Knowing the Current State

As was discussed in Chapter 5, Internal Labor Market (ILM) analysis provides a wealth of facts about the current state of an organization’s workforce and the management practices that influence it. It also provides insight into the future. It does these things in two ways: by documenting workforce-relevant trends that can be expected to continue and by using statistical models to forecast the future state of the workforce in light of those trends. Those models help identify the causes and consequences of workforce dynamics. Hence, they can be used to predict the results that are likely to follow a change in one or more of the causes of those dynamics. Let’s say an organization knows through ILM analysis that the education and early job experiences of its new recruits strongly influence the rate at which those individuals advance into management positions. The model behind that knowledge can be used to answer questions such as the following:

• How many new recruits will advance into management positions within five years if the number of new hires with advanced degrees is increased by 25 percent but nothing else changes?

• How much will the company’s retention rates and compensation costs change as a result of the new hiring policy?

The modeling part of ILM analysis provides a complete picture of how the human capital system can be expected to change as a result of a single policy change such as a new hiring practice. Organizations can be a lot smarter about the future when they are equipped with strong facts about the present.

Of course, not everything about the current state can be known through quantitative ILM analyses. Those analyses have to be supplemented with other facts and insights from a number of sources, such as focus groups, surveys, and interviews of employees. Those sources produce facts that human resources (HR) information systems and other databases are unlikely to capture and reveal.