W W W . W A T S O N W Y A T T . C O M

Workforce Planning:Data Analysis to SolutionsPresenter:

Henry E. Noey, Jr.

Senior Consultant and Account Manager

Session Objectives

About Watson Wyatt

A framework for workforce planning

10 questions a workforce plan should answer

Keys to success– Workforce planning in practice – 2 case studies

Gap analysis

Keys to success

Q&A

88 offices

30 countries

6,000 associates

About Watson Wyatt

We’re Everywhere You Do Business

Consult to 70% of Fortune 100Advisors to half of the top 100 corporate pension

funds in the United Kingdom Dominant presence in many markets in Europe and

Latin America First firm in our industry to open an office in China

and the first approved to serve pension funds in Japan

We’re Everywhere You Do Business

Provide actuarial services for more than twice as many of the world’s 300 largest pension funds than our nearest competitor

Comprehensive research for multinational clientsGlobal 50 Remuneration Planning Report – preferred

reference work for international HR practitioners Human Capital Index® – includes results from more than

2,000 companies around the globe

We Turn Research Into Results

Our advice is grounded in the most extensive and respected research in the business

First to investigate the management impact of changing demographics, the shift from traditional pensions to hybrid plans and emerging trends in phased retirement

1994

“U.S. Retirement Policy: The Sleeping Giant Awakens”

1996

“From Baby Boom to Elder Boom: Providing Health Care for an Aging Population”

1999

“Phased Retirement: Reshaping the End of Work”

1999

“Global Aging - The Challenge of the New Millennium”

2000

“The Unfolding of a Predictable Surprise: An Analysis of the Shift from Traditional Pensions to Hybrid Plans”

Workforce Planning in Oil & Gas

Workforce Planning Roundtable– Platform for networking– Open forum re: common

issues & solutions Workforce analysis Sources of talent Availability of global

data

Apache BP

Baker Hughes ChevronPhillips

ConocoPhillips Cooper Cameron

Devon Energy Duke Energy

Exxon Mobil Halliburton

Marathon Oil Kerr-McGee

Key Energy Noble Energy

Schlumberger Shell

Transocean UNOCAL

Workforce Planning Defined Translate business strategy into human

capital needs Analyze

– Current demographics– Current and projected staffing levels– Current and projected skill mix– Turnover trends– Retirement risk– Assumed growth– Available external workforce supply and

demand Assess current people practices relative to

internal and external workforce situation Identify short- and long-term risks in

attracting and retaining critical talent Recommend recruiting and retention

programs to close the risk gap and protect intellectual capital

Prioritize programs/solutions by ROI

Finding The Right Answers

Ensuring an available pool of talent

Internal labor supply External labor market

Optimizing human capital investments

Reducing the cost of turnover

Targeting investments in recruitment and retention

Protecting intellectual capital Addressing the impact of an

aging workforce Facilitating the transfer of

knowledge

Key Workforce Planning Components

The right number & right mix of workers at the

right time

The right number & right mix of workers at the

right time

Supply

• Business Requirements• Internal Demographics• “Employment Deal”

Demand

• Labor Pool• Lifestyle Shifts• Economic and Regulatory

Environment

Op

tim

al

Wo

rkfo

rce

Mo

del

Workforce Levers

Talent Management

Total Rewards

Employee & Labor Relations

Training & Development

Recruiting

Leadership

Outcomes

Invest Well

Invest Well

High Customer

Satisfaction

High Customer

Satisfaction

Reduce

Costs

Reduce

Costs

Increase

Shareholder

Value

Increase

Shareholder

Value

ExecuteBusinessStrategy

ExecuteBusinessStrategy

Bu

sin

es

s S

tra

teg

y

10 Questions A Workforce Plan Should Answer…

Demand What does my current and projected overall workforce profile look like? What is the demographic profile of my top 5 to 10 critical positions? Where are we at risk due to unnecessary turnover and/or impending retirements?

