Workforce planning is the art and science of having the right people with the right skills in the right place at the right time. There are two parts to this process. The “art” is having a strategic understanding of the various skills, abilities and experiences you need on your staff to fulfill your mission. Once you have a clear picture of these needs, the “science” part is the analytical process of determining the size, makeup, allocation and management of your workforce so you can actualize your plans.

I want to talk about the second part of the process today: how you determine the optimum number of employees to have, how much to pay them and how to allocate their efforts. Rolling dice is a game of chance and workforce planning is an analytical process, but in both, you will see that there are multiple ways to achieve your goals.

Typically, before we even start this part of workforce planning, culture and experience put blinders on us. We set some arbitrary limitations on our options so we usually only consider approaches we’ve seen before. Among these limits is the core belief that we pay our employees for 52-weeks each year and we get (roughly) 47-weeks of productive time (two weeks of vacation plus one week of sick time plus 10 days of paid vacation) from them.

It doesn’t have to be that way. Like the various combinations resulting from rolling a pair of dice, you have some variables to work with. I’m going to show you how you can do it differently and get better results. And we can do this by experimenting with changes in just three variables:

• Your total number of employees
• How much productive time they work
• Their pay

As I pointed out at the top, you can achieve the same revenue and cost results with different combinations of these variables. With a few basic facts about your workplace, we can use a calculator to help us understand the effect of manipulating these variables. I’ve attached an Alternative Workforce Planning calculator to use if you want to experiment with these suggestions in your workplace. Let’s delve into the details with an example.

The standard 47-week work year (after vacation, sick time and vacations) yields 235 productive days per year per person; if you have 100 employees on this schedule your company requires 23,500 a total of productive days per year.

The equation looks like this:

52 weeks in a year
x               5 business days each week
=            260 business days in a year
-              10 days (2 weeks) of vacation
-              10 paid holidays
-                5 paid sick days
=            235 productive days per employee per year
x            100 employees
=            23,500 total productive days for all employees in one year

You can generate about the same number of productive days by having more employees working fewer days. One way to achieve this is by hiring 7 additional employees and giving every one of your 107 employees an additional 3 weeks of paid vacation. The new equation looks like this:

52 weeks in a year
x               5 business days each week
=            260 business days in a year
-              25 days (5 weeks) of vacation
-              10 paid holidays
-                5 paid sick days
=            220 productive days per employee per year
x            107 employees
=            23,540 total productive days for all employees in one year

Just like a pair of dice, where a “four-three” and a “six-one” both add up to seven. Except we’re not relying on chance; we’re planning the company we want to build.

But we’re not quite done: you can’t simply add more employees at the same salary or your payroll / revenue ratio goes through the roof.  And because you haven’t changed your total number of productive days, your revenue will remain the same. That means that you must pay each one of your 107 employees a modest fraction less than before in order to keep your total payroll from escalating. This is not an easy thing to contemplate but stay with me a moment and we’ll look at why, in many cases, this is not only acceptable but potentially beneficial for everybody.

Next, let’s look at how we can adjust pay to keep our new system in synch. Remember that revenue hasn’t changed and we want to keep the pay / revenue ratio the same; obviously this means that total payroll and related costs must stay the same too even though we’ve hired 7 additional people. How do we adjust cash compensation to do this?  Play with the calculator a bit and we find that an 8% decrease in cash compensation across the board will bring total staff cost to exactly where it was before we added the 7 new employees.

Here’s the original situation:

100 total employees
*            $70,000 average cash pay per employee
=            $7,000,000 total payroll
+            $1,440,000 total cost of benefits (at $1,200 per employee per month)
+            $120,000 administrative costs
=            $8,560,000 total staff cost

And here’s what the new scenario looks like:

107 total employees
*            $64,400 average cash pay per employee
=            $6,890,800 total payroll
+            $1,540,800 total cost of benefits (at $1,200 per employee per month)
+            $128,400 administrative costs (pro-rated to account for more employees)
=            $8,560,000 total staff cost

Cash comp goes down, benefits and admin costs go up and the net result is no change in total staff cost.

