In short:

  • Over the past few months, your HR team has been on a roller-coaster ride from record low unemployment to record high. Time to level set.
  • A formal workforce planning and analytics initiative brings human resources back in step with the rest of the business.
  • Salaries and benefits are likely your largest line item, so finance leaders must be part of the workforce conversation.

Workforce planning and analytics is a valuable, strategic process for companies of all sizes looking to get ahead of HR challenges. But it plays an even more pivotal role in the sort of fast-changing economic environment we’re in today.

The “analytics” piece of workforce planning and analytics refers to the process of determining, with data, whether you have the right number of people, with the right skills, in each functional area based on your short- and long-range business plans. By visualizing and modeling HR scenarios, leaders can make workforce decisions faster, and with more confidence.

Back when just getting warm bodies in the door was a challenge, analysis may have fallen by the wayside. Take this opportunity to fix that. By codifying data-driven workforce planning as a necessary activity, companies become more resilient, agile and in control of their futures.

This guide will help finance leaders understand and advocate for data-driven HR.

What is Workforce Planning?

Workforce planning is a process that enables a company to assess its current workforce and compare that reality with future workforce needs as determined by business objectives. Some key goals are to identify and address workforce gaps, codify succession plans and keep a handle on HR costs.

We’ve said before that CFOs have data and analytical skills that can be invaluable for HR colleagues, and that developing a proactive retention plan will save money in the long term. Of course, at the time, there were 7 million open jobs chasing 6.3 million unemployed people. Still, we’d argue that while there may be more applicants for open positions, those with in-demand skills are still, well, in demand. And a new, recently announced freeze on H1-B visas through 2020 will exacerbate hiring difficulties for some roles.

Our advice stands: Finance leaders need to drive the workforce planning process in close collaboration with human resources colleagues, and with support from senior executives. Aligning headcount to budgets to ensure there are no cost overruns now, or in the future, is part and parcel of the CFO’s mandate to manage runway.

Why is Workforce Planning Important?

Business plans are always evolving based on economic conditions, yet HR tends to lag the plan by a good bit, for a number of reasons. In the spirit of never letting a crisis go to waste, this is an opportunity to get HR in step with the evolution of the business and drive recovery and success more quickly.

The three most common workforce planning challenges are:

  • The quality of HR data
  • A reactive mindset
  • Failure to align business strategy with human capital strategy

Done properly, workforce planning addresses all of these. It provides resilience, minimizes risk and ensures business continuity in the face of economic or business disruptions. Whether it’s a key executive heading into retirement or an acquisition, having a framework to inform the business on which roles will be critical to future success based on projected needs and historical HR data can avert expensive and disruptive hiring missteps.

Most workforce planning comes in the form of managers requesting more headcount during the annual operating budget cycle. While recruitment is a key component of workforce planning, it’s not the only part.

Least Common Action

So why do so many companies fail when it comes to comprehensive workforce planning?

Often, HR data lives in multiple places, so it’s time-consuming and expensive to centralize and normalize data to the degree needed to make it inform important decisions that often need to happen quickly. In smaller firms, there may not even be a human resources or human capital management system in place — hiring is ad-hoc, and leaders pay attention to workforce needs only when disruption impacts the business.

Whatever the reason, underusing workforce data introduces risks few companies can afford. Ask yourself: Did we overreact to the COVID-19 disruption? Did we under-react? Were there opportunities we could have seized if we had had better insights into our skill sets?

By having a proactive plan, CFOs can identify and mitigate risks before the business reaches a crisis point. Or, conversely, spot pockets of expertise that could give you a leg up.

Another reason for failure is that workforce planning requires breaking down information and organizational silos. On the upside, business leaders are incredibly invested in their people. They’re incentivized to collaborate on a workforce analytics project, making it an ideal exercise to break down those management silos and set you up for better planning in the future.

Just frame this project as about helping business leaders keep their people and watch the buy-in happen.

How Can ‘People Analytics’ Improve Workforce Planning?

HR analytics, also known as people analytics, is a powerful technology to monitor, measure and analyze workforce data to improve business outcomes and set new initiatives up for success.

For example, using performance management, tenure and payroll data, CFOs can identify talent gaps, burnout or high levels of attrition. Employee engagement or satisfaction survey data feeds the analytics engine to spot underperforming managers or departments that need headcount. HR and finance leaders can use this information to assess current workforce conditions and build a plan that encourages more engagement and increases satisfaction and retention. With the ability to drill down from summary to detail and create ad hoc models, people analytics offers valuable tools to fine-tune and manage the plan.

For example, even now, the top 5% to 10% of employees can fairly easily find new positions. In some industries, such as warehouse logistics, certain banking and finance sectors and remote IT support, hiring is up, sometimes by triple digits. Comparing the high-performer turnover rate to the overall employee turnover rate is a key HR metric to track. When you disproportionally lose your best people, productivity and the quality of your product or service are at risk.

Man on his laptop

The New CFO Dashboard: KPIs To Track Now: As the economy reopens, CFOs are settling into their more-prominent roles as data brokers. Find out the other indicators your peers are watching.

Types of Workforce Analytics

There are three types of HR analytics: historical, predictive and prescribed.

Historical analytics looks at the past to help quantify and describe changes made to the workforce. Yields insights into such areas as revenue per FTE, turnover rates, employee engagement, average time to fill a position, benefit costs and headcount trends.

Predictive analytics looks at future business objectives to spot gaps in both skills and headcount.

