Preparing for an Unpredictable Future: How HR Needs to Drive Scenario-based Planning
More than ever before, we’re being reminded that the future is not a fixed and static destination. Our economies, the labor markets as well as the world of work are being reshaped before our very eyes. This means that instead of planning for one future, businesses need to learn to plan for multiple and evolving futures and account for numerous potential scenarios.
And HR needs to drive this process. More broadly, HR has a key role to play in facilitating the process of defining these multiple future scenarios for the business. And more specifically, HR also has a responsibility to ensure that its own strategies and operations are scenario-based and dynamic to be able to address challenges such as talent shortages and the Great Resignation.
It’s hard to predict the future. So prepare for multiple scenarios
Change is here to stay. And its pace is accelerating. This means that the challenges organizations are having to grapple with are becoming more complex.
Whether it is the need to address climate change, employees’ changing work demands, high attrition rates, accelerating digitalization of the workplaces, rising inflation or laggard supply chains, complex challenges are making it increasingly difficult to accurately predict the future.
That’s why organizations should invest more time and effort into identifying multiple scenarios and preparing for all eventualities. This is called scenario-based planning.
While scenario-based planning is an approach that has already been used extensively within the business and financial strategy domain, HR has not yet fully embraced it. This needs to change.
Scenario-based planning and how it helped retail during COVID-19
Companies that do scenario-based (i.e. identifying multiple potential future scenarios) and dynamic (i.e. the ability to change plans as the situation evolves) planning are more likely than their peers to perform at or above financial and other targets.
Take the example of the retail industry. Prior to the pandemic, many retailers still relied heavily on their strong store presence to sell their goods and products. All that changed with COVID-19 and the numerous lockdowns that followed.
All of a sudden, organizations had to adjust business plans that did not account for the need for a massive expansion of online shopping on the go and quickly. Retailers were caught off guard because they did not foresee a future that could potentially shift from onsite to online so swiftly.
But not all retailers suffered equally (or at all). Those that foresaw the eventuality (once the pandemic started) that lockdowns would last longer than a few weeks or months and prepared for this scenario, were quick to develop a new or expand their existing online shops. As such and unlike others, they were able to continue selling to customers whose buying behavior had radically changed.
In other words, they embraced scenario-based planning and benefited from it.
Four elements of scenario-based planning
Be it retailers, the hospitality industry, or any other business in another sector, for an organization to do scenario-based planning well, it needs to consider these four elements:
- First, the company has to identify all relevant scenarios of where the market could move.
- Second, it needs to identify all external flags that would guide the organization in leaning toward one scenario rather than others based on how the situation evolves on the ground.
- Third, the leadership needs to outline business responses for each of the scenarios. This exercise is useful for the company to see what specific internal policies it would need to change in order to implement each scenario (if and when that scenario proved most accurate).
- Last but not least, the company has to assess all scenarios based on how likely or unlikely they are (and do so in percentage points to try be as precise as possible). Moreover, the company also needs to continuously monitor and assess the viability of other new potential scenarios occurring from the evolving reality.
The role of HR in scenario-based planning
When it comes to helping organizations embrace scenario-based planning, HR needs to lead in these three areas:
#1. Facilitating the process at the company level
The challenges that companies have to foresee and seek solutions to are increasingly complex. That’s why coming up with potential scenarios in the first phase of the planning will require the involvement of many departments and teams across the organization. HR thus needs to lead collaboration in this process.
Moreover, as it has a good overview of not only the organization’s own workforce but follows the trends in the broader economy, HR’s qualitative input on the state of the labor market (based on real data), for instance, will be very useful in identifying both the scenarios as well as potential external flags indicating where the market is moving.
#2. Identifying and implementing HR interventions
Realizing each scenario in practice would require a number of HR interventions to support the organization’s response overall. It would, thus, be up to the HR department to both clearly outline and prepare concrete action points to take for each scenario individually.
These interventions can range from the more high-level (e.g. updating strategies, suggesting a change to the organizational design) to more concrete (e.g. freezing all vacancies, continuing or changing leadership development programs).
#3. Introducing scenario-based planning to HR itself
While HR certainly has a role to play in facilitating and contributing to scenario-based planning at the organization level, its own departments can benefit from the practice internally as well.
There are many challenges that organizations face where HR plays a primary and dominant role in helping find the right solution. A good example of this is the current talent shortages or the changing relationship between workers and work leading to high attrition rates.
An HR department that uses scenario-based planning is thus able to quickly react to any change in the labor market.
For instance, dealing with the Great Resignation, a scenario-driven HR department would be ready (if need be), among other things, to:
- Launch (internal) talent marketplace
- Overhaul upskilling and reskilling programs
- Improve employee’s career experiences
- Deliver inclusive rewards
Prepare for multiple futures now
In today’s volatile world, no company can afford the luxury of having a tunnel vision when it comes to an increasingly unpredictable future.
To help organizations become more scenario-based and dynamic in their planning, HR departments will need to step up to the plate and take leadership – not only to facilitate and contribute to the process but also to use the technique internally themselves.
HR teams that adopt this approach set themselves and their businesses up for success – especially in today’s volatile world.