes talent management as a meaningful, shared, conscious, and deliberate approach undertaken to attract, develop, and retain people with the aptitude and abilities to meet the defined current and future organizational needs in terms of capacity, behavior, attitude, knowledge, and style. He moreover describes the talent management definition in the following table
Figure 3: Talent Management Definition (Pellant, 2011, p. 318)
There Pellant (2011, pp. 318-319) illustrates the process of settling down the talent management approach within an organization by clarifying the strategy of an organization, definite of the talent profiles through the internal and external selection of talents, to integration of talents into the organization by using the tool of constant feedback and revision between the core strategy and the chosen approach.
It is also a tool for organizations to help it build them build the people with the right skills, in the right place, at the right time.
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