Root Causes of Behavior What are the root causes and/or correlations to undesirable turnover? What are the characteristics of employees who stay and succeed? What motivates and retains our top performers and/or critical talent? What HR practices are getting in the way of or helping with attraction and retention of

desired talent?

Supply What and where is the supply of talent for our most critical positions, short and long

term? What is the external market perception of us as an employer?

Outcomes What are the characteristics of workforce models that produce the best outcomes

(e.g., productivity, financial outcomes, customer satisfaction)?

Workforce Planning: Keys to Success

Don’t assume you know your workforce: There are typically “hidden” behavior patterns not readily apparent

Take a focused approach: Zero in on critical jobs and segmentation for actionable findings

Apply quantitative methods: Establishes ability to model behaviors and determine cost and ROI drivers

Be open minded and flexible: A “one-size-fits-all” strategy of the past may not work for the future

Develop an integrated strategy: Rewards and benefits are total package

Case Study #1: Aging Workforce Problem:

– Significantly aging workforce in key field supervisory jobs– Limited documentation of processes– Recruiting has been primarily from college graduates and then OJT

Hypothesis:– Hiring needs driven from both aging and internal movement– Recruiting “net” will need to be broadened– Knowledge transfer processes will be critical to meet business demand

for talent– Problem more/less severe from location to location

Actions:– Multi-faceted– Focused on employee life cycle

Executive SummaryNew Entrant

Average Age (Promotion)

32.0

Average Age (Internal Move)

36.8

Retirements/TurnoverAverage Age (Ret) 59.1

Average Age (Int/Ext)* 43.4 / 37.9

Turnover (Int/Ext) 4% / 3%

Hiring Needs2007** 143 18%

2010** 369 45%

2012** 527 65%

Current Population

Employee Count

814

Average Age 43.9

Average Service

17.9

% over 50 36%

% Retirement Eligible

15%

* Average age of turnover** Column 3 represents the # of cumulative hires as a percentage of current employees

Projected Hiring Needs Over the next 7 years:

- 527 need to be hired to maintain current population (cumulative)

- 20% of the current population will be gone due to retirements

* Internal Attrition includes employees moving from Exempt to Union as well as to other non-operations positions

Objectives

0%

10%

20%

30%

40%

50%

60%

0-5 yrs 5-10yrs

10-15yrs

15-20yrs

20-25yrs

25-30yrs

30+yrs

Employee RetirementDistribution

Years to Retirement

#1 Objective–Optimize costs associated with acquiring employees subject to appropriate mix of job skills/ competencies required to meet the projected demand for XYZ’s services

#2 Objective–Reinforce and solidify relations with current employees to ensure effective future workforce staffing required to meet projected demand for XYZ’s services

Outcomes10-15 Years to Retirement Group

A. Maximize retention of current high-performing employees

B. Transition employees from other parts of the organization

C. Implement phased retirement program

Sources to Fill the Gap

Internal Labor Market

External Labor Market

D. Acquire new hires at entry level and professionally develop employees

E. Acquire mid-career professionals seeking a change in employment

Job Group #E

Job Group #D

Job Group #C

Job Group #B

Job Group #A

Workforce Planning Resulted in Data-Driven Investments…

Demand Analysis Projected Key Talent Needs Geography Turnover Workforce Aging Retirement Rates

Supply Analysis Labor Forecasts

– New Graduates– Competitor sources

Industry Influences

Gap Analysis Programs& Practices Employee Satisfaction Employee Demographics Talent Sourcing

Business Strategy & Human Capital Implications

Phased Retirement Retirement Benefits Retiree Medical Mentoring Knowledge Transfer

Retire

Branding Preferred Employer Sourcing Strategy Career Web Site Alternate Work

Arrangements

Targeted Recruiting Applicant Tracking Selection Process Compensation Benefits

New Hire Orientation Training & Development Mentor Programs Talent Management Performance Evaluation

Employee Satisfaction Work/Life Balance Compensation and

Benefits Work Environment Leadership

Attract Recruit Invest Retain

Employee Life Cycle Immediate Solutions

Attract: How can we become an employer of choice to the desired talent to support the business?

