If the last few years have taught business leaders anything, it’s that your organization has to be prepared for the unknown. And although “future-proof” may be a trending buzzword right now, the idea behind it is an important one: there’s a need for businesses to take proactive action that allows them to be flexible and agile in the wake of uncertainty.
Scenario-based planning is one of the most effective tools for this.
Finance teams and executives have long relied on scenario-based planning to mitigate risk, but human resources leaders should also be using this strategy given the quick-changing nature of today’s world.
Effective scenario-based planning takes into account the skills and agility of your workforce — and then addresses the skills gaps that become apparent in the process. Prepping and upskilling your people for all number of possibilities will build adaptability and resilience within your entire organization. Then, when circumstances demand change, you’ll have skilled talent capable of stepping up to the plate.
Let’s discuss how to use scenario-based planning to prepare for the internal and external circumstances that might necessitate adjustments to your HR strategy and ensure you’re ready to proactively address your greatest talent challenges.
What is scenario-based planning?
Scenario-based planning is a strategy for mitigating risks and capitalizing on opportunities that prepare for the future by considering various situations and their possible outcomes.
This strategy helps executives understand the potential effects of a number of different but plausible events. Based on this understanding, finance, HR, operations and other critical departments can prepare initial responses that might be necessitated. If these stakeholders are unavailable during an actual extreme event, the company will have access to documented plans to effectively navigate the situation.
In terms of HR, this exercise should view potential scenarios through the lens of how each might affect your workforce needs, with the objective of getting your company and your workforce ready for any number of real-world situations in which you could reasonably find yourself.
Often, companies will take too narrow of an approach to future planning, setting only objectives that predict the future they want to have and the future they think most likely to happen. This approach helps you prepare for some scenarios but can fail when things don’t go as planned. The whole company — and especially HR — can find itself with a workforce ill-equipped to shift direction or move into action in response to unexpected, real-time change.
On the other hand, scenario-based planning allows your company to get ready for a range of reasonable possibilities by considering, planning for and rehearsing potential actions under uncertain or unpredictable circumstances.
The benefits of scenario-based planning for people leaders
Every shift in strategy, whether due to unforeseen circumstances or a change in company direction, requires a resilient, flexible workforce to implement the new strategy into action. Scenario-based planning provides leaders a framework for making educated HR decisions, from how to best allocate L&D dollars to reorganizing staff for more coverage in underprepared areas.
When it comes to learning and development specifically, scenario-based planning can provide you with clearer insight into the potential skills needs and gaps of your future workforce. Start first with your organization’s expected or ideal future. Does your workforce have what’s needed to deliver on your present strategy? If not, where should you be investing resources and training?
From there, you can expand toward best-case/worst-case scenarios or scenarios based on significant potential changes in, say, policy or the economy. What skills and abilities would your workforce need in those instances?
Running these scenarios can inform your L&D initiatives and play a strong role in succession planning. You may find you need to pack your succession bench differently depending on the scenario. L&D is a long-lead endeavor, with initiatives often taking longer to plan, implement and execute. Scenarios offer valuable, immediate insight into the future(s) you need to prepare for.
Steps to using scenario planning for workforce learning & development
Here’s how to integrate a scenario-based approach into your greater workforce planning strategy.
Step 1: Use existing data to fabricate scenarios
The first step is to combine historical data with plausible outcomes and use this to predict ramifications for each part of your L&D plan. Consider factors like employee expectations, technology requirements and training tools as well as external factors like industry conditions. Additionally, consider potential shifts coming in society, economics, tech and politics, and generate scenarios based on these to inform your strategy.
Here are a few scenario examples:
- What happens if Equal Employment Opportunity (EEO) regulations change significantly in terms of recruitment, hiring and firing. How might that affect our HR processes?
- What happens if our two main competitors merge? How would our organization respond to that strategically and what talent gaps and skills gaps would we need to address in HR to stay competitive?
- What if we ramp up our internal capabilities to deliver training and education, only to face significant head-count reductions due to market conditions? How can we make the most use of L&D dollars on a reduced budget?
- The organization is betting big on a new product next year and the COO is going on maternity leave. If sales exceed projections, do we have the infrastructure, manufacturing and people in place to deliver the goods on time, as well as a well-trained replacement for the COO’s leave?
Step 2: Define the stakeholders
Discussions and predictions surrounding your scenario planning are only as good as the people contributing to it. It’s absolutely critical to have wide representation on your team whenever discussing scenarios, especially where L&D is concerned. Different employees have wildly different needs and a commitment to cognitive diversity encourages a wider variety of situations and solutions to be considered.
Step 3: Define the variables most likely to impact the outcome
Anticipate that headcount, budgets and resources could be impacted by a disruption. Some business models will be permanently affected – but how? And what actions can you take to bring greater adaptability and minimize disruption?
Step 4: Prioritize based on likelihood and impact
With seemingly endless scenarios to consider, half of the battle is prioritizing them based on the highest likelihood and the largest impact in areas where you’re least prepared. Turn to the executive level for guidance and clarification on long-term strategies and their largest concerns for business success.
Step 5: Test, assess and refine your scenarios
Scenario-based HR planning is an ongoing process and testing is a key component for feasibility. Take this step in three parts:
- First, consider the plausibility of the scenario, the level of impact and then the feasibility of your solution. Look to historical data that speaks to the likelihood of the scenarios you are running. Consider also reviewing previous test data to better understand how employees respond to new initiatives and what was most successful.
- Create a cost-benefit analysis to illuminate the implications of choices. What is lost and what is gained in your various scenarios? Are there some anticipatory actions you take that result in a greater loss than necessary? What changes can you make to mitigate these potential losses?
- Create a contingency analysis to help manage risks and seize opportunities caused by external impacts. See how this affects HR strategy, with particular attention to L&D for filling new skills gaps. Repeat your testing process with every change you make to your scenario planning to ensure the best functionality for your evolving HR strategy.
Technology for scenario planning
Better data gathering and intelligence analytics through advanced human resources management technology can help you better understand historical data and more accurately predict and plan for future scenarios.
Similarly, it’s equally as important to ensure that your L&D initiatives are easily measurable and you have access to data that speaks to program performance and impact. With these tools in your kit, your company will be better able to establish diverse solutions and build future-proof strategies to keep your people and your company moving forward in uncertain times.
Scenario-based planning can bring peace of mind and drive vital decisions regarding succession planning, recruitment, upskilling/reskilling and technology advancements. This process verbalizes the potential ups and downs and shifts your organization may face in the next years, and that alone instills an awareness that can shape decisions and provide a more inclusive view of how the future might look.
Tunnel vision serves no leaders well. Scenario-based planning removes the blinders and brings the periphery into view, giving people leaders the tools they need to see what’s coming from all sides.