Looked at from the outside, any rational observer would think that managers making a big business decision – to launch an entirely new type of product, to move into a new market in another country or a related industry, or even to open a new headquarters or R&D site, say – would prioritize three uncertainties: “Are there customers who will buy our products?”, and “Are there employees and the right resources to create those products?”.
But unfortunately only two get most of the attention. Those that run business units or other teams that would make decisions like moving into a new market have often come from a sales or operational background and are more likely to think about how much they’ll sell and how much it will cost to make the product or provide the service rather than working out if the location they are moving to will have employees with the right types of skills and experience.
HR teams in CEB’s client networks say that they are often the last to know of any of these types of talent decisions being made but end up being the first to be blamed when things go wrong.
The Power of Labor Markets
As companies move to do more and more knowledge work, the caliber of employees, and the experience they have, will become ever more crucial to firms looking to eke out a competitive advantage. And this, coupled with the fact that employees are now more able to freely move around the globe means that companies are increasingly all competing for the same pool of employees.
So it’s probably more important than it’s ever been that senior line managers take labor markets as importantly as the market for their products and services when they are looking to put their next big strategic move into action.
Where Corporate Real Estate Comes In
Although the HR function has a big role to play as an advisor to senior managers about the attractiveness of different labor markets, the corporate real estate (CRE) team has a role to play too.
When CRE professionals were asked in a survey what activities in a typical real estate portfolio planning exercise they thought were important, 92% of them agreed it was important to understand the firm’s headcount projections and whether it was in the right labor markets to meet future headcount demands. Unfortunately, only 52% of respondents said their function is good at doing so.
However, as one team in CEB’s client network of CRE professionals showed, basing real estate discussions around future talent demands can shift business partners’ perspectives on the value that CRE provides to the company and make them more willing to work together to create the most efficient locations for the company. There were three stages to what the team did at this big US financial services firm.
Change the conversation: To gain interest from business partners, the CRE team changed the way it approached conversations with them. Instead of presenting volumes of data or talking about costs, the CRE team asked how business partners were preparing to staff the roles they needed across the medium- and long-term to implement their strategy.
This approach gave Real Estate a way in. The team could then link the business’s talent needs to CRE’s location decisions, which piqued business partners’ interest. And this different start to the conversation also enabled CRE to demonstrate that these discussions are not just about real estate priorities and that CRE understands what matters most to the business.
Highlight the gaps: CRE then used information provided by the business on its talent needs, together with labor analytics data from a third-party provider, to uncover gaps that could jeopardize any plans.
The team used a scorecard (see chart 1) to highlight both skill gaps (the current and future mix of skills required by the business to meet future growth targets) and labor market gaps (whether the labor markets the firm is currently in fall short of future requirements). Beyond prompting the business to think about talent needs, this scorecard could also show how urgent it was to fill any gaps.
Chart 1: Alignment of labor markets with future needs Source: CEB analysis
Demonstrate the difference: After that, CRE assessed potential locations based on the talent needs provided by the business. The team evaluated locations on criteria such as talent quality, availability, and cost to show business partners how location decisions they made now would affect the labor supply in the future.
The analysis can provide comparisons between certain target markets to assess their ability to meet business needs (see chart 2). Working with the business to conduct this analysis positioned CRE as a “strategic” partner, helping it operate above the status of a service provider that would only be consulted at the end of decisions.
Chart 2: Labor attributes scorecard Illustrative Source: CEB analysis