– Robust and compelling employer brand

Recruit: How do we ensure that our recruiting approach and tools are as efficient and effective as possible to get the talent we need when we need it?

– Enhanced mid-career hiring program– Measurement processes for sources of talent and success rate

Phased Retirement

Retirement Benefits

Retiree Medical

Mentoring Knowledge

Transfer

Retire

Branding Preferred

Employer Sourcing

Strategy Career Web Site Alternate Work

Arrangements

Attract

Targeted Recruiting

Applicant Tracking

Selection Process

Compensation Benefits

Recruit New Hire

Orientation Training &

Development Mentor Programs Talent

Management Performance

Evaluation

Invest

Employee Satisfaction

Work/Life Balance Compensation

and Benefits Work

Environment Leadership

Retain

Employee Life Cycle Immediate Solutions

Invest: What are the optimal investments in developing and managing talent?

– Training and development processes and programs revised to decrease the time to proficiency

– Recognition for knowledge transfer

Retain: How do we ensure that we are retaining the right people?

– Employee development integrated into leader performance evaluation

– Robust communications for understanding and appreciation of total rewards and opportunities

Phased Retirement

Retirement Benefits

Retiree Medical

Mentoring Knowledge

Transfer

Retire

Branding Preferred

Employer Sourcing

Strategy Career Web Site Alternate Work

Arrangements

Attract

Targeted Recruiting

Applicant Tracking

Selection Process

Compensation Benefits

Recruit New Hire

Orientation Training &

Development Mentor Programs Talent

Management Performance

Evaluation

Invest

Employee Satisfaction

Work/Life Balance Compensation

and Benefits Work

Environment Leadership

Retain

Employee Life Cycle Solutions

Retire: How can we best manage the exit of our workforce and intellectual capital?

– Revised retirement and retiree medical plans to drive the desired retirement behaviors

Phased Retirement

Retirement Benefits

Retiree Medical

Mentoring Knowledge

Transfer

Retire

Branding Preferred

Employer Sourcing

Strategy Career Web Site Alternate Work

Arrangements

Attract

Targeted Recruiting

Applicant Tracking

Selection Process

Compensation Benefits

Recruit New Hire

Orientation Training &

Development Mentor Programs Talent

Management Performance

Evaluation

Invest

Employee Satisfaction

Work/Life Balance Compensation

and Benefits Work

Environment Leadership

Retain

Longer-Term Solutions

Program to identify current feeder pool employees earlier in their career to develop into these positions

Alternative work arrangements for work/life balance

Phased retirement alternatives for selected individuals

Processes, tools and mentoring program for knowledge transfer

Case Study #2: Recruitment & Retention

Problem:– Significant retention issues at key career points– Very competitive recruiting/talent market– Diversity does not match customer base

Hypothesis:– Employees need different “deals” at different stages of life– Employer of choice brand will make a difference in recruiting the

necessary talent– Reward dollars can be allocated more effectively to reduce

turnover and recruiting “ramp up” costs

Actions:– Restructure of rewards to align with life stages

A first step is to improve the employment deal with customized recruiting and retention tools

On campus recruiting

Experienced hires

$

$

$$SR. ASSOC.

