Workforce planning is a strategic, forward-thinking process that requires commitment. It won't happen overnight and could take months to reap results. But the benefits are enormous, they include saving on labor costs and improvements in productivity through smarter talent management decisions. Workforce planning also plays a strategic role in enabling organizations to meet their operational and financial objectives.
In a nutshell, the workforce planning process starts with a good understanding of what staff to hire and how many you will need a year or two years from now—in addition to today’s and forecasted needs. You can do this by surveying line managers and using a staffing model that helps you understand what talent is needed for today and the future and how many employees are currently in your workforce. Next, model your talent demand and supply and use the results of this analysis to calculate the gap in your workforce. Last, your team will need to create an action plan with specific workforce interventions for the next 2 to 5 years.
Example: Headcount Analysis, Compensation Analysis, Turnover Forecast, and Recruiting Forecast
The most important use case for workforce planning is optimizing your current staff mix and size for maximum performance. With companies spending nearly 70% of their operating expenses on their workforce, executives are keen on finding ways to control labor costs while improving the overall workforce productivity.
Effective workforce planning allows organizations to forecast when and where they should add more staff for the most optimal results. Advanced organizations are also looking into which skill sets their team needs and how turnover and recruitment could affect them.
For example, due to the recent shift in artificial intelligence and automation, digitalization has been identified as the top priority for many companies. Using data and analytics, HR can better understand the turnover of their IT staff by looking at the current distribution of staff across different job types, departments, and business lines throughout their organization. If there is a high turnover rate and cost in certain departments or among specific positions, you may need to hire additional employees to ensure the success of your digitalization initiative. The bottom line is workforce planning can help organizations increase performance, reduce costs, and align their workforce strategy with organizational objectives.
Example: Headcount and Compensation forecast
2. Stay Ahead of Labor Market Changes
Workforce planning also enables HR to anticipate how changes in the labor market will impact their labor budget or Total Cost of Workforce. In the last decades, the labor market witnessed major shifts in talent demand and supply due to an aging workforce and the emergence of automation and artificial intelligence. COVID-19 has further accelerated these labor market trends forcing organizations to radically change how they recruit, manage, and retain talents.
Diagram: 8 Steps to Workforce Planning Success
Many seasoned HR analytics practitioners pointed out that the ability to answer the questions that are relevant for executives is critical to workforce analytics and planning success.
Where will our company be in three to five years, and what does that mean for the type of people we will need to recruit?
Can we model our workforce to optimize cost, profit, and productivity?
What percent of our workforce is customer-facing or revenue-generating and where are they typically located?
Step 2: Scenario Design and Future Vision State
Here's where you start laying out the groundwork for your workforce planning process. You'll want to assess both quantitative and qualitative data related to how employees are utilized as well as what future projections might look like—especially in terms of market trends, technology changes or other factors that could affect company operations and business models over time. Make sure to include a "future vision state" for your organization to have a clear idea of what the future looks like and how it will impact workforce planning.
Step 3: Demand Forecast Macro (Top-down Planning)
This step involves looking at the market demand for your products or services, as well as how external factors such as the economy and political landscapes will impact future demands. This is important because it allows you to take a big-picture view of potential changes that may affect company growth so you can plan accordingly concerning hiring patterns in different regions over time.
Here, you'll want to look at how each of your business units, departments, and teams are doing. For example, if one department is projected for growth while another isn't—or needs more employees than the other does—this will significantly affect workforce planning efforts and when (and where) these employees need to be hired.
This step involves looking at your internal supply. (i.e., the number of employees you currently have in each region across all business units and teams). This data will help with forecasting as well as identifying any gaps that may exist between actual need vs. what's being supplied internally or externally to meet the demand for specific roles and skillsets.
This is the process of looking at the current labor market to determine what talent is available. This includes identifying potential sources for hires and where your organization may need to increase its external recruiting efforts to meet demand over time.
Example: Using data to find cities with the least competition and the most talent supply
At this stage, you'll have all the information necessary to determine whether there are any gaps between supply and demand. This will help make changes in your hiring strategies, training plans, and overall talent management efforts moving forward.
Lastly, you'll want to develop a clear action plan that outlines the steps needed to fill any current gaps and meet future workforce demands. This includes identifying your organization's talent supply chain, which is essentially how you source employees—whether it be through internal promotions or external recruitment efforts. You should also identify potential training plans and assess what sort of changes you can make to company culture to retain more employees.
Example: Assembling the recruiting plan