But we’re cutting people’s pay a lot. How can this be ok? Let’s look at this from a few angles:

First, remember that your employees are working substantially less than they were before – three weeks less in this example. So if the average cash compensation in your company before the shift was $70,000 per year, the average employee made $297.87 per workday. (70,000 / 235). Now, an 8% cut brings the same employee’s cash compensation to $64,400 but she or he is only working 220 days; this means that her daily cash pay has been reduced to $292.73 (64,400 / 220), a reduction of $5.15 per day or 1.7%.

Second, let’s look at total compensation, a much truer indicator of take-home value for the employee: cash comp plus the value of company paid employee benefits. Remember that the value of our benefits remains unchanged so total compensation per day of work decreases just .3%.

Old:
$70,000 cash compensation
+            $14,400 value of benefits
=            $84,400 total compensation
/            235 productive work days
=           $359.15 total compensation per day worked

New:
$64,400 cash compensation
+            $14,400 value of benefits
=            $78,800 total compensation
/            220 productive work days
=           $358.18 total compensation per day worked (a decrease of 97 cents or .3%)

Okay, but still, we’ve reduced cash compensation by an average of $5,600 per employee. That won’t go over very well, will it? This is a hard fact and shouldn’t be sugar coated; that said, times are challenging and people are losing their jobs left and right. Structuring your workforce with this model strengthens your company, builds organizational resiliency, actually increases employment, increases the likelihood that jobs will not be lost in the future and provides employees with a healthier work life relationship. Is that worth taking a bit of a pay cut?

All of this logic aside, some human decisions have to come into play; remember we’re working with averages in this example. I suggest that, below a certain level of pay, cash comp shouldn’t be cut at all. People making $150,000 a year can absorb a cut better than can someone making $35,000 a year. In this example, our goal is an overall 8% cut… that doesn’t mean that every employee can or should account for the same amount.

Let’s take a look at some of the benefits in more detail.

1. More employees means you have the ability to hire for a broader variety and scope of skills, abilities, experiences, personalities, cultures, approaches and perspectives on life and that’s a good thing.

2. More time off is a good thing for employees and for the company. Study after study demonstrates clearly that overwork and work place stress is a killer. An additional three weeks off each year gives people more time with family, more time for community involvement, more time for R & R, more time for hobbies, more time to recharge their batteries. All of that makes for more productive and happier employees.

3. More time off is one serious plus to add to your branding arsenal in your effort to become an employer of choice. For candidates and new employees, they’ll come in to your culture knowing that salaries may be a touch lower than another firm but nobody can match the quality of life that you’ll be offering.

4. And, as an additional social benefit, by increasing your staff you are doing your part to decrease unemployment, keep more citizens productive (and insured) and increase buying power in the community. How can that not be a good thing?

This is not a one size fits all solution. But I hope it will stimulate some thinking about the options you have in planning your workforce.

**************

If you want to try this with your organization feel free to use the attached calculator. First, fill in the blue cells with the information applicable to your organization. Data you will need:

• The number of employees you have
• The total annual payroll
• How much the company spends every month per employee for benefits
• How much the company spends annually on administrative costs
• How many vacation days, holidays and sick days the company pays for
• Total annual revenue

Then experiment with the three variables – a number of employees to hire, an amount to reduce pay, and a number of additional vacation days – by entering various options in the yellow cells. The goal is to get as many “results” boxes shaded green as possible.

Today let’s combine two hot trends in blog posts: one is the “10 ways to….” post and the other is the “sustainability” related post. Many of the latter take the form of advising us how to stop wasting something so that’s what we’ll do too. Usually “waste” is applied to resources such as food and paper; because we write for the work place, our list is about people. Our post today is dedicated to managers, business owners, policy writers and anyone whose actions affect the culture at work. So, in no particular order:

34 Ways To Stop Wasting Your Employees
(Management actions that cause employees to stop giving their best, to resign before you want them to and otherwise to stop caring).

