Workforce Planning: Everything You Need to Know
Workforce planning is an important factor in reaching your business goals. 8 min read
Workforce planning is an important factor in reaching your business goals. It’s the forecasting, analysis and preparation that certifies human capital, and failure to create a solid, structured plan is detrimental to the success of your business. As the cornerstone of strategic human resource, an effective workforce plan helps a business acquire and retain talent behind its success.
The Importance of Workforce Planning
From the beginning of the hiring process, a company must choose its talent wisely. Creating a smart talent pipeline, also known as a recruiting channel, is the most optimal way in building a well-qualified team, ultimately setting your business up for success. This is why workforce planning is arguably the most important step in optimizing your organization.
Creating a talented, promising workforce takes careful planning, measuring and optimizing. Many organizations are not sufficiently aware of the current or future workforce gaps that limits their business strategy, but that doesn’t stop boards of directors, CEOs and chief human resources officers from declaring that workforce planning and data- driven decision-making is a top priority. To avoid the inconsistencies in objectives regarding outputs in workforce planning that ultimately lead to workforce gaps can be prevented by simply planning ahead. If a company is more efficient and prepared, any future layoffs or rush hires can be avoided and managers can be fulfilled with the right number of people with the right skills to do the job.
Using Data and Analytics for Improved Workforce Planning
Although workforce planning is every business's best bet in achieving success, it is not the easiest to accomplish. Time frame, data integrity, control, and forecasting are some of the common reasons why workforce planning has consistently been difficult for programs to launch. Two important trends that companies should be aware of and take advantage of are the broad-scale acceptance of data-driven-decision-making and recent advances in predictive analytics and modeling technology.
The wide acceptance of data driven decision making may be a mouthful to say but one that shouldn't be ignored. It infuses the culture of organizations and make workforce planning more attractive. Similarly, the recent advances in predictive analytics and modeling technology provide more compelling near-term actionable information about granular employee-level supply risk and helps business with scenario planning.
When both data-based decision making and advances in predictive analytics and modeling are utilized into account during the workforce planning process, profound results occur. Implementing these strategies have the ability to create high-performance organizations. If you’re not already analyzing your data to assess the status quo, you should be. In order for companies to forecast and hit goals, companies must have access and utilize their qualitative and quantitative data to their advantage. They not only cast a light on strengths and weaknesses within the company, but also highlight capability gaps and future leadership bench strength. The information data can provide is invaluable for any business and without meaningful outputs, business managers cannot hope to use the information to make strategic workforce decisions.
The data needed can be found in most organizations if you know where to look. Quantitative data like demographics (age, gender, location), payment and benefits, employment lengths, and history of roles and experience can often be found in HR databases, records, and payroll systems. Qualitative data, on the other hand, includes performance ratings, employee training history, how positions were filled, mobility preferences, flight-risk ratings, and internal employee career plans and can usually be found in the company’s talent management systems or online records. The combination of these two types of data with technology provides valuable insight into the strengths and weaknesses of an organization’s workforce and potential future needs.
Types of Workforce Planning
There are two types of workforce planning, operational workforce planning and strategic workforce planning.
- Operational workforce planning functions on a person-to-person level and streamlines employee-related operations day by day. This can be optimizing work schedules and distribution of talent among divisions and departments, identifying functional needs of new hires, ensuring the greatest possible overall job satisfaction for the company.
- Strategic workforce planning encompasses all aspects of a company and deals with broad-based issues that evolve overtime. This can be forecasting future needs of the company, evaluating future sourcing options, and implementing effective analytical strategies. This helps understand the direction of the company and maintain its status.
Key Components of a Workforce Plan
There is no one format or formula for workforce planning. Workforce plans can be extremely complex and take months to create while others can be created in weeks and may focus on just one aspect of workforce planning like retention of customer service employees or succession planning. The most effective approach depends on the organization’s size, needs, time, and goals. However, all businesses should consider three areas of focus in their planning activities: talent forecast, talent action plan, and an integration plan.
Talent Supply-Demand Forecasting is a process for predicting upcoming changes in supply and demand of the workforce. To determine demand, the organization starts by deciding how many of each type of employee it needs across each division of the organization. To determine supply, the organization compares the number of staff it has in each role to the demand. The supply analysis should look at qualitative and quantitative information like turnover, retirement, internal position changes and overall capability.
The next step is the forecasting side where predictions are made based on analysis of talent supply and demand. The forecast should make predictions about the company’s anticipated changes in operations and expected earnings, changes in supply and demand that expected company growth or shrinking might cause; vacancies that are expected to arise in the near future; and availability of talent to fill positions both inside the company and in the regions the company hires from.
This forecasting helps managers and HR know what to expect and make informed decisions based on predictions. It also lays the groundwork for developing specific action plans in the next phase of workforce planning. These plans in turn, provide the company with an advantage over its competitors.
