Scenario planning in the business and HR paradigm: what you need to know

Would you like to make a business plan for the next five years that’s based on data? Then take seven minutes to read about scenario planning.

Forecasts of possible changes, trends, and events are usually based on social, political, economic, environmental, and technological assumptions. But changes may well derail any basic assumptions and trends, leaving your employees reacting to change rather than leading it.

To understand what trends will strongly impact your organization and make effective decisions, you need to use scenario planning. In this post, you will discover scenario planning examples, techniques, and practices.

First, let’s go over the basics and figure out what scenario planning is.

Scenario planning is a way of formulating strategic hypotheses about existing drivers and their uncertainties. The US military came up with the concept of scenario planning, and it’s been used in training to guide research efforts for more than 20 years.

Gradually, businesses started adopting scenario planning. After all, it allowed them to identify ranges of potential outcomes, estimate impacts, evaluate responses, and manage both positive and negative opportunities.

For the HR industry, scenario planning has also brought benefits, especially for workforce managers. They can not only perform workforce planning themselves but also make it an automated process.

Scenario planning allows leaders to respond quickly and decisively. When a situation has been thought out in advance and managers have documentation about what they should do in the given situations, no one has to scramble during a crisis.

There are many examples of scenario planning. We review those relevant to HR.

The main idea is to have a competency model for each scenario. Sometimes, the model will include changes in the work organization. For example, many companies prefer to be adaptive to their workforce and encourage internal mobility. Thus, they move from a job focus to a role focus.

Scenario planning for HR and business allows managers to anticipate possible future outcomes and proactively develop strategies to address them.

Here are several scenario planning examples that can give a unique perspective to HR managers and contribute to successful scenario plans.

HR should participate in business and scenario planning meetings to understand the business’s challenges and how strategic talent management can help solve them.

Every plan for every business scenario depends on an efficient and prepared future workforce. Therefore, HR should take the lead in proactively developing a workforce strategy that can withstand any possible scenario. Because people connect all aspects of the business, HR is in a great position to bring key stakeholders together and help plan meeting scenarios.

We don’t know for sure what will happen in the next three to five years, but we can analyze past information to make predictions. HR managers should collaborate with other business leaders to develop scenario plans and review internal and external data to develop specific goals.

Because HR touches every level of business operations, HR managers have access to company-wide data. Get past data from your HR processes to establish a baseline and gauge the success of past plans. For example, performance appraisal and pre-hire assessment data can help you identify gaps in your current workforce that could impact future scenarios.

Organizations can prepare for contingencies through advanced training.

For example, in extreme economic instability and volatility, companies may hesitate to commit to large numbers of full-time workers and prefer to use contract workers. You can start preparing such infrastructure as gig economy by bringing employees, contractors, or temps into the same team or department.

Most scenarios also involve the increased use of automation and artificial intelligence technologies. As artificial intelligence and automation will become even more critical to work in the future, you can start building the infrastructure for them now. Try incorporating automation into different teams and roles within the company to identify the skills your workforce will need to work alongside this technology, allowing you to scale automation and AI seamlessly.

Scenario plans typically last three to five years but should be reviewed annually by your management team. When the pandemic started, many companies didn’t expect it to last for so long and probably expected to go back to everyday life in one year. However, this assumption left them in limbo, unable to fully embrace remote or hybrid work in the long term.

The COVID-19 pandemic underscores the need for regular scenario planning. However, we should also emphasize that scenario planning isn’t only for bad days; it’s also critical when things are going well.

Business continuity planning for any scenario allows you to act quickly and decisively when the time comes.

Integrating business scenario planning with HR helps business leaders become more aware of the business’s external forces. Developing and implementing scenario plans can help you better understand your business strategy and priorities.

Include scenario planning in your executive team’s regular meetings.

Make sure your HR team has everything needed to redefine what normal means for your company. And remember: They can only do so by anticipating the future. Therefore, scenario planning is critical to your business and to HR’s ability to steer your organization towards a brighter future.