1. Believe that your employees want to do a good job
2. Treat them like adults
3. Hold them responsible for their behavior and their words
4. Take responsibility for your actions and words
5. Give them realistic expectations and then hold them responsible for fulfilling them
6. Listen carefully
7. Assign them to jobs that fit their skills and interests
8. Pay them fairly but understand that money doesn’t make up for other shortcomings
9. Speak honestly
10. Make sure that your actions and your words line up
11. Be transparent about your motives
12. Understand that “corporate culture” derives organically from the sum total of management’s actions and not at all on what they say
13. Managers should manage. Everyone is a manager of something
14. Leaders should lead. Everyone can be a leader in some way
15. Praise in public, criticize in private
16. Give praise as soon as it’s due, only when it is due, and in proportion to what you are praising
17. Don’t try to measure what can’t be measured
18. Obey employment laws
19. Go beyond mere compliance
20. Treat your customers and your suppliers right
21. Exercise restraint in the use of your power
22. Support your employees’ professional growth
23. Support your employees’ growth as human beings
24. Focus more on what they are good at and like to do and less on trying to fix what they’re not so good at
25. Take appropriate risks
26. Build a culture where mistakes are accepted
27. Accept responsibility for your own mistakes
28. Regardless of what HR says, each person is different and needs to be managed differently
29. “Performance management” is more than filling out a review form once a year; do it every day
30. Don’t pretend that you know things you don’t know
31. Understand that authority is granted to you because of your actions and not by your title
32. See the forest and the trees and know how to tell the difference
33. Fix what’s broken
34. Only fix what’s broken

I’m sure that there are more but if you master these you will have created a workplace culture that people will want to commit to. What more could you want?

“Won’t talk, eh? Read this:”

“This document outlines the general Terms and Conditions of Employment and is a confidential document between you and “X” (hereinafter called “The Company”). Please read it carefully and sign it. This signifies your acceptance of the Terms and Conditions under which you are employed. You will be kept informed and notified in writing of any subsequent changes to your terms of employment.” *

Arrrggghhh! Stop, please!! I’ll talk!!!

So, how is it that employee handbooks make such a mockery of the English language and make employees feel like dirt all at the same time? Actually, there are just two problems with the humble handbook: the content and the writing.

Ok, I’ll grant that the handbook is a legal document and certain language is required in certain places. But, please. These are human beings we’re talking to, not automatons or idiots. You are trying to establish a relationship, after all. You need to set out the terms of the relationship and offer some guidance, that’s all. There is simply no reason that the human beings in management can’t speak to employees like they’re human beings too.

Back to my example; as horrible as it is, there’s nothing wrong here that a little effort and humanity can’t fix. Let’s tease apart a couple of examples, explore some of the stupid mistakes companies make in setting policies and writing handbooks and we’ll see how easy it is to fix them:

“Promotional recruitments are limited to employees with at least six months of continuous (full-time equivalent) employment.” *

At least we can figure out what is being said here! That’s a start. Let’s take a look at the two wrong things:

The content. Why on earth would you even consider such a policy? What company in its right mind discourages advancement? Say you hire Susie on Monday. By Friday you realize she is a superstar. A month later a job opens that is obviously perfect for Susie – it’s challenging but not too. It offers growth in a direction you know she wants to go. It pays better. She’s not expecting it. Let her apply. Susie will love you and love the company. The only downside is if she gets that job now you’ve got to fill this one again. Oh, the upheaval! Suck it up and promote her. You still have the stack of resumes from which Susie appeared in the first place – dig out your # 2 and #3 candidates and call ‘em up.

The writing. For some reason, people tend to depersonalize handbooks by writing them in an indirect voice. Where is the verb? “Limit”, that’s the action. Who is doing the limiting? Have ‘promotional recruitments’ somehow become sentient beings imbued with the ability to think and take action? Uh, no. Management…. that’s who. Also, handbooks already focus too much on what employees can’t do; why take something inherently positive, a promotion, and make it negative? Tell folks what they get, not what they don’t get.

So let’s try this a different way:

“We enthusiastically offer our employees the opportunity to apply for promotions whenever and wherever they arise.”

