Now TRP is as essential as MRP

In this article we want to emphasize the need of Talent requirement Planning or Predicting talent requirements of a Company. The need is as essential as MRP or Material Requirement Planning for Production. In case of IT expected business from clientele based global business trends where TRP is becoming essential.

The biggest workforce challenge that employers face in a volatile economy like that in India lies with workforce planning. The new problem that companies face in the general area of talent management, and that is dealing with uncertainty, the virtual impossibility of knowing what business demand and talent needs will be in the future.

In the old Indian economy before the 1990s, it was easy to make these predictions because growth was slow and predictable. As a result business demands were also highly certain and predictable. After the economic reforms, explosive economic growth made forecasting business demand and talent needs highly uncertain.

Recent surveys suggest that up to two-third of US employers do no workforce planning of any kind, no forecasting of how many employees they will need and what roles they need to be in. A generation or so before, roughly 90% of US employers actually had a dedicated “manpower planning” function to forecast talent needs.

No workforce planning in practice means relying almost entirely on outside hiring because internal development requires some planning to execute. Relying entirely on outside hiring has lots of drawbacks-under-cutting morale and retention of current employees and, more recently, facing a tight labor market where costs are rising and supply in uncertain.

If outside hiring has reached its limits and the traditional planning approach doesn’t work, what’s the solution? It begins with acknowledging the risks that our forecasts will be wrong.

One approach that leading companies like Dow Chemical and Capital One have taken has been to move away from efforts to generate a specific forecast of future demand and instead moved to develop simulations of future demand. The difference is that simulations generate lot of estimates based on the different assumptions that operating managers might hold: “Tell us your best guess about your business plans, and we’ll tell you how many and what type of talent you need. Now give us your second best guess, and we’ll generate a new estimate.” The idea is to get at what statisticians refer to as robustness what is the range of likely outcomes for talent demand? A hidden benefit from this approach is that human resources get to influence the business plans of the operating managers: “Your strategy will require this many outside hires and internal promotions. Are you sure you can handle that?”

The next in forecasting, and one that few companies yet have tackled, comes directly from supply chain management: What happens when our best estimate is wrong, as it surely will be? The odds that we will be able to predict the number of new people we need exactly is about zero. So what does it costs us if we are wrong? We can be wrong in two ways: Too little talent, which can get in the way of getting business done, and too much talent or surplus employees, leading to layoffs.

Fortunately, calculating these “mismatch” costs is straight-forward: What would we have to do if we have too little talent or too much, and how much would that cost us? A generation ago, the big concern was falling short on talent needs because there was no just-in-time alternative. Going long was a less of a concern because excess talent could be parked on a bench where it would wait until there is a need. Now the situation is reversed. There are lots of alternatives to find just-in-time talent like outside hiring, temps, contractors as long as the amount of such talent is relatively small in numbers and duration.

Going long means maintaining a “deep bench”, which is another term for inventory. The reason that an inventory of talent is so expensive now is because of attrition. The best way to lose valuable employees is to give them skills and than ask them to sit on a bench and wait to use them, turning down the calls from head-hunters along the way.

Good business practice requires minimizing the sum of both of these costs. We do that by moving in the direction of the risk that has the lower cost. For most employers now, that means under shooting our best estimate of demand to avoid the risk of going long. If our best guess is that we will need 100 additional middle managers next year, we might want to plan on developing only 90 to avoid going long.

There is a good chance that we will have to hire a few middle managers on the outside market if we fall short. If our estimate of demand is really uncertain we could need as few as 80 internally to avoid the risk of having surplus talent. Then if we fall short, as we likely will, we make up the gap with outside hiring, contract work or temps.

A more realistic and cost-effective approach to business begins by addressing, not ignoring, the uncertain environment in which we operate. And that is true for talent management as well.