1. Key Tool for Managing Economic Uncertainty HR Scenario Planning: [Insert name of speaker and date of presentation here]

2. SHRM © 2012 Managing Today’s Economic Uncertainty Hence, strategic workforce planning is being recast to include rigorous thinking about the improbable Companies are turning to scenario planning to analyze possible post-recession outcomes and their corresponding human capital needs The U.S. and global economy remain fragile following the 2008-09 recession Forecasting and talent-gap analysis are difficult with today’s uncertain recovery 2

3. SHRM © 2012 Views of the future “I never think of the future – it comes soon enough.” Albert Einstein (1879-1955) US (German-born) physicist “The best way to predict the future is to invent it.” Alan Kay (renowned visionary, researcher-computer science ) “The trouble with our times is that the future is not what it used to be.” Paul Valery (1871-1945) French critic & poet 3

4. SHRM © 2012 Why scenario planning? Source: SHRM report, “2015: Scenarios for the future of Human Resource Management” 4

5. SHRM © 2012 The Goal of HR Scenario Planning The goal of the Scenario Planning model is to enable higher quality strategic thinking among HR professionals by supporting ongoing monitoring of the changing dynamics in the HR external environment. Scenario planning is NOT about predicting the absolute future. It is about tracking and monitoring continuities and discontinuities so that leaders can recognize trends ahead of the curve. 5

6. SHRM © 2012 Desired Outcomes of Scenario Planning Anticipation of key opportunities and threats Strategic alignment with the business units involved in key HR decisions Strategic lens for identifying innovative, winning strategies Early warning capability to sense and respond to important weak signals in the environment Improved strategic decision outcomes with less overall risk. 6

7. SHRM © 2012 Scenario planning success story: Royal Dutch Shell During scenario exercise in 1968, Shell discovered it had exposure in marginal oil fields and tankers Based on scenario planning, it sold and leased back tankers and reduced its position in marginal oil fields Its strategy worked when the Oil Shock hit: Shell moved from #11 oil company in 1970 to #4 in 1975 Shell was able to react quickly to 1974 Oil Shock because of scenario planning 7

8. SHRM © 2012 Scenario planning success story: Royal Dutch Shell Shell uses scenarios to explore the future. Our scenarios are not mechanical forecasts. They recognize that people hold beliefs and make choices that can lead down different paths. They reveal different possible futures that are plausible and challenging. Our latest energy scenarios look at the world in the next half century, linking the uncertainties we hold about the future to the decisions we must make today. 8 Quote from Looking Ahead: Scenarios on Royal Dutch Shell Web Site:

9. SHRM © 2012 Classic missed opportunity: Encyclopedia Britannica EB turned down Microsoft’s offer to put Britannica’s encyclopedias on CD-Rom discs Sales plummeted 53% from 1990-1994 When EB launched its own Web site years later, it was inundated with several million hits on its first day Today there’s a new business model: Wikipedia... EB failed to foresee the advantages of CD-ROM and the Web In 1989, its sales were at a high water mark 9

10. SHRM © 2012 Potential Game Changers Today Hardware: Netbooks, tablets, smart phones Web-based services: Cloud computing, data delivery, movie streaming Information: Free online news, file sharing of music and even eBooks, citizen journalists using Twitter and social networks to share news around the globe New energy sources: Sustainable sources, off-the- grid and sell-back-to-the-grid capabilities? 10

11. SHRM © 2012 Possible Game Changers in the HR Space New employment legislation [insert latest example of new/pending legislation] Global trends in education Global demographics Values and attitudes towards work/life fit Women’s education and workforce participation Improvements in HR technology Rising benefit costs A weak labor market 11

12. SHRM © 2012 Putting Scenario Planning into Practice 1.Develop credible scenarios 2.Then identify success factors or competencies for your organization to flourish in each scenario 3.HR and top management should then focus resources on developing these competencies 12

13. SHRM © 2012 How to Create Credible Scenarios 1.Scan the media to identify trends 2.Analyze and plot the trends 3.Poll a wide group of experts in a given field 4.Create simulations with people playing roles 5.Develop visions of a desirable future 13

14. SHRM © 2012 Define Your “Dimensions of Uncertainty” Uncertainties are concrete forces that are important to your business and whose outcome is highly unpredictable. In general, these are important guideposts, but you should be prepared for them to play out in different ways. HR professionals can define dimensions of uncertainty through surveys, focus groups and interviews with stakeholders within and beyond the HR space. 14

15. SHRM © 2012 Scenarios should encompass several potential futures within these dimensions of uncertainty 15

16. SHRM © 2012 How difficult will it be for my company to recruit the top talent it will need to compete as the economy recovers during 2013-2017? Scenario Planning: The Post-Recession Economy 16

17. SHRM © 2012 1.Availability of US Talent: Will there be an abundance or scarcity of talent in the post- recession economy? 2.Strength of US Economy: Will the US economy recover quickly or slowly from the 2008-09 recession? Post-Recession Dimensions of Uncertainty 17

18. SHRM © 2012 Four-Scenario Matrix Availability of US Talent Strength of Economy strong weak scarce abundant A weak recovery but abundant talent #4 - A weak recovery and scarce talent #3 - A strong recovery and abundant talent #2 - A strong recovery but scarce talent #1 - A weak recovery but abundant talent 18