That wasn’t so hard. Let’s try another one:

“Performance reviews are normally conducted every six (6) months from the date of hire, with the exception of a three month review at the end of your probationary period.” *

The content: Ditch the probationary period. If there’s one thing we should all have learned during this last year, it’s this: we’re all on probation all the time. No job is safe. And what does putting a new employee on probation do for his psyche? He’s a new employee, for crying out loud! He’s excited! He’s thankful for a job! He’s ready to work hard and make you love him! Besides, there are legal reasons why having a probationary period is a bad idea (the short version: if being in a probationary period means an employee could easily be fired for whatever reason, then having successfully completed the probationary period seems to imply that the employee’s job is secure).

You made the poor sap jump through burning hoops of fire to get the job; you’re the one who picked him out of a stack of 200 resumes and offered him the job. If he’s not right for the job, well, that sounds more like it’s your fault. (Ah, now there’s an idea: put the hiring manager on probation every time he or she hires a new employee! I’ll bet we’d see the quality of our hiring increase just a tad).

The writing: “performance reviews are normally conducted…”? Like magic, they appear out of nowhere, those performance reviews, and then they conduct themselves. WE, management, conduct performance reviews.

How about we say this in plain English:

“After you’ve been working here for three months, we’ll sit done and have a conversation about your work. We’ll compare notes to see if we’re meeting your expectations and if you’re meeting ours. After that, we’ll hold a more formal performance review every six months.”

Get the idea? So, here’s how to rebuild your employee handbook:

First, take a long hard look at all of your policy statements; can you identify the business reason each one exists? If you have a policy that doesn’t work for the betterment of your business or that doesn’t foster the development of your employees, scrap it.

Next, run a few “find and replace” searches: find every instance of “The Company” and “management” and replace them with the simple and more personal “we”. Do it again changing “the employee” or “employees” to “you”. Almost instantly, you have humanized your relationship with your employees. Of course, this will create some quirky sentence structures but you’ll have a good smile as you clean those up.

Now the hard part: It’s time to pull out your machete and hack your way through the jungle one stinking sentence at a time. You will find it easier if you apply these next suggestions at the same time, paragraph by paragraph. Start by reading every sentence out loud. That will usually help you see where the smell is coming from. Here are some specific actions to take:

• Many sentences in a handbook are overly long. They might make more sense as two shorter sentences.
• Cut all the big and impersonal words. Who says “shall”? Nobody, that’s who. “Hereinafter”? Most lawyers don’t even talk like that anymore.
• Toss most of the stuff in parentheses (it’s usually redundant).
• Almost all sentences in a typical handbook are written backwards with the object and subject reversed. Think about what the action is and who is taking the action. Take the sentence apart if you need to and rebuild it.

I swear, you’ll read some sentences and you’ll scratch your head trying to figure out what it actually means. And each one you rewrite to read more clearly and more succinctly will make you feel more like a human being. You’ll feel like you opened the window on a spring day and let the fresh air in.

What does this look like in real life? Let’s try one more example to see how we’d tackle this process. You’d think that giving employees time off to vote would be simple. Hah! Read on. This cadaver is rotten to the core:

“On days when elections for public office (“elections for public office” includes elections for sheriff, school board, district attorney, and all primary and general elections) are scheduled throughout the state, county, city or town in which the employee is registered to vote, schedules will be changed as needed to ensure that work either starts at least three hours after the polls open or ends at least three before polls close”. *

Now, stop for a second and let yourself smile at the absurdity of that paragraph. For crying out loud, people! What are we trying to communicate here? The law says that employers need to give employees time off to vote. It’s not that complex. Try saying something like this:

“If you’re registered to vote and your normal schedule makes it difficult for you to get to the polls when they’re open, let us know. We’ll adjust your schedule so you can come in late or leave early ensuring that you have enough time to vote.”

Oh, and how might we rework that horrendous opening paragraph in a more humane manner? How about this?

“We have covered some of the basics about our working relationship in this handbook. It is a legal document, so we need you to sign the form in the back. That will let us know that we see eye to eye. We’ll tell you if anything changes.”

