Recently we found ourselves thinking about external labor market data and how it’s used in strategic workforce planning and analytics.
We see and hear about many workforce planning initiatives that use external market data as a predictor for their models. One example would be looking at unemployment trends and using it to predict internal turnover. The belief being that a rise in unemployment will lead to better retention rates due to a lack of jobs available.
Here’s the thing – we agree. What we’re not sure we agree with is that it’s a one-to-one correlation to your organization. It’s probably safe to say that a rise in unemployment will reduce voluntary turnover at most organizations. But will it affect your organization the same way as your competitor down the street?
Your organization is inevitably going to have its own unique factors, culture and initiatives whereby external factors affect it differently than any other organization. Let’s say you pay above average for your critical jobs. An improving economy or a shrinking labor market in the area is not going to affect this company as much as it would a company that underpays its employees. A company with college recruitment programs is going to have more of a natural entry-level pipeline into certain jobs than one that doesn’t.
The point is that there is a far more accurate predictor of how external factors are going to affect your organization.
That predictor is your internal information.
If unemployment went up 12 percent in the past year, why would you try to use that external statistic as a workforce planning predictor as to what will happen if it continues? The effect of a 12-percent unemployment increase on your organization is staring you right in the face – in your own organization’s data. You have what you’re looking for right in front of you within your internal workforce analytics trends. What happened to your organization’s turnover in the past year? How closely (or not closely) did it follow the 12 percent trend? Did it only go down five percent, or was it 20? This is a far more accurate indicator of how unemployment affects your company than any external metrics, because by its very nature it’s going to include both internal and external influences and factors.
Instead of making semi-educated guesses of external factors’ influence on your company, you are making strong estimations based on what has already happened in your setting. And this internal information is no more of a lagging indicator than the external info is.
My final point is that if you’re already doing workforce planning, and you’re already taking your internal trends into account, then overlaying external trends on top is actually double-counting the predictive trend. The conclusions you come to will be inaccurate. Trends in the economy and market are already accounted for in your internal workforce analytics. There is no need to account for them again by incorporating additional external trends.
Some food for thought.