Workforce planning

Taking the time to plan and make decisions as part of a broader strategy improves every aspect of your business, including your workforce. Despite the size or type of company, workforce planning is a valuable HR process that ensures you have the staff to execute your business strategy.

Learn what workforce planning is, how it helps with goals and produces positive outcomes, the benefits it can offer, five key steps in workforce planning, and what it looks like in practice.

Discover:

• What is workforce planning?
• Primary workforce planning criteria
• The goal of workforce planning
• How workforce planning affects HR processes
• The benefits of workforce planning
• The five core workforce planning steps

What is workforce planning?

Workforce planning is the process of analyzing existing employees and planning for future staffing requirements through talent gap assessment, developing employee management procedures, and setting recruitment strategies.

With effective workforce planning, your business is always staffed with the necessary talent, knowledge, and experience to produce positive business results.

Workforce planning requires developing an appropriate and cost-effective strategy for retaining, recruiting, and training your workforce while also continually assessing employee performance.

A survey by the American Productivity & Quality Center (APQC) shows 89% of 236 organizations integrated workforce planning into their business operations.

The plan for your workforce, what it will look like moving forward, and how to strategize for specific goals are unique to your business and depend on many factors. Typical components that affect workforce planning include:

• Talent availability
• Business growth
• Age of the existing workforce
• Current knowledge/skill gaps
• And much more

Strategic workforce planning

Strategic workforce planning is a proactive approach to managing staffing needs and aligns HR processes to business-wide goals. It guides future employee plans and decisions, ensuring they adhere to the company’s long-term vision.

Strategic workforce planning tends to take place at the senior leadership level and focuses on big picture goals such as:

• Structural organization
• Employee redeployment
• Succession planning
• Staffing budgets
• Maintaining capacity
• Reducing risk

Operational workforce planning

In contrast to strategic workforce planning, operational workforce planning focuses on the business’s immediate priorities. For example, which staff level can efficiently meet the current deadlines and objectives?

4. Improved retention strategies

Effective workforce planning gives you a clear understanding of employee skills and where they can be the most successful in the business.

So rather than terminating employees, you can retain valuable staff through well-planned redeployment.

5. Flexibility

A clear workforce plan with recruitment and training structures in place can make your business more agile, with the ability to efficiently anticipate and react to change.

You can reduce your overall staffing costs by developing plans to:

• Increase your productivity and workforce ROI
• Retain talent and reduce costs associated with employee turnover
• Develop a flexible workforce that can meet customer demand in different circumstances

Labor costs can account for up 70% of total business costs. Workforce planning allows you to map talent to value and ensure you are getting the best results for the costs.

The 5 core workforce planning steps

Successfully implementing new workforce planning strategies is an extensive procedure. However, businesses can break down workforce planning into five core steps to simplify the process.

1. Deciding strategic direction and goals

Workforce planning is a top-down process requiring clear organizational direction and defined strategic goals to inform and guide future decisions.

• What direction do you see your business going in?
• What are you hoping to achieve through workforce planning?
• What are the primary goals/milestones you are targeting?
• Why does your business need new workforce planning structures?

These are vital questions to ask yourself before analyzing your workforce and implementing new employee management strategies.

It is also important to remember that every process in your business affects another. Therefore, your workforce planning must be an organization-wide endeavor and include effective communication between HR and other departments.

Your new workforce plan must be produced with a collaborative approach that generates a consensus amongst all invested parties. Without organizational buy-in and a rationale for new strategies, you cannot reap the benefits of workforce planning.

Consider this step setting the “soft” workforce planning framework that will define the overall strategy to assess future information rather than the plan’s specific details.

2. Analyze existing workforce

The next step is to properly assess your existing workforce.

Common strategies used in this step include:

1. Demand planning – Determining the number of employees needed for each role required to reach your goal. Demand planning requires accurate business forecasts to determine your workforce’s future number, structure, and composition.
2. Internal supply – Internal supply planning needs accurate talent evaluations, an understanding of the expected employee turnover rate (retirements, resignations, etc.), and the design of training and professional development programs.
3. Gap analysis – Identifying the gaps in your workforce and making plans to close them through recruitment, redeployment, and training.

These strategies help to answer the following questions:

• Do you have the right-sized workforce?
• What skills, knowledge, and experience do your current employees have?
• Do your employees need additional training?
• What new resources can improve workforce performance?
• Is your workforce correctly structured? (This includes organizational design, departments, communication channels, etc.)
• What is your current employee turnover rate?

What you have now is the starting point for future workforce plans. You can begin developing workforce planning strategies when you know what you have (step 2) and where you want to be (step 1).

A common pitfall of workforce planning is ensuring it is based on high-quality information from within the organization and external sources. Workforce planning defined by inaccurate forecasts and undeliverable future goals cannot be successful.

3. Develop your plan

This is where companies must take their overall goal, input the assessment of their existing workforce and produce a concrete plan for the future.

Businesses must plan their workforce to reflect the value and revenue it produces. A simple example of workforce planning in action could be:

A company is manufacturing two models of cars. Model A is the business’ flagship car, selling the most and bringing in the most revenue. However, model B is showing significant growth, and the income from model A is beginning to stagnate.

The car company can produce a simple revenue table based on 2023 figures and 2024’s forecasts.

The revenue per employee for model A is $250,000, and the revenue per employee for model B is $300,000.

Based on growth forecasts, you can estimate that staff working on model B will need to increase by 57 to match increased demand. This process assumes the forecasts are accurate and there are no sudden changes in sales or production. At the same time, model A will likely begin to have a surplus of staff in 2024 and need a reduction of 8 employees.

With workforce planning structures in place, you can develop plans to retrain and redeploy staff from Model A to Model B during 2023. This kind of planning minimizes disruption and reduces employee turnover.

Of course, this is just a plan based on forecasts and does not mean you should immediately move eight employees from model A to model B and hire 49 more. Instead, the business should put redeployment, hiring, and training plans in place to execute when key revenue indicators are met and take a gradual approach that matches the shift in focus of their business.

4. Implement workforce planning

Successfully implementing workforce planning requires:

1. HR personnel to clearly understand their new roles and responsibilities.
2. Strategies and processes for recording all relevant data and information.
3. Effective communication channels between all invested parties to support the plan.
4. Defined measurement and evaluation criteria to assess the plan’s success.

While the future HR plans for managing your workforce are specific to your business, they will involve some or all of the following:

• Recruitment
• Onboarding
• Training
• Retention
• Redeployment
• Outsourcing
• Succession planning
• Deploying new technology

With many new processes to implement, workforce planning does not transform your company overnight. Instead, it is a gradual endeavor that optimizes each procedure for the given circumstances to get your business closer to your long-term goals.

5. Monitor results

It is crucial to remember workforce planning is an iterative process whereby progress is monitored and measured against specific milestones and long-term goals.

Post-implementation, your workforce planning processes may need adjusting due to unexpected factors within your business or to meet new realities of your industry.