* Sadly, all of the examples I’ve included here are not only taken from real employee handbooks, they are available on the internet as “sample” handbooks for employers to download and use as their own. Communication is the core of our relationships and using an “off the shelf” handbook is simply a horrible way to waste one of the base line tools employers have to communicate with their employees.

The “global village” concept works because it’s easier for us understand personal relationships than impersonal ones and it’s easier to comprehend the effects of our actions on a local scale than it is on a global scale.

What would we see if we looked at work the same way? We all (well, most of us) work. It is one of the great unifying experiences that define us as people.

In this view, we are a village of 1,000 people and there is but one employer for whom we all work. That one employer embodies all of the labor of all humanity; it is a true multi-national corporation. For better or worse, it has its hand in all sorts of business dealings.

Here’s the employment report for World-Wide Global, Inc. and it’s not a pretty picture.

1,000 people live in our global village
•    60 people in the village control 59% of its total wealth (which means that 940 people survive with the remaining 41% of the wealth)
•    430 people in our village lack basic sanitation
•    147 are always hungry
•    22 are children living on the streets

In our village:
•    461 are working
•    61 are unemployed

Of those who work,
•    185 work in agriculture
•    95 work in industry, and
•    181 work by providing some kind of service

•    187 people in our village earn less than US$2.00 per day
•    and 95 earn less than US$1.25 per day

However,
•    32 children under the age of 17 are required to work
•    19 of these children work under terrible conditions (that’s one in every six) such as working in mines, with chemicals and pesticides or with dangerous machinery
•    2 of our fellow villagers are slaves (2 out of every 3 slaves is a child)

When we start talking about child labor and slavery, the “world village” model breaks down. Some really important numbers just don’t translate well:

-    2 slaves? That’s not so bad, is it? The real number is closer to 12,300,000.

-    Just 19 children required by life circumstance or force to work under extraordinarily dangerous conditions? Try 126,000,000. No, even that number doesn’t get the picture across. How about one of these:
o    One hundred twenty-six million.
o    Nearly four times the entire population of Canada.
o    More than twice the population of France.
o    Almost half the population of the United States.

The CIA estimates that about 800,000 people are trafficked annually across national borders (by way of comparison, San Francisco has a population of about 800,000). Even the word “trafficked” diminishes the reality of the situation: Trafficking , according to the CIA definition, involves transporting people away from the communities in which they live, by the threat or use of violence, deception, or coercion so they can be exploited as forced or enslaved workers for sex or labor. This number includes just those people who are moved across national borders; the CIA estimates that millions more are trafficked within their own countries. The vast majority (640,000) is female and up to 50% (400,000) are minors; 75% of all victims (600,000) are trafficked into commercial sexual exploitation.

Who in their right mind would want to have anything to do with this outfit? Apparently, most of us don’t seem to mind.

Isle Royale is a 210-square-mile north woods island.  It is the third largest island in the contiguous United States yet there are no roads and no permanent human inhabitants. It is just about as close to true wilderness as you can find in this country.

Isle Royale supports dynamic and mutually dependant populations of wolves and moose – wolves are the only predators that the island’s moose face and the moose make up 90% of the wolves diet. The populations of the moose and the wolves fluctuate relative to each other. The (admittedly over-simplified) interaction works something like this: when the moose thrive there is more food for the wolves, which makes them healthier and when they’re healthier they reproduce more successfully. Larger wolf packs eat more moose, which decreases the moose population. Fewer moose means less food for the wolves, which decreases their population. Fewer predators mean more moose survive and their population grows again. Of course there are other factors involved such as the weather, vegetation (moose food), and ticks (a major health problem for the moose) but the dynamics in the relationship are clear.

This interdependency has been continuously studied for over 50 years making it a classic story of the relationship between predator and prey. Through this study we’ve learned a great deal about “carrying capacity”. The Global Development Research Center defines carrying capacity as “the number of individuals who can be supported in a given area within natural resource limits, and without degrading the natural social, cultural and economic environment for present and future generations”. But it’s clear that “the number” of individual wolves and moose supported on Isle Royale varies in a complex equation relative to other populations on which they depend. Carrying capacity is not stable and it’s not predictable.

