What is Workforce Planning and Why is it Important for Business Growth?

Have you ever wondered how some businesses cope with the changing demands so quickly? Or how some companies fail to understand their workforce needs which creates a bottleneck in achieving their business goals?

Workforce planning is one of the biggest drivers of business success.

It employs the right number of employees with the right skills at the right time to ensure productivity and profitability.

Therefore, companies should formulate a well-structured workforce strategy that includes – predicting the staffing needs, assessing the gaps, and implementing solutions to position itself for future success.

This article will help you understand the benefits of workforce planning and how workforce planning software can improve operational efficiency.

First, let’s look at the basics.

What is workforce planning?

Workforce planning includes analyzing the current workforce, determining future resource requirements, identifying the gap between current and future needs, and implementing solutions to accomplish the mission and strategic goals. In short, it is a forecasting strategy for continuously balancing skills (labor supply) against the upcoming demand.

A perfect workforce planning strategy can help organizations address challenges like – lack of skilled staff, changing job trends, increased overhead costs, etc. It ensures sustainable organizational performance by identifying the talent needs proactively.

Let us understand workforce planning with the help of an example.

Example of workforce planning

Let’s say your business has plans to expand internationally, but your staff is centered in one country. Your workforce planning would involve finding out the below –

Number of staff required
Where should the staff be located?
What skills should the staff possess?

In this case, you need to do a brief analysis of your current capabilities and how much workforce is required to expand your services. You might also consider hiring, learning and development opportunities, identifying the key hires, etc., to scale your business.

Now, let’s delve deep into the types of workforce planning.

Types of workforce planning

There are primarily three types of workforce planning: strategic, operational, and tactical. Let us go through them to understand the differences-

Strategic workforce planning

It is a systematic process of identifying talent needs that aligns with the organization’s strategic goals. It is designed with an outlook of 3 to 5 years. The main objective is to ensure they have a skilled workforce to meet their long-term goals. Business global expansion is an example of strategic workforce planning.

Operational workforce planning

This level of workforce planning involves keeping track of day-to-day operations, addressing ad-hoc changes, and assigning people for immediate positions. It is generally designed with a 12 to 18 months outlook and helps the organization align the existing workforce to meet short-term requirements. Planning for seasonal fluctuations is an example of operational workforce planning.

Tactical workforce planning

This level of workforce planning involves concrete actions that help achieve the goals identified in the strategic plan. It prioritizes delivering the project on time and within budget and is organized around the fiscal year. Some tactical planning examples are marketing strategies, succession plans, and workforce arrangements.

Having learned about various types, now, without further ado, let us check the steps required to conduct workforce planning.

What are the steps of workforce planning?

An active workforce planning process is not a singular action but rather a step-by-step process that works in alignment with the business goals.

Here are the five distinct analytical steps in workforce planning –

Understand the organization’s strategic goals

The first step is to understand the organization’s business strategy and goals. Here, the HR personnel needs to partner with seniors to understand strategic objectives and drivers of business success. Some of the vital questions to ask before analyzing the workforce are –

What are the future goals/initiatives of the organization?
What talent does the organization need to reach the next level?
How prepared is the organization for growth?

These questions help determine strategic areas and identify roles that deliver results in line with business goals.

Conduct a supply and demand analysis

The next step is to forecast the organization’s future work requirements and analyze the skill set. It encompasses knowing the number of employees, their skills, and their demographics. Organizations need to understand –

What is the most critical talent gap?
Which skills would help organizations achieve their goals sooner?
Is it better to hire a mid-level or senior-level talent?

This will give you a clear picture of your workforce capabilities, based on which managers can implement necessary measures if there is any shortage or excess.

Formulate a mitigation plan

Once you have identified and evaluated the gaps, you need a plan to address those gaps. Some of the initiatives you can think of include – new recruitment, rewarding top talent, training /upskilling, or hiring contingent resources. To ensure the above plan is managed correctly, HR should know –

Is the requirement one-time or recurring?
Is it possible to bridge the skills gap with training/upskilling?
Is it cost-effective to hire a new employee?
Does the organization have a succession plan to fill critical positions?

Organizations need to formulate a mitigation plan that aligns with their hiring strategy to meet the demands.

Control and monitor progress

Workforce planning is an iterative process, and progress needs to be measured against specific milestones or strategic goals. In most cases, it may require some adjustments due to unexpected circumstances or changes in objectives. Some of the questions to ask during this stage include –

How much closer are we towards the goals?
Is the workforce planning strategy working as expected?
Are there any bottlenecks in implementing the strategy?

After addressing these questions, HR personnel, in coordination with senior management, must regularly monitor the performance of the workforce planning strategy. If it is not fulfilling the organizational requirements, they can take corrective measures to align it with their business goals.

Let us delve deep into the advantages of having a workforce planning strategy in an organization.

What are the benefits of workforce planning for organizations?

Workforce planning enables organizations to achieve short-term and long-term objectives while addressing challenges like – talent shortage, frequent hiring/firing cycle, unplanned attrition, etc.

Below are the positive effects of implementing successful workforce planning –

Aligns talent acquisition strategy with business goals

While formulating a workforce planning strategy, HR personnel need to understand the strategic and operational goals of the organizations. Based on this analysis, the management team, in partnership with HR, can identify and analyze the skills gap.

