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8 Steps to Workforce Planning Success: Comprehensive, Strategic Approach Leads to Positive Results

Updated: Feb 27, 2023

Workforce planning is a strategic, forward-thinking process that requires commitment. It won't happen overnight and could take months to reap results. But the benefits are enormous, they include saving on labor costs and improvements in productivity through smarter talent management decisions. Workforce planning also plays a strategic role in enabling organizations to meet their operational and financial objectives.

We put together this guide to showcase the benefits and use cases of workforce planning as well as the eight steps that you can take to create a positive impact in your organization. If you’re new to this space, you’d want to read our article on the basics of workforce planning and check out our comprehensive online course.

Table of Contents

The Strategic Way of Workforce Planning

Workforce planning is the process of aligning human capital needs with the overall business strategy to meet the organization’s objectives. Before you begin working on your workforce plan, be sure that you know the business strategy and the workforce questions that your executives are asking. This will also help guide your team on crafting your future vision state for your workforce plan. Skipping this step had led to the failure of many organizations.

In a nutshell, the workforce planning process starts with having a good understanding of what staff to hire and how many you will need in a year or two years from now—in addition to today’s and forecasted needs. You can do this by surveying line managers and using a staffing model that helps you understand what talent is needed for today and the future and how many employees are currently in your workforce. Next, model your talent demand and supply and use the results of this analysis to calculate the gap in your workforce. Last, your team will need to create an action plan with specific workforce interventions for the next 2 to 5 years.

The Strategic Way of Workforce Planning

Traditional vs. Modern Workforce Planning

Additionally, your team will also have to decide on the depth and level of detail of your workforce plan - traditional vs modern.

Traditional approaches rely heavily on headcount and succession planning. Over time, it looks at supply vs. demand for various job types to determine whether you have enough staff or need additional employees.

Modern workforce planning is more strategic and comprehensive, focusing on the skills gaps in addition to headcount gaps. It looks at both quantitative and qualitative data and other factors that may affect the future. Things like technology advancements, changes to business models, or growth plans. In other words, modern strategic workforce planning focuses on creating an environment where employers get the talent required for their business strategy and employees want to stay with their company for years to come.

Traditional methods for workforce planning are prone to over budgeting and under budgeting while demanding significant expenditures in recruiting and training personnel. Companies may save hours by utilizing a revolutionary tool like SOLVE™, allowing HR professionals to quickly create workforce scenarios, make projections, and compare various scenarios to find the most optimal plan for their business goals.

Compare Headcount vs. Compensation Distribution
Example: Compare headcount vs. compensation distribution

Workforce Planning Use Cases

Besides filling headcount gaps, there are many use cases for workforce planning, including:

1. Optimize Workforce Mix, Cost, and Performance

The most important use case for workforce planning is optimizing your current staff mix and size for maximum performance. With companies spending nearly 70% of their operating expenses on their workforce, executives are keen on finding ways to control labor costs while improving the overall workforce productivity.

Effective workforce planning allows organizations to forecast when and where they should add more staff for the most optimal results. Advanced organizations are also looking into which skill sets their team needs and how turnover and recruitment could affect them.

For example, due to the recent shift in artificial intelligence and automation, digitalization has been identified as the top priority for many companies. Using data and analytics, HR can better understand the turnover of their IT staff by looking at the current distribution of staff across different job types, departments, and business lines throughout their organization. If there is a high turnover rate and cost in certain departments or among specific positions, you may need to hire additional employees to ensure the success of your digitalization initiative. The bottom line is workforce planning can help organizations increase performance, reduce costs, and align their workforce strategy with organizational objectives.

Example: Monitor workforce size, cost, and mix
Example: Monitor workforce size, cost, and mix

2. Stay Ahead of Labor Market Changes

Workforce planning also enables HR to anticipate how changes in the labor market will impact their labor budget or Total Cost of Workforce. In the last decades, the labor market witnessed major shifts in talent demand and supply due to ageing workforce and the emergence of automation and artificial intelligence. COVID-19 has further accelerated these labor market trends forcing organizations to radically change how they recruit, manage, and retain talents.

Instead of waiting for the job market to recover, HR teams need to think about how to adapt to this new environment. What-if scenario modeling allows HR to forecast how changes in individual elements like wages, talent availability, or turnover rate impact the overall workforce cost and gaps. This means you will be able to stay ahead of changing labor market, making it less likely that your team overbudgets or underbudgets.

By having a comprehensive understanding of how many employees it takes for your business to run efficiently—and where they are needed most—you're allowing yourself to adjust as needed.

