Workforce planning and succession management

The key capability trends within the APS and workforce challenges identified by agencies, when coupled with the sustained period of economic growth being experienced in Australia, low unemployment rates and an ageing population, present significant workforce planning challenges for the APS.

These are not new challenges. They have been identified in previous State of the Service reports and are the subject of a number of reports, most notably, the MAC reports on Organisational Renewal⁶ in 2003 and Managing and Sustaining the APS Workforce⁷ in 2005. With the increased awareness of the challenges facing agencies, the need to undertake effective workforce planning could not be clearer.

In 2004–05, the ANAO conducted a cross-agency performance audit on workforce planning across APS agencies. The audit surveyed 86 agencies to determine the extent to which workforce planning is underway across the APS.8 The report assessed agencies against four criteria to establish the level of development of workforce planning. The criteria were designed to determine whether:

• The agency has assessed the demand for, and supply of, labour in the context of achieving the organisation’s desired capability. Workforce planning is an integral part of the business planning process.
• The agency has assessed the potential gap in workforce characteristics and competencies. The agency has undertaken trend analysis of demographic data to provide both descriptive and forecasting models describing how changes will affect the workforce in the absence of management action, and to model the varying impact of possible management actions. The agency has assessed the competencies and skills of the workforce to analyse the differences between the current and desired competency profile.
• The agency’s assessments have informed all relevant business strategies including, but not restricted to, HR strategies.
• The agency has a measurement framework in place. Incremental progress can be measured on a range of relevant factors, as well as provide links to the overall performance of the agency. The chosen performance measures are clearly and compellingly linked to the success of the organisation.

The ANAO found that, while a number of APS agencies are undertaking workforce planning, few, if any, could claim to have successfully embedded workforce planning into their business processes. The ANAO also considered that more could be done by agencies with respect to assessing the demand for, and supply of, labour and relating shortfalls to capability.

Like most HR issues, workforce planning is far from being a precise science and, even when the outcome desired is reasonably clear, the process for accomplishing it is not. Accordingly, the agency survey did not directly ask about whether agencies had workforce planning processes in place but about whether agencies had policies, strategies and/or frameworks that aim to ensure they have the skills and capabilities needed for the next 1–5 years.

Forty-three per cent of agencies reported having put in place policies, strategies and/or frameworks that aim to ensure they have the skills and capabilities needed for the next 1–5 years (a similar result to 2003–04). Of the remaining agencies, 51% reported that they were in the process of developing relevant policies and 6% did not have relevant policies in place and were not developing them. Of those 42 agencies that reported being in the process of developing relevant policies in 2004–05, 20 agencies had been developing relevant policies for the last three years.

It is interesting to note that of the agencies that revealed they were either in the process of developing relevant policies or did not have relevant policies in place, and were not developing them, the majority identified facing workforce challenges during 2004–05.

This seems to indicate that these agencies would clearly benefit from investing resources in completing and implementing appropriate policies, strategies and frameworks, and fine-tuning when required, rather than continuing to ‘develop relevant policies’ year in and year out or not having them at all.

Because a number of large agencies changed their response from ‘yes’ to ‘being developed’ this year, the proportion of large agencies with relevant policies decreased from 76% in 2003–04 to 62% in 2004–05. Thirty-eight per cent of medium agencies and 34% of small agencies had put in place relevant policies.

Workforce planning challenges

The agency survey asked agencies whether they had faced any challenges during 2004–05 in a number of areas of workforce planning.

Consistent with the 2003–04 survey results, the most common workforce planning challenge faced by agencies was in accessing adequate information to evaluate the effectiveness of learning and development, identified by 54% of agencies. As reported last year, challenges were also experienced in the areas of:

• the ability to predict and plan for changes that are likely to impact on the agency’s business (e.g. technological change, greater cross collaboration with agencies— identified by 46% of agencies compared to 54% in 2003–04)
• identifying the capabilities required to deliver future workforce needs (41%, compared to 45% in 2003–04).