4-6 years

EXPERT/MANAGER7-9 years

SR. MANAGER10-12 years

EXECUTIVES

ASSOC.1-3 years

The challenge is to keep rewards

efficient for the Company and

relevant for every employee

A more responsive reward program can begin to improve the overall work experience

Lifecycle RewardsLifecycle Rewards

Annual Turnover

Lifecycle Rewards lets employees make choices that influence their decision to stay and remain motivated…

Julio, age 22, Engineer $23,500 in college loans Low to modest medical

coverage needs Going to work for the first time “Work hard, play hard”

Life Stage

Profile

Catastrophic healthcare coverage only

Lowest dental coverage No vision coverage Purchase 4 additional PTO days No 401(k) participation

Base salary Bonus Base healthcare and security

benefits Eligibility for retirement plan

Customized Benefits

Base Program

Julio’s Lifecycle Rewards Corinne’s Lifecycle Rewards Paul’s Lifecycle Rewards

Picture of young

professional woman

Picture of minority with

family

Corinne, age 38, Sr. Engineer Recently married Purchasing first home Evaluating career and family

options

Opts out of medical in favor of spouse’s plan

Purchases additional life and other security coverage

Takes balance of flex credits in cash

Milestone Award payment goes to down payment on home

Modest 401(k) participation

Paul, age 45, Engineering Manager

Married, two children Considering larger home Planning for college and

retirement

Lifecycle Rewards Family PPO, dental, and vision

Pending Milestone Award earmarked to fund a 529 plan

Maximum security elections No additional PTO days

purchased Maximum participation in 401(k)

Base salary Bonus Base healthcare and security

benefits Eligibility for retirement plan

Base salary Bonus Base healthcare and security

benefits Eligibility for retirement plan

Lifecycle RewardsLifecycle Rewards

…and helps manage compensation and benefits for employees throughout their career

Year 1: Cathy is hired as an Associate Engineer

Year 3: Cathy is married and adds her husband as part of her healthcare coverage

Year 5: Pays down her remaining college debt with her first Milestone Award

Year 6: Little Kelly is born, 7 pounds, 6 ounces. Cathy is promoted to Senior Engineer

Year 8: Second Milestone Award is paid, family purchases new home

Year 9: Uses three weeks from Leave Bank to be with ailing parent

Year 11: Promoted to Engineering Manager. Third Milestone Award is paid into Retirement Account

This is not just about “choice” – its also about

being responsive and understanding your

employees

Lifecycle RewardsLifecycle Rewards

The core objective is to make it compelling

for individuals to join and stay

Estimated savings associated with increased retention

$63

$226

$133

$454

$261

$670

$341

$895

$477

$1,085

$566

$1,246

$698

$1,351

$789

$1,414

$868

$1,443

$890

$1,456

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1 2 3 4 5 6 7 8 9 10

Year of Program

Program Savings Opportunity(Dollars in Millions)

Cost Savings~$560 Million in cost savings over the next ten years + possible productivity gains among existing employees

Lifecycle RewardsLifecycle Rewards Sourcing & RecruitingSourcing & RecruitingWork/Life & Career Management

Work/Life & Career Management

Direct rewards will not solve all the issues…

Job Sharing

Job Rotations

Reduced Hours

Job Posting Technology

Interest-based

Competency-based

Management Training

Formal Mentor Program

Capacity Planning

Diversity

Sourcing Strategies

Screening & Profiling

Offer Management

Other Areas of FocusCurrent Focus

Lifecycle Rewards is not the “silver bullet”, there are other critical issues to address

Near-Term (1/1/06)

– Milestone Account– Enhanced Match

Medium-Term (1/1/07)

– Flexible Benefits– Leave Bank

Workforce Planning: Keys to Success

Don’t assume you know your workforce: There are typically “hidden” behavior patterns not readily apparent

Take a focused approach: Zero in on critical jobs and segmentation for actionable findings

Apply quantitative methods: Establishes ability to model behaviors and determine cost and ROI drivers

Be open minded and flexible: A “one-size-fits-all” strategy of the past may not work for the future

Develop an integrated strategy: Rewards and benefits are total package

Where are the gaps?

Lack of employee data, global systems and analytical tools

Majority focus on period costs – limited longer-term thinking

Limited connection between business strategy and future employee needs

‘Silo’ approach to rewards

Closer than most…..

The major E&P companies

Larger Oilfield service firms

Questions:

W W W . W A T S O N W Y A T T . C O M

Workforce Planning:Data Analysis to Solutions