Prescribed analytics combines historical analytics with predictive analytics to shape the workforce plan and inform decision-makers of likely outcomes based on what’s happened in the past and what is needed in the workforce for future success.

CFOs who’ve dabbled in big data analysis may recognize these three buckets. Even those without that background will see that being able to plan based on prescribed, aka prescriptive, analytics is the desired outcome. We’ll talk more about how to get started, but as you assemble data sources, remember that the output needs to be both actionable, in that it shapes specific advice on steps to take, and non-static in that recommendations reflect the latest data.

In some cases, new information will change the prescribed path forward. The more data that goes in, the more dramatically recommendations may shift. That can be difficult in the context of hiring, so make sure everyone remembers why you’re going down this path.

Benefits of Workforce Analytics

CFOs making the case for using analytics to measure and quantify workforce performance and future plans have three compelling arguments:

Transparency: An analytics initiative sets up a pipeline to distribute workforce information to managers involved in hiring, down to whatever level executives consider appropriate. Clearer communications gets everyone on the same page vis a vis hiring and training existing employees and minimizes wasted time recruiting and interviewing.

Runway planning: With key performance indicators in place, finance leaders are better able to understand workforce costs and trends as they relate to business performance. Add an understanding of your particular recovery scenario, and cash management gets more straightforward.

Strategic HR: Potentially whip-lashed HR leaders get out of a reactive role dictated by the latest unemployment stats and become strategic partners to finance and other executives.

Across the board, companies are better able to hire the right people with the right skills at the right time to achieve business objectives by taking analysis, mapping it to the plan and determining where training/retraining or new talent is needed — and where cuts may be made without risking growth.

Basic Principles of Workforce Planning

The fundamentals of workforce planning are executive sponsorship, good data, accountability and business continuity.

Sponsorship may be the most important right now. HR managers and CFOs need to enlist the CEO, or the most senior executive they can, to ensure the initiative is properly resourced and prioritized.

Once a sponsor is secured, make a few points to the organization as a whole: Workforce decisions are central to what a company does with its cash, and as such, deserve the best data available. Any companywide initiative is only as good as its execution, so all stakeholders must be responsible for their roles in the plan, keep data flowing and provide regular updates to their managers.

Lastly, the fundamental goal of this effort is to align workforce needs with business needs to guarantee business continuity and ensure short- and long-term demand forecasts are supported with people power.

The Workforce Planning Process

The workforce planning process will be different for each company because of dynamic and differing workforce needs across industries and geographies. But a simple way all firms can begin a workforce planning process is to think of it in six distinct steps:

  1. Define Business Objectives
  2. Present Analysis
  3. Future Analysis
  4. Gaps
  5. Align
  6. Execute and Adjust

First and foremost, any workforce plan must be tightly connected to business objectives. These objectives need to be measurable and few in number.

Next, analyze your present-day workforce to determine what makes it strong — and what makes it vulnerable.

Then, define and analyze what your future workforce needs to look like to meet or exceed business objectives.

Run a gap analysis between the present state and future state and develop practical strategies to close those gaps.

Align key stakeholders with those gaps and strategies, and assign ownership and accountability to the appropriate leaders.

Execute the plan. Monitor and make adjustments as needed.

Review the plan every 90 days, at least, to provide added resiliency against external market conditions.

Workforce Planning Example

A good plan should account for all three worker statuses: starters, current and leavers.

Starters are those people who are new to the company. Current employees are those in your workforce today. Leavers are those who have left the company or are committed to a leave date. Your plan should also include not just full-time employees but also contractors, temps, part-timers, seasonal workers and interns.

The plan should model certain events, like rapid workforce increases, sudden staff reductions, mergers & acquisitions and succession planning. If a particular person leaving would affect business continuity, how will you address that? Is HR involved in your crisis management strategy?

The plan should look ahead between three and five years. Below you can download our outline template, and here’s a brief scenario of how a workforce plan works.

Download the Workforce Planning Template

Get the Brainyard’s sample outline with seven areas you need to cover for long-term, data-driven HR success.

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Example: A professional services firm needs to keep its IT certifications up-to-date in order to market its expertise, maintain high levels of customer satisfaction, remain able to distribute desirable brands and remain competitive among peers.

Say that most consultants are currently utilized at 75% or more. The business forecast shows that these high utilization rates are expected for the next 12 to 18 months. There’s no time to pull current consultants out of the field for retraining and recertification, which can be a time-intensive process. Without current IT certifications, however, the firm may lose clients. Just as important, highly skilled employees, who value being kept current on certs, could decide to leave. Both losses could have a damaging effect on the company and its reputation.

A good workforce plan will allow for each consultant to have non-billable time set aside during the year to keep certifications from expiring, while also triggering hiring when the current workforce is at maximum utilization. This will enable the company to meet its business objectives, retain key employees and work on finding top talent before the situation is at hair-on-fire status.

Also of note: If you’re looking for funding or to be acquired, a mature workforce planning and analytics process is an asset well worth highlighting. The resulting plan is a trusted source of information for critical decision-making, especially in rapidly changing business environments.

Data can be centralized and visualized very quickly and economically with today’s cloud solutions, so don’t wait. Workforce planning won’t happen by itself: It needs to be driven by an executive with insight into fiscal reality and current and future business objectives. Sounds like a job for finance.

Marc Holliday is a senior product marketing manager for human capital management solutions at NetSuite. Prior to NetSuite, Marc held senior-level product management and marketing roles at Deltek, Microsoft, Great Plains and Solomon Software.

Mark Bianco

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