In 2005, agencies were asked whether they had systems in place to determine the number of people working in the agency employed as consultants or other forms of independent contractor. Forty-four per cent of relevant agencies could determine numbers of consultants and 42% of relevant agencies could determine numbers of independent contractors. Forty-one per cent of agencies had systems in place to determine the number of people in other categories (such as secondees).

Workforce planning challenges were more commonly identified by medium and large agencies than by small agencies. This may reflect a number of issues, including the greater complexity of planning in larger agencies and the difficulty of assembling and analysing information when dealing with a large number of employees in sometimes decentralised operating environments.

The survey asked agencies to identify which measures they had in place as part of a workforce planning process to meet their identified workforce challenges in 2004–05. The most common measure, reported by 78% of agencies, was aligning performance management systems with identified workforce requirements (up from 71% in 2003–04). A further 16% of agencies were developing this measure. The prevalence of this measure is encouraging, indicating that many agencies have recognised the need to link broad business requirements, with the development needs of individuals. Interestingly, of the five agencies reporting that they did not have their performance management system aligned with identified workforce requirements, three had reported in the 2003–04 agency survey that they did, and two had reported that the measure was being developed.

The second most common measure in place to deal with workforce challenges, reported by 76% of agencies, targeted attracting and retaining people with critical skills (e.g. by enhanced and/or more flexible pay and conditions, and offering development opportunities), up from 69% in 2003–04. A further 11% of agencies were developing this measure. Agencies that selected this measure were asked to identify from a list of benefits/arrangements/conditions, in addition to those already widely available to employees, those that their agency had used during 2004–05 to attract and retain people with critical skills. The most prevalent condition offered to employees was higher base salaries (reported by 82% of relevant agencies). Other widely used arrangements included development opportunities (e.g. study awards, fellowships, secondments) (63% of relevant agencies), performance-related bonuses (53%) and enhanced conditions (e.g. leave, reunion fares) (40%).

Other measures used widely in dealing with workforce challenges included:

• learning and development strategies aligned with identified workforce requirements (65%, with a further 30% developing this measure)
• recruitment strategies aligned with identified workforce requirements (63%, with a further 28% developing this measure).

Succession management strategies linked to future workforce needs are not yet widely used, but the results suggest that a larger number of agencies are working on putting such policies into place. Twenty-four per cent of agencies reported using them now, and another 44% were developing them.

Large agencies were more likely than other agencies to use the measures dealing with workforce challenges outlined in the survey, including learning and development strategies and performance management systems aligned with identified workforce requirements, succession management strategies, and measures to attract and retain people with critical skills. Nonetheless, over half of all small and medium agencies use each of these measures (other than succession management strategies). It also needs to be recognised that smaller agencies may be implementing more informally some of the measures that larger agencies include as part of a formal workforce planning process.

As well as being asked about measures to address workforce challenges in general, including succession management strategies, agencies were also asked specifically about whether they had a formal approach to succession management. Twenty-eight per cent of agencies indicated that they had such an approach. This shows noteworthy growth on the 20% in 2003–04 and 4% in 2002–03 who stated that they had a ‘formal succession plan’. Formal approaches to succession management were more common among large agencies (57% compared to 43% in 2003–04) than medium agencies (23% compared to 19% in 2003–04) or small agencies (14% compared to 8% in 2003–04). Succession management will become increasingly important with around 70% of SES and 55% of EL2 employees aged over 45.

This year’s survey results indicate that many agencies are planning for succession in a more informal way. The means by which agencies identify potential leaders is discussed in Chapter 10.

6 Management Advisory Committee 2003, Organisational Renewal, Commonwealth of Australia, Canberra.

7 Management Advisory Committee, Managing and Sustaining the APS Workforce.

8 ANAO, Workforce Planning, Performance Audit Report No. 55, June 2005, <http://www.anao.gov.au>

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