Compare labor supply and salary trends
Example: Compare labor supply and salary trends

3. Strategic Talent Arbitrage

In his best-selling book "Moneyball: The Art of Winning an Unfair Game," Michael Lewis talked about the Oakland Athletics Major League Baseball team. The A's were able to find undervalued players, giving them an opportunity for success at a lower cost than their competitors. Extensive use of data and analytics is a crucial element in making this strategy a reality.

The same is also true with workforce planning—you can leverage data to enrich your understanding of market changes and future trends and make strategic talent moves that will benefit your organization. You'll have the ability to hire the right talent in right place and at the right place. This is even more relevant with the ongoing trends in employee turnover, reskilling, and talent shortage.

This use case also manifests in the form of the buying vs. building vs. borrowing talents question. Buying talents refers to the practice of hiring experienced talent from the market while building talents focus on bringing in more junior employees and training them to fill your talent needs. The use of outsourcing and temporary employees is also known as borrowing talents. Each strategy has its own pros and cons and should be used strategically to meet organizations’ complex talent demands.

8 Steps to Workforce Planning Success

Use these steps as a guide when beginning your workforce planning process:

8 Steps to Workforce Planning Success | SOLVE
8 Steps to Workforce Planning Success

Step 1: Workforce Questions

Many seasoned HR analytics practitioners pointed out that the ability to answer the questions that are relevant for executives is critical to workforce analytics and planning success.

To boost your understanding of workforce planning and give you a better idea of what your organization lacks, we have compiled a list of the top 25 most important human capital questions that all HR leaders should be asking. Answering those questions is imperative to the success of your workforce planning process.

Below are some of the most frequently asked workforce planning questions:

  • Where will our company be in three to five years, and what does that mean for the type of people we will need to recruit?

  • Can we model our workforce to optimize cost, profit, and productivity?

  • What percent of our workforce is customer-facing or revenue-generating and where are they typically located?

Download - The top 25 questions to boost your workforce analytics

Step 2: Scenario Design and Future Vision State

Here's where you start laying out the groundwork for your workforce planning process. You'll want to assess both quantitative and qualitative data related to how employees are utilized as well as what future projections might look like—especially in terms of market trends, technology changes or other factors that could affect company operations and business models over time. Make sure to include a "future vision state" for your organization to have a clear idea of what the future looks like and how it will impact workforce planning.

Step 3: Demand Forecast Macro (Top-down Planning)

This step involves looking at the market demand for your products or services, as well as how external factors such as the economy and political landscapes will impact future demands. This is important because it allows you to take a big-picture view of potential changes that may affect company growth so you can plan accordingly concerning hiring patterns in different regions over time.

Demand forecast macro (top-down planning)

Step 4: Demand Forecast Micro (Bottom-up Planning)

Here, you'll want to look at how each of your business units, departments, and teams are doing. For example, if one department is projected for growth while another isn't—or needs more employees than the other does—this will significantly affect workforce planning efforts and when (and where) these employees need to be hired.

Step 5: Internal Supply Modeling

This step involves looking at your internal supply. (i.e., the number of employees you currently have in each region across all business units and teams). This data will help with forecasting as well as identifying any gaps that may exist between actual need vs. what's being supplied internally or externally to meet the demand for specific roles and skillsets.

Step 6: External Supply Modeling

This is the process of looking at the current labor market to determine what talent is available. This includes identifying potential sources for hires and where your organization may need to increase its external recruiting efforts to meet demand over time.

Example: Using data to find cities with the least competition and the most talent supply
Example: Using data to find cities with the least competition and the most talent supply

Step 7: Demand and Supply Gap Analysis

At this stage, you'll have all the information necessary to determine whether there are any gaps between supply and demand. This will help make changes in your hiring strategies, training plans, and overall talent management efforts moving forward.

Example: Drill-down to explore workforce insights
Example: Drill-down to explore workforce insights

Step 8: Workforce Action Plan

Lastly, you'll want to develop a clear action plan that outlines the steps needed to fill any current gaps and meet future workforce demands. This includes identifying your organization's talent supply chain, which is essentially how you source employees—whether it be through internal promotions or external recruitment efforts. You should also identify potential training plans and assess what sort of changes you can make to company culture to retain more employees.

Example: Assemble recruiting plan
Example: Assemble recruiting plan

Learn to Build a Winning Workforce Plan

Workforce planning is a comprehensive, strategic approach that allows HR leaders and business managers to meet their organization's future goals by thinking several steps ahead of the game. This way, your workforce will be prepared for whatever comes next—whether it's new products or services on the horizon or the increased demand for other items in your industry.

The Human Capital Management Institute (HCMI) has created a self-paced online course for those interested in learning how to build a winning workforce without breaking the bank. You don't need to come from an analytics or data science background to complete this course—just a desire to learn more about workforce planning and where the future is headed.

Have questions or ready to get started


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