HR professionals often mention the concept of workforce planning but rarely explain it. Used properly, workforce planning strategy allows HR managers to plan for the opportunities they will utilize in the future. However, what is strategic workforce planning, and why it’s so important? In this article, we’ll share the workforce planning process, provide some examples, and end with a set of tools you can use to start planning your workforce.
So, what are the key facts about strategic workforce planning?
Applying outdated HR techniques such as downsizing, you can’t build sustainable business processes, focus on employee development, and create a robust corporate culture. Instead, workforce planning strategy helps organizations build an effective business plan and upskill their employees.
Strategic workforce planning (SWP) helps organizations achieve a single goal: to have enough high-quality employees for the future. In other words, it’s about having the right person for the right job at the right time.
Strategic workforce planning is becoming increasingly important for a few reasons
When you act purposefully, you build your future. Flexible workforce planning strategy largely shapes the experience of employees. It also helps companies:
- Build teams that work well together to achieve effective long-term results
- Improve customer relations
- Enrich talent management capabilities.
In addition, strategic workforce planning has the following advantages:
The aging workforce poses several challenges, including skills shortages, retraining problems, and mass retirement. Thanks to strategic workforce planning, younger talents gain the necessary experience to be ready for a new position.
Increased global competition motivates companies to work smarter. There is no need to spend time and money to find a new specialist when you can prepare an internal one. Moreover, a high workforce turnover costs businesses thousands of dollars. Having a strategy that determines whom you need to hire, how you plan to hire them, and how to attract new recruits will increase employee retention, productivity, and return on investment (ROI).
Let’s talk about the numbers. Average labor costs in the United States are growing; for example, in 2021, they increased by 1.1% over the last year. Thus, it’s a challenge for growing organizations. However, workforce planning can be an effective solution. For example, after applying strategic workforce planning, Deloitte, as an example of a large company, could save about $6 million for every 100 employees reassigned under the scheme.
Strategic workforce planning helps companies identify their business needs, skills, and talents to help them meet those needs and propel the workers to perform successfully.
Talented employees create a competitive advantage for the company. Strategic workforce planning helps train the right people to be worthy replacements for retiring employees.
Workforce planning strategy helps you determine the desired outcomes, align human resources with business goals, and boost employee motivation and commitment.
However, there are some challenges in strategic workforce planning
Strategic workforce planning isn’t a silver bullet for all HR tasks. For this reason, be aware of the potential risks that come along:
A workforce plan can create the assumption that everything is under control, forcing HR managers to lose sight of the plan or stop looking for changes to consider. However, strategic workforce planning isn’t a one-time process; it requires long-term learning and analytics.
Sure, strategic workforce planning gives your business excellent stability by developing your workforce skