I recently spent a very enjoyable hour discussing financial workforce planning with Mark White of MHR.

I did not fully appreciate how workforce planning has developed over the years, the huge difference between private and public sector, the GDPR conundrum nor the potential number of drivers that can be used in a salary plan. This article summarises our discussion. 

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The development of financial workforce planning

We have certainly seen a sea-change in financial workforce planning over recent years. I started my career as an accountant in industry in the 1990s, and, at this time, we were very much of the ‘last-year + % salary increase’ brigade. We may have finessed this with rough bonus, employer tax and pension calculations and changes in FTE numbers, but that was as far as we went.

As times progressed, and Excel models became more popular and complex, there was a tendency for many to move to a named individual level budget – but only if HR would release this information! 

We also saw connectivity with other parts of the budget that helped drive more detailed and accurate calculations.

Nowadays, there is the potential for hugely complex calculations, taking multiple drivers into consideration. I am sure not many finance staff would have heard of the ‘Bradford Factor’ a few years ago, but now it could well be one of many drivers! These include performance criteria, absence, sickness and disciplinary.

With the current focus on connected planning (or xP&A as defined by Gartner), we should also see financial workforce planning as an integral part of a best-practice process, alongside such elements as overhead and revenue planning, S&OP, balance sheet and cash flow.

The development of HR

If we go back a few years, HR was very much concentrated on getting payroll correct. This has now progressed to HR collecting more information and data around skills and development. HR analytics is now a hot topic, with KPIs and metrics going far beyond purely numerical data.

All of this, of course, supports the planning process and benchmarking between organisations. Benchmarking is a big subject that is becoming a real focal point for organisations as they try to attract and retain talent. 

The problem is, it’s moving very fast. Salaries and packages have rapidly moved forward, and people’s perception of the working environment has changed. What they value has changed. It is not just about money; it’s about work-life balance.

What we can be confident of is that there is a much closer relationship developing between HR and finance. Where performance management used to be purely the domain of finance, HR can now be heavily involved. Planning processes and meetings now include finance and HR. 

Excel may not be GDPR compliant! 

Whilst in the past Excel may have been acceptable as a planning solution, a combination of GDPR and extended planning drivers may change this. If you are only using the employee’s name within an Excel planning model, you are probably OK. 

However, if you require information such as gender, date of birth or any other personal information, this will bring the Excel model into the remit of GDPR and require compliance processes to be applied. 

You may find that Excel struggles to deliver the levels of security and control necessary to satisfy compliance with GDPR.

The public/private sector divide

What is apparent is there is potentially a big difference between the public and private sector when it comes to salaries and payroll. In the public sector, you are far more likely to have strict grade and scale structures with defined increments. 

Public sector tends to be more stable in terms of growth and staff, with less churn as a result. In addition, there are some specific rules within the public sector that impact workforce planning. 

An example of this is the police, where they are required to retire from the force after 30 years’ service, regardless of age. This drives the need for very long-term planning to determine future workforce needs, and planning by role rather than individual.

In the private sector, you are more likely to encounter individually negotiated salaries. There is a higher churn in employees, plus more growth. Planning tends to be shorter, perhaps only looking a few years into the future.

The other difference is the factors that can be used to determine performance. Private sector organisations may, for example, use disciplinary and sickness data, where this would be seen as unacceptable within the public sector.

Therefore, it can be easier in the public sector to plan year on year, as there is more certainty and less subjectivity. However, it could be argued that the private sector allows far more flexibility to the employer to reward and retain talent.

So, whilst I would normally argue that there is no difference between the public and private sector, this is clearly an example where there is.

This article is sponsored by MHR

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