Because talent is such a crucial asset for any business, workforce planning is one of the most important factor in organizational growth. Unfortunately, many organizations still don’t fully understand their current and future workforce needs. This can severely limit a company’s ability to reach key goals, stunting growth.
With well-executed, strategic workforce planning, companies can more accurately predict needs to better ensure resources are used in the right place at the right time.
What Is Workforce Planning?
Workforce planning, also referred to as strategic workforce planning, is a process that helps to ensure the right person is in the right position at any given time. It requires an organization to analyze, forecast and plan out its future staffing needs while factoring in whether existing employees or outside talent can fill those needs. This focus on planning typically requires talent management solutions which can help make those determinations and help fulfill its business objectives.
Why Is Workforce Planning Important?
Talent management is a persistent challenge for any organization, but workforce planning helps to minimize — and where possible, eliminate — current and future staffing issues. For example, an aging workforce can create talent shortages for certain roles due to mass retirement and a lack of appropriate skills. Considering skilled workers can give an organization a competitive edge, hiring and keeping employees who are both ambitious and skilled creates a pipeline to replace departing staff, ensuring long-term success.
Businesses today must innovate faster than ever before, and they need talented employees who can handle those demands. This forces organizations to work more efficiently, finding ways to keep costs down (including the expenses that are a product of an aging workforce) and maximize their budget without compromising quality.
Benefits of Workforce Planning
Effective workforce planning ensures that a company is not simply reacting to risks like a talent drain due to retirements or employee attrition. Most business already plan for these potential events. It is a constant strategic evaluation of how talent risk can impact an organization’s finances, product development and customer relationships.
Benefits of workforce planning include:
- Metrics that allow leadership to identify risks before it impacts the organization’s goals.
- Tools and reports that articulate the impact of decisions, so you can better manage future investments in your workforce.
- A clear view of supply and demand challenges by location and expenses.
- Identifying and rectifying issues that may limit productivity.
- A competitive advantage.
- Consistent reports of outcomes to assess meaningful and measurable results.
Workforce Planning and HR Analytics
Workforce planning can be considered one piece of HR analytics, which are what an organization uses to shape its people management strategy. However, strategic workforce planning focuses on the more long-term initiatives behind hiring and retaining employees. People or talent analytics, while also a data-driven approach to employee management, concentrates on evaluating relationships between talent and business outcomes.
6 Tips for Effective Workforce Planning
To effectively implement workforce planning, HR leaders need to be inquisitive and strategic and collaborate with executives from across the organization. A plan should be tied to your company’s overarching objectives and include all relevant factors that can impact your hiring and employee management.
Here are six steps you need to take to create an effective plan:
- Establish concrete current and long-term business objectives. The more concrete and detailed you can get with your business objectives, the better. That way, you’re able to identify and measure the most relevant metrics after you launch this effort.
- Lean into HR analytics. People analytics can offer insights into your current workforce, looking at your employees' demographics, work contracts and seniority profile. You can also see the performance and quantity of staff members on hand.
- Identify skills gaps. Analyzing skills gaps allows you to anticipate long-term needs and the potential challenges that come with that. This can give you a head start in finding possible solutions, like training existing employees to cover the gaps, hiring more workers or shifting to a different employment model.
- Conduct workforce scenario planning. It’s impossible to be ready for every contingency, so preparing for different scenarios is key. Model different scenarios that could potentially impact your business and determine what that might mean for your workforce.
- Ask for outside advice. Leaders can lean into their network and seek out the advice of others who are in similar positions. They can also hire outside help, such as a consultant who specializes in strategic workforce planning. This person can work alongside you for parts or all of the project.
- Monitor your plan. Your workforce strategy is a fluid plan, so you must monitor results in real time and make quick adjustments based on what you’re seeing as necessary.
Workforce Planning Process
The workforce planning process starts with building basic guiding principles and then following an ordered list of steps. This not only gives your team a roadmap to follow and keeps you organized, but has proven to increase the effectiveness of this initiative.
Principles of Workforce Planning
There are three general guiding principles for strategic workforce planning:
- Align the plan with the organization’s objectives or strategy. This guideline helps you determine the direction you want your organization to head in the next five to 10 years.
- A long-term focus. Workforce planning ensures an organization looks at both tactical and strategic decisions.
- It focuses on an organization’s most important roles. Since a select amount of work has a disproportionate effect on an organization’s overall success or failure (think Pareto Principle), the company’s most critical roles should be its primary concern. Then, the focus can turn to overhead and management.
4 Steps in the Workforce Planning Process
Since the workforce plays a central role in an organization’s future, here are steps you can take to ensure your workforce planning strategy aligns with your broader vision for the company.