To the wolves of Isle Royale, the island is their entire world. Moose make up the majority of the wolf economy and hunting is the wolves’ job. There are numerous small employers on the island but the biggest employer in wolf world is Moose Incorporated (General Moose? MooseSoft? International Business Moose?). When production at Moose, Inc. drops, consumption in wolf world drops as a result. From the wolves’ point of view the carrying capacity of Isle Royale fluctuates. The wolves can’t establish an ever-growing economy; they can’t even establish a stable economy.

So, to understand the real meaning of carrying capacity we need to remember that food is scarcer in winter than in summer and harder to come by in drought years than when times are flush. It changes as a result of dynamic interactions that are out of the control of the participants. When the economy falters jobs go away. Carrying capacity drops.

Our human economy is built around the expectation of steady, endless growth. It’s not designed to work well with the fluctuating production and consumption that result from the cycles of the natural world. We don’t like the kind of population fluctuations that the moose and wolves on Isle Royale experience (I expect that the wolves and moose aren’t crazy about it either). We like our growth steady and predictable.

On top of that, we also care about other people (okay, that’s an overgeneralization. I’ll take that up in another post). When large numbers of people die because of famine or disease (akin to a drop in the moose population), we are horrified. We want to help. We send aid. (Is it possible to suggest without sounding inhuman that these populations had exceeded their local carrying capacity? Rather than sending aid to help more people survive, perhaps only to die later in another famine or plague caused in part by that increased population, is the better solution to encourage social changes that lead to limiting population growth?)

It is true that technology has allowed us to artificially increase the carrying capacity of our environment almost everywhere we live, which has led us to increase our populations well beyond their natural limits. However, carrying capacity is diminished by the effects of increased population: as an environment (or an economy) is degraded, its carrying capacity shrinks further leaving it unable to support a population that could formerly have lived there on a sustainable basis.

Dana Meadows says that a “… state of global equilibrium could be designed so that the basic material needs of each person on earth are satisfied and each person has an equal opportunity to realize his or her individual human potential”. The moose and the wolves show us, though, that equilibrium is not the same thing as stability. Equilibrium, when considering the interdependencies of a biologically diverse environment and the variations (natural and human caused) in climate and seasons, implies that populations (and economies) will fluctuate over time. Including ours.

Here, from our vantage point half way through 2009, we see unprecedented unemployment; “iconic employers”, the very symbols of American commerce, are drying up and blowing away leaving thousands without work. Rather than bemoan the very natural (and uncontrollable) ebb and flow of our economy, we should put our efforts and our resources into changing society’s expectations of and our relationship to work.  Economic “command and control” is beyond our ability. We can’t control our economy any more than the wolves can control the moose population. We must learn to adapt to economic forces that are out of our control.  More on that in future posts.

Postscript: If you’re not from the upper Midwest you may never have given much thought to Lake Superior, which is the largest fresh water lake in the world (by surface area). Much of the beauty of this region remains unspoiled simply because it’s not on the way anywhere. Spending time on Lake Superior and visiting Isle Royale should really be on your “must do before I die” list.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery” (David Copperfield, 1849).

Dickens never used the term “sustainability” but he grasped the concept perfectly. While his words are just about one person’s modest budget he is also speaking to the reality of any system of any size: if you use more (of anything) than you have access to, you will eventually run out. If you use less than you have access to, you will always have enough. What else do we need to know to live sustainably?

Welcome to the inaugural post of the First Third Blog. The unifying feature of these posts is focused yet covers a lot of territory: “Work, social justice, and the human side of sustainability”. In upcoming posts I’ll write about the future of work, the lessons of the moose and wolves, the myth of “work-life balance”, Twitter in the workplace (and why you’d better pay attention), my “intersecting planes” theory of career planning, why the GDP is a faulty construct (and a better way to view economic growth), and lots more!

I hope that this forum will provoke your thinking and stimulate a lot of discussion – your comments are always welcome. In fact, if you would like to contribute a post of your own, let me know.