Workforce planning is a process that is often poorly understood and rarely implemented within organisations. One reason is that it implies long-term thinking. This can be in contradiction with the short-term orientation of companies. However, the ability to effectively anticipate future labour needs and match them with the organisation’s trajectory is a necessity for HR departments. We've outlined a simple 5-step process that gives insight into how to approach workforce planning for your business. But first, let’s define what workforce planning is.
Defining Workforce Planning
Workforce planning analyses a company’s strategic objectives, anticipates their impact on the organisation’s operating activities and accurately plans the human resources needed to achieve these objectives. Workforce planning typically involves asking both qualitative and quantitative questions: How many staff do I need? With what type of skills? In what type of organisational structure? For how long?
The Workforce Planning Process
At first, this process may seem very straightforward. In practice, however, the data needed to establish workforce requirements and staffing needs are not readily available or remain highly speculative. Yet, strategic workforce planning is becoming indispensable in an ever-changing labour market and is key to the company’s overall success.
Step 1: Make An Inventory Of Available Resources
The first step in the workforce planning process is to make an inventory of the human resources currently available in the company, both in quantity and quality. The following employee data should be collected: age pyramid by job group, education level, technical training, professional experience, skills and career aspirations. The goal is to make a thorough assessment of the level of qualification of each employee.
Step 2: Effective Planning Over Time
The second step in the workforce planning process is to assess how the employee data you collected in step 1 will evolve at different time periods (e.g., 6 months, 1 year, 2 years). For each job category, you need to apply the effective turnover rate. This means subtracting the projected departures due to retirement, resignation or transfer and adding the arrivals from other job categories. This will provide a clear overview of the workforce available for each department or team at a specific point in time. Hence, strategic workforce planning cannot be approached as a one-off exercise. It must be part of a sustainable and iterative process, allowing continuous alignment of resources to the company’s needs.
Step 3: Assess Current Occupied Positions
The third step in the workforce planning process is to make an inventory of the positions currently occupied. Here, you should not forget to mention all the characteristics related to the job itself. For each job, you need to establish a comprehensive task analysis that includes a detailed description of manual and mental activities, an assessment of the tools and equipment used, the required level of performance and the working conditions.
Step 4: Estimate Future Labour Needs
The fourth step in the workforce planning process is to make an estimation of the future demand for labour based on sales forecasts, internal restructuring, the introduction of new technologies, business diversification or expansion, union constraints and any other relevant internal or external factors. At this stage, your estimations should be communicated to the top management. C-level company leaders should be informed about any issues and challenges that may arise from meeting these newly identified labour needs.
Step 5: Match Labour Supply And Demand
The final step in the workforce planning process is to match labour supply with demand and identify potential gaps. Three scenarios are then possible:
- In scenario 1, there is no gap between labour supply and demand for the period under evaluation. In this case, workforce planning must be pursued as it is successful. However, this scenario is rather rare since it may indicate shortages and surpluses in different business units.
- In scenario 2, there is a labour shortage. In the very short term, this shortage can be made up if the current employees agree to work overtime. If the shortage is more serious (in numbers) or if it covers a longer period, the company should implement a dedicated recruitment program. This often involves setting up an internal talent training program. This helps in retaining employees and is more cost effective than hiring new people. Another option in this scenario is to work with external recruitment agencies to quickly hire the needed professionals. This can be done either on a contract or contract-to-hire basis.
- In scenario 3, there is a labour surplus. This situation is very delicate since the way it’s handled can have a detrimental effect on the employees’ morale. What is then the best solution to adopt? One solution is that the company can proceed by attrition, i.e. allow time to erode the surplus. The company’s turnover rate will eliminate any surpluses (if, of course, the company stops hiring). Another option is to retain all employees but share the work by reducing the number of hours worked per week.
Strategic workforce planning is still rarely implemented in companies. Like any planning exercise, it is difficult to quantify its impact and it is often regarded as a non-value adding activity. Often because its value can only be measured at a specific point in time. But this is a mistake. Human Resources departments must convince their companies of the importance of strategic workforce planning.
Failing to do so can bring the organisation into a delicate situation. For example, if the company finds itself with a sudden shortage or surplus of staff, the impact on the HR department will be huge. More efforts will have to be made in order to hire new talent or relocate others accordingly.
This is why workforce planning should be considered a critical task by any HR department. It should take into consideration the company’s strategic focus and make sure every stakeholder is aligned towards achieving the same goal.