19. SHRM © 2012 1.Availability of US Talent Contributing forces: – Levels of unemployment – Talent as a key driver of retention/recruitment – Education trends – Demographics of working age populations – Ability to source educated workers from abroad – Strength of the labor market Dimensions of Uncertainty Factors 19

20. SHRM © 2012 2. U.S. Economic Strength Contributing Forces: – Growth in US Gross Domestic Product (GDP) – Global demand for goods and services – US Government programs – Consumer spending – Worker Productivity – Technological innovation – Rise of new industries, such as the green sector Dimensions of Uncertainty Factors 20

21. SHRM © 2012 Characteristics – US GDP only grows at 2% annual rate through 2017 – US unemployment rises above 8% through 2017 – Large number of unemployed talented workers – These workers are more willing to accept lower level positions – Companies are able to recruit talented workers at relatively low cost and relatively quickly Scenario #1 – Weak Recovery, Abundant Talent 21

22. SHRM © 2012 Scenario #1: Weak Recovery, Abundant Talent Business Questions: What are the business implications of this scenario for my organization and its strategies? What capabilities do we need to build or acquire? Which competencies will I need to prepare for this scenario? What resources or investments made by my organization will be less valuable in this particular scenario? Legal Questions: What legal risks will we face in poaching talent? Do we have the necessary legal expertise to recruit globally? 22

23. SHRM © 2012 Characteristics – US GDP grows faster than expected at 5% rate through 2017 – US unemployment drops to 3% by 2017 – Low number of unemployed talented workers – These workers are more in demand and are seeking higher paying positions – Companies have difficulty recruiting talented workers and must offer them higher wages Scenario #2 – Strong Recovery, Scarce Talent 23

24. SHRM © 2012 Scenario #2: Strong Recovery, Scarce Talent Business Questions: What are the business implications of this scenario for my organization and its strategies? What capabilities do we need to build or acquire? Which competencies will I need to prepare for this scenario? What resources or investments made by my organization will be less valuable in this particular scenario? Legal Questions: Is it too risky to use social networks for recruiting talent? Should we avoid checking credit scores as a screening tool? 24

25. SHRM © 2012 Characteristics – US GDP grows at a relatively strong rate of 3.5% through 2017 – However, job growth is not as fast as expected because of productivity increases and off-shoring of jobs – Unemployment only drops to 7% by 2017 as baby boomers stay in job market rather than retiring – Relatively high number of unemployed talented and experienced workers – Companies are able to recruit talented workers relatively easily Scenario #3 – Strong Recovery, Abundant Talent 25

26. SHRM © 2012 Scenario #3: Strong Recovery, Abundant Talent Business Questions: What are the business implications of this scenario for my organization and its strategies? What capabilities do we need to build or acquire? Which competencies will I need to prepare for this scenario? What resources or investments made by my organization will be less valuable in this particular scenario? Legal Questions: Do we have strong non-disclosure policies to minimize risk of losing confidential information with departing employees? Should we take advantage of the abundant talent to bolster our affirmative action program? 26

27. SHRM © 2012 Characteristics – US GDP grows at only 2% rate through 2017 as effects of the recession linger – US unemployment remains high at 7% through 2017 – Skills shortages increase as talented baby boomers retire and younger workers lack necessary skills – Large numbers of low-skilled unemployed bring down consumer spending and stifle economy – Employee morale is an issue as companies struggle to compete and to find the talent they need Scenario #4 – Weak Recovery, Scarce Talent 27

28. SHRM © 2012 Scenario #4: Weak Recovery, Scarce Talent Business Questions: What are the business implications of this scenario for my organization and its strategies? What capabilities do we need to build or acquire? Which competencies will I need to prepare for this scenario? What resources or investments made by my organization will be less valuable in this particular scenario? Legal Questions: What legal steps can we take to minimize potential lawsuits by disgruntled employees? Should we consider a long-term incentive plan (LTIP) to ensure the “stickiness” of our best employees? 28

29. SHRM © 2012 Review competencies you identified for each scenario Identify competencies common to all scenarios Do the same for success factors Identify which competencies and success factors need to be developed or strengthened Build support for programs to develop and strengthen weak or missing competencies and success factors Put Your Scenarios to Work 29

30. SHRM © 2012 SHRM’s 2005 Scenario Planning Report In 2004 SHRM worked with Decisions Strategies International on a scenario planning project. GOAL: Help HR professionals by allowing them to live in potential scenarios for the future of HR management 2015: Scenarios for the Future of Human Resource Management was published in 2005 30

31. SHRM © 2012 SHRM Resources 31 Quarterly survey Assesses hiring expectations, recruiting difficulty, job vacancies, and new-hire compensation indices Jobs Outlook Survey Report and LINE

32. SHRM © 2012 SHRM Resources Major metropolitan area focus Available in PDF or PPT for individual use 32 Metro Economic Outlook

33. SHRM © 2012 33 SHRM Resources Metro Economic Outlook (cont’d)

34. SHRM © 2012 Who will be Winners? “In a rapidly changing world, the winners may not be those companies that can produce and distribute a specific product, but those that can deploy their core competencies across all possible futures they encounter.” -- Dr. Roch Parayre, Senior Fellow Wharton Business School 34