A Talent Action Plan is what it sounds like: it is a plan for managing the business’s talent, its workforce. Comprehensive talent plans cover all areas of an organization’s talent management ranging from recruitment efforts to training and development of new hires and long-term employees. The workforce supply-demand analysis is utilized to guide the development of the talent action plan. The plan focuses not just on current needs but on projected needs of how many and what type of employees will be needed to continue to operate and grow the company.
Effective talent plans are specific. They set forth specific, measurable goals for meeting the company’s hiring needs, now and into the future. They provide timelines, deadlines, and budgets for instituting the steps in the talent plan. Effective talent plans are further broken down into detailed action items for and specify who in the company is in charge of overseeing each component of the plan. For example, the plan should set out who, or at least what position, is responsible for overseeing new hire recruitment. Talent plans should be revisited frequently to ensure that progress is being made towards workforce talent goals and they should be adjusted to the business’ changing needs, as needed.
Companies talent goals are different so all talent plans will be different. However, there are three core activities that all talent plans should include: recruitment, retention, and prediction.
Recruitment. Talent action plans should address recruitment. Recruitment of talent involves identifying potential talent for current or anticipated needs, developing a positive relationship with the talent, and hiring the talent. Talent plans should address recruitment of employees at all levels, from upper level executives to entry level employees, although, the approach for recruitment different types of employees will be different. New recruits for positions may be identified externally, at events like career fairs, or internally, from the existing talent pool.
Retention. The work of talent plans is not done once all positions are filled. Planning for retention and development of talent within the company is a vital function of talent action plans. When companies plan for and invest in their employee’s happiness and development, companies win. Hiring is expensive and companies can save a lot of money if can retain their employees longer. Training also helps prepare internal employees for moving up or to different positions within the company ensuring helping to fill talent demand as it arises, particularly for future company management roles.
Prediction. Talent supply-demand forecasting is not a one-time task. It is an ongoing responsibility of the company to ensure qualified, effective talent is available when needed. Understanding supply-demand flow forecasting helps the company predict gaps in positions so that company leaders and human resources can plan to fill those gaps before they arise. Changes in company goals, profits, and structure as well as other unexpected changes impact supply-demand predictions. The talent action plan should provide for new forecasting to be done periodically so that forecasts are based on current information and thus, more accurate.
Integration Plan. It is not enough to have a talent action plan. For it to be of any benefit to an organization, the organization must fully implement it. Many companies struggle with the implementation portion of the action plan. Implementing a plan requires the support and assistance of all departments and all company employees. Gaining this support is not always easy.
Action plans should address how company buy-in will be obtained. This is a multi-faceted issue that typically involves identification of potentially resistant employees, planning communications, and setting out a case for the importance of future focused talent planning. The integration plan may set forth incentives, like bonuses, additional days-off or other benefits, for meeting action plan goals helps obtain the support and best efforts of company employees in carrying out the plan.
Benefits of Effective Workforce Planning
The primary importance of implementing workforce planning of any kind is simply economics. If done well, workforce planning will increase productivity, cut labor costs, and cut time-to-market for businesses. It gives businesses the opportunity to look toward the future, prevent unexpected surprises, allow leaders to consider all eventualities, and ultimately lead to greater results for businesses. It works by forcing everyone in the organization to look to the future, consider what may and is likely to happen, and plan ahead. It has historically been under-utilized and not recognized for how it can benefit the organization.
There are many benefits of workforce planning for businesses that take the time to do it:
- Strategic planning becomes aligned with head count and talent planning;
- Clear illustrations of demand and supply issues broken down by expense area, reporting relationship, and location;
- Managers gain the easy to use tools they need to make staffing decisions and see how those decisions impact the workplace
- Reports help decision makers decide how to allocate investments in talent;
- Identified and quantifies talent risk before it impacts business objectives;
- Controls and limits unplanned talent expenditures;
- Discovers issues that limit employee productivity so they can be fixed;
- The company’s competitive advantage increases because hiring is planned instead of reactive;
- Company leaders gain consistent reporting that quantifies outcomes and improves their decision making;
- The implications of workforce decisions become concrete and their financial impact becomes clear.
Workforce Planning Best Practices
With technological and cultural workplace changes, there are many companies whose human resources staff do not have the expertise needed to design and implement effective workforce planning. Companies should make efforts to educate their staff on best practices for workforce planning and bring in new staff or consultants to fill this knowledge gap.
Some of these best practices include:
- making workforce planning and strategic business planning parallel processes;
- ensuring company leadership values data-driven decision-making;
- promoting workplace transparency and objective decision making
- investment in data management programs and advanced tools to analyze the data;
- hiring human resources employees who know how to interpret data and conduct modeling and forecasting using available data;
- gathering data from not only inside the company but from external and social data as well.
Of these and other benefits planned rather than reactive risk management and the development of useful metrics are two of the greatest benefits and two of the best ways of gaining support for improved workforce planning.
If you need help with workforce planning, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.