- Supply Analysis: Look at how your current and future workforce will change due to trends such as attrition or market growth. Consider how well the existing workforce supports your current strategy, the number of employees at each level, the difficulty of filling certain positions and whether any local talent pools or recruitment partners could help provide the specific talent you need.
- Demand Analysis: This stage helps you understand your organization’s current and future talent requirements. Consider the number of staff needed to complete key tasks and any anticipated changes in regulations or policies that would affect your business, opportunities to leverage resources and how the organization’s workload could change.
- Gap Analysis: At this stage, you compare supply and demand to identify workforce gaps and then prioritize the most critical ones. Consider how the business can address these gaps to remain competitive, what jobs have hard-to-find skills, how retirement affects employee numbers and how to improve workplace diversity.
- Solution Analysis: This is when you implement activities and interventions to close your workforce gaps and ensure your organization meets its goals. Consider how to develop planning capabilities, how to use data to identify action steps, what metrics best monitor risks and the biggest workforce planning needs. You’ll also need to look at different staffing options such as recruiting, training (or retraining), contingent staffing, hiring part-time or temporary employees and outsourcing (with personnel like contract workers or consultants).
Workforce Planning Example
Let’s say a company has two different product lines and is debating whether to add a third. Sales for the first product line are slowly declining, whereas the second one is taking off, with forecasts predicting continued growth.
Using data such as current revenue, expected annual growth and the number of sales and support staff, leaders can settle on a goal for revenue in the upcoming year. This is a simplified way to assess how staff should grow based on these goals and current data.
Assuming staffing costs are equal for both product lines, it’s safe to think the first product line isn’t as profitable. Therefore, there probably isn't a need to increase staff. If there are "excess" workers, then they work on the second product line, assuming their skills remain relevant there (if not, the business could consider retraining them). Leaders can also plan and retrain employees anyway, anticipating future needs for the second product line, reducing hiring costs.
Based on the numbers, leaders also predict the second product line will remain more profitable. The organization can then look at the growth percentage to estimate the number of additional staff required to support that rise. These hires can happen immediately or over time, depending on how these projections play out.
Keep in mind that this is a simple example that only takes into account a few basic factors. More information will make your plan more useful and relevant, but also more complex.
HR and Payroll
Free Workforce Planning Template
Use our free workforce planning template to help you determine the strategic direction your business needs to take when it comes to hiring and managing employees.
Role of Succession Planning in Workforce Planning
Succession planning can offer insight when it comes to workforce planning. It provides reports to identify employee skills, leadership qualities, potential for growth and any gaps in key roles. Armed with data, current leaders can take steps to reduce gaps. It may also help you reduce costs if you notice that you may not have to hire new talent to replace employees in current positions.
How Human Capital Management (HCM) Systems Can Help
HCM systems can automate much of the data gathering process and increase data accuracy. These solutions can offer valuable insights, such as productivity analytics and employee progress against individual goals. This information can make the workforce planning process much more feasible and less daunting.
Choosing the Right HCM
When choosing an HCM system, finding the right fit means looking at the type of data you need to ensure a more thorough and effective planning process. While most HCM systems store basic data such as the number of employees and payroll information, businesses should look for solutions that are more robust with a goal of taking advantage of additional functionality as they grow. Look for a system that can run user-defined reports and map out multiple workforce scenarios so you're more prepared.
Ultimately, workforce planning aims to help businesses put the right people in the right jobs at that particular time. It means leaders need to understand their current workforce, plan multiple future scenarios and determine their business objectives.
While it’s a complex process that requires a lot of time and thought, workforce planning is well worth the effort. It gives your organization a competitive advantage because you’re better prepared for the future, so you’re not left scrambling when needs arise. Workforce planning helps an organization plan for the future. Managers can make data-driven decisions based on a role’s importance and individual performance, and the business can evaluate the impact of different work. Meanwhile, business leaders will benefit from workforce planning because they will be able to plan ahead.
Workforce Planning FAQs
What is the goal of workforce planning?
The goal of workforce planning is to ensure the right amount of people are in the right position at the right time. This allows an organization to work more efficiently and effectively and is especially beneficial for larger companies.
What are the steps in workforce planning?
Workforce planning involves finding gaps between future organizational needs and your current workforce. The remainder of the process is centered on finding and executing on ways to minimize these gaps.
How does workforce planning improve productivity?
Workforce planning enables businesses to respond more strategically and nimbly as leaders see needs develop, whether due to changes in their industry, organization or the working population at large. It also ensures workers have the relevant skills and knowledge needed to be a good fit for and excel in their position.