They can then thoroughly map their talent acquisition strategy as per their needs.

Organizations that adopt a workforce planning strategy that aligns with their business goals can expect to be more successful in attracting and retaining top talent.

Helps foresee and bridge demand and supply gap

Workforce planning enables organizations to predict future demands and take corrective measures proactively. A significant part involves conducting a thorough assessment of skills required by each department and recognizing the gaps.

The capacity vs. demand reports helps organizations take the right measures to mitigate shortages or excesses of resources. For example, managers can proactively implement the resourcing treatments, such as training and hiring, for the shortage of resources or actively market excess capacity to bridge this gap. It helps to future-proof the organization to meet the market volatility.

Reduces expensive hiring/firing cycles

According to a Glassdoor Study, the average cost of hiring a new employee is around $4,000.

When an organization does not have an appropriate workforce planning strategy, they resort to hiring new employees during a resource crunch. On the other hand, they might release these resources once the project gets over to avoid increased bench size. But, when a project with a similar resource requirement comes up in the future, they initiate the hiring process again to ensure the availability of these skill sets. This will result in frequent hiring/firing cycles, jeopardizing the firm’s reputation.

By leveraging workforce planning, HRs can predict and prevent potential resource shortages and take measures to build a robust workforce. It helps to ensure they have sufficient resources for pipeline projects, which avoids last-minute hiring and minimize costly hiring/firing cycles.

Minimizes unplanned attrition

Attrition can be attributed to many reasons such as economic downturn, improper planning, low performance, etc. Workforce planning helps minimize unplanned attrition by fine-tuning HR practices such as – empowering employees, recognizing top performers, and offering competitive perks.

Organizations can set clear and appealing career paths for employees to improve morale and career satisfaction while increasing productivity. Some career development strategies include – Individual development plans (IDP), cross-departmental collaboration, peer-to-peer coaching, and reverse mentoring. Empowered employees are more likely to stay in the company for longer, which reduces the chances of unplanned attrition.

Makes your workforce future-ready with training/upskilling

Often, skill sets in an organization may become obsolete due to the emergence of new technology, services, competitive forces, or new product lines. So, instead of filling the skills gaps via external channels such as hiring, organizations may choose other resourcing treatments like training, upskilling, etc. It is a less costly employee development solution, particularly for critical positions

Therefore, organizations should focus on updating the skills and capabilities of their employees as an effective workforce planning strategy. Training, retraining and upskilling, job rotation, etc., are some activities to future-proof the workforce. All of these also allow businesses to guard their business against market volatility and uncertainties.

Helps in succession planning for critical positions

Often, crucial resources leave the organizations for various reasons like – retirement, resignations, or transfers within the company. Managers need to ensure the sudden resignation of senior employees does not jeopardize the work and reputation of the organization.

An effective workforce planning process helps identify future leaders who can fill positions when senior employees leave the organization. It ensures a smooth continuation of the business and, at the same time, helps reduce turnover costs.

Prepares to deal with market volatility

Present day business challenges such as cost pressure, market volatilities, the ongoing global pandemic, economic crisis such as stock market crashes, etc., are affecting every business, irrespective of the industry they belong to. In such a case, it becomes difficult to plan the workforce needs. Firms often take reactive measures like abrupt layoffs, halting new projects, etc., to maintain the organization’s health. When the situation improves, they hire employees with the same skill sets, which increases overhead costs and adversely affects business sustainability.

With workforce planning, companies can beat the adverse effects of market volatility. It provides foresight into shortage or excess of resources ahead of time.

This helps the hiring managers to expand their talent pool and select the right fit for the right projects.

With a workforce planning tool, organizations can implement the best strategy that adds to their organization’s bottom line.

How can modern workforce planning software help improve operational efficiency?

In today’s talent-based economy, the workforce is a critical element that keeps successful companies running. Organizations can gain a competitive edge by looking ahead and planning what skills and roles will be needed to meet their objectives now and in the future.

Workforce planning software helps offset some of the uncertainty surrounding workforce planning. The centralized visibility of the tool offers real-time insights into the future resource demand. Accordingly, managers can streamline the workforce planning processes based on profile skills, certifications, and competencies required.

It also helps identify and overcome capacity problems ahead of time. Thereby avoiding last-minute hiring and costly hiring/firing cycles. With capacity vs. demand reports, one can predict and prevent shortage/excess resources. Additionally, it helps you future-proof the workforce and improve talent management and succession planning program accuracy.

An enterprise-grade workforce planning solution also helps organizations prepare for seasonal workforce demands in advance. It enables managers to create the right mix of permanent or contingent resources and reduce overhead costs.

Conclusion

While many organizations consider workforce planning just as a staffing tool, it is critical for training, development, and succession planning. Through workforce planning assessment, organizations can measure their staffing needs. This will enable them to establish training and development initiatives that help them meet their strategic and operational objectives.

Does your organization invest in workforce planning?

The Glossary

The SAVIOM Solution

SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. With over 20 years of experience, this Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals. SAVIOM also provides tools for project portfolio management, professional service automation, and workforce planning software. So, SAVIOM can help your business to establish an efficient system geared towards your specific business challenges.

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