The Value of ILM for Looking Ahead

ILM analysis helps an organization understand both what its workforce is now and what it is becoming. Thus it offers the foundation needed for effective workforce planning that is capable of supporting business strategy, a point we examine more closely in the next chapter.

ILM analysis can be used to simulate the effects of alternative strategies for achieving desired ends. A particularly powerful application of ILM analysis for looking forward is in the area of workforce diversity. Many organizations have formal diversity programs designed to achieve an appropriate level of representation of women and minority group members. Hiring often is seen as a quick way to meet diversity goals. However, this tactic may or may not produce a sustainable solution. The interrelated influences of hiring, development, promotion, retention, and pay that are unique to each organization ultimately determine a company’s success in achieving workforce diversity. In other words, a company’s internal labor market needs to be geared to support those objectives.

The facts learned through ILM analysis inform a company’s choices about how best to meet its diversity goals. For example, a company may find that it has inadequate representation of women and minorities at middle or upper management levels. One solution to this shortcoming is to increase hiring directly into those levels. An alternative is to increase hiring into the jobs and levels that prepare individuals to perform successfully at the middle and upper levels, that is, to improve the pipeline of candidates.

Which solution or combination of practices is most effective depends on the ILM patterns. It may be that what is most important is the innate ability and market experience of individuals—general human capital—and so hiring directly into areas of deficiency is the appropriate solution. However, if firm-specific experience is critical to success, strategies focused on building the pipeline may over time be more effective and financially sound. After all, if the job candidates hired lack this institutional knowledge, they will be less likely to perform well and more likely to leave. The company will do all the right things in hiring and still be left without the diverse workforce it seeks, and the investments made will yield little or no return.

Companies used to guess about these things, but that is no longer necessary. Using ILM analysis, they can measure employees’ responsiveness to different factors, such as rewards, internal mobility, and career development programs. These quantitative measures make it possible to project into the future to identify the quickest, surest, least expensive ways of meeting longer-term human capital objectives, such as those related to diversity. This analytic tool also reveals the right measures to track and tells managers when to make course corrections as conditions change.

ILM analysis is critical to understanding current workforce dynamics and projecting what workforces can become. Finding methods to determine what the workforce should be is the subject of the next chapter.