DEMOGRAPHIC CHANGE: PORTFOLIO ANALYSIS ON HUMAN RESOURCES STRATEGY



Overview and client problem

With more than 220.000 employees, Deutsche Bahn AG (DB) is one of Germany's biggest employers. In the framework of the internationalisation of DB, the department of human resources (HR) strategy encounters various challenges. One challenge is that as DB transforms into an international logistics company, the working environments and tasks of DB employees are changing significantly. Another challenge is that the employability of DB's workforce is threatened by the effects of the rapidly approaching demographic change.

 

In this context, DB joined forces with a MARA1 team to generate and transparently evaluate activities to proactively address the problem of internal demographic change. Acting as a responsible employer, DB aims to increase the company's competitiveness by developing and implementing measures that specifically address the needs and challenges of individual employee groups. The company ranks - to our knowledge - among the first to address HR strategy development issues with decision analyses.

 

Objective of the project

In the framework of the joint DB/MARA project, an HR strategy is to be developed that puts special emphasis on maintaining the employability of DB's existing workforce. Because employee groups are affected very differently by demographic change, only a highly diversified portfolio of individual measures can respond to the specific needs of DB. With the support of decision analyses, DB wished to consolidate the relevant internal knowledge, and to appraise and prioritise counter measures in order to develop an optimal portfolio of HR activities.  Strategically, DB wanted to address three questions:

  1. How can DB best prepare its employees for the future challenge of demographic change?
  2. Which synergies can DB exploit across departments?
  3. What budget is required to implement a comprehensive future strategy? How can it be justified?

Portfolio of employability options

Modelling approach

With the support of MARA, DB generated and evaluated options with the departments of qualification, health and labour relations. The primary focus was on three target groups. A socio-technical approach, which combines Multi-Criteria Decision Analysis (MCDA) and decision conferencing (special type of group meetings), was used in combination with computer-based optimisation tools to perform a cost/benefit evaluation of the activities across the involved departments. The resulting portfolio of options to manage the internal demographic change is displayed above.

 

Notable characteristics of the evaluation process were the dominance of 'soft' benefit criteria which represents an HR peculiarity. They include criteria such as working ability enhancement, motivational effects and the long-term impact of specific options (see figure on the right). Additionally, the scope of the evaluated options differed immensely - from a few people affected to over 40.000.
The modelling approach incorporated internal and external realisation constraints in the form of a risk criterion. Options success probability was judged by the department of labour relations. This made the benefit estimate more realistic and also stimulated valuable discussion among all involved parties.


Evaluation criteria structure

Results and impact

The iterative nature of the option elicitation process enabled the decision makers to analyse their current and potential activities to manage internal demographic change in more depth. The discussion and mutual justification proved to stimulate creativity, as new insights emerged along the way.

 

Decision makers found it highly valuable that participants of all level were involved in the process. As a group, they were able to generate a common understanding of the objectives of each of the departments as well as the overlapping objectives across departments. The generated consistency helped them to address the main trade-offs when counteracting the negative affects of demographic change.


Conclusion

To our knowledge, it is one of the first times that an MCDA modelling approach was used in order to help develop a strategic allocation of resources in the field of HR. Methodologically, MCDA helped to assess the performance of options on non-monetary criteria and was flexible enough to incorporate the encountered uncertainty.

 

The MARA team succeeded in providing DB with a thorough analysis of how it could face the challenge of internal demographic change. The results of the model provide DB with a sound argumentation for the composition of activities that will be promoted in the future. The exploration possibilities of the results of this project are flexible enough to merge the insights with those of other studies, e.g. the MARA project on Recruiting Channel Optimisation. Drawing on these results, a valuable contribution can be made by MCDA approaches to the development of HR strategies.


Most relevant literature

  • Hardin, G. (1968): The Tragedy of the Commons. Science, Vol.162, p.1243-1248
  • Keeney, R.L and Raiffa, H. (1976): Decisions with Multiple Objectives: Preferences and Value Tradeoffs. New York: Wiley
  • Keeney, R.L. (1992): Value-Focused Thinking. Cambridge, Massachusetts: Harvard University Press
  • Lengnick-Hall, C.A. & Lengnick-Hall, M.L. (1988): Strategic Human Resources Management: A review of literature and proposed typology. The academy of Management Review, Vol. 13, No. 3., pp. 454-470.
  • Noda, T. & Bower, J.L. (1996): Strategy Making as an iterated process of Resource Allocation, Strategic Management Journal, Vol. 17, pp. 159-192.
  • Phillips, L.D.  (1984): A theory of requisite decision models. Acta Psychologica, Vol. 56, pp. 29-47.
  • Phillips, L.D. and Bana e Costa, C. (2005). Transparent prioritisation, budgeting and resource allocation with multicriteria decision analysis and decision conferencing. Working Paper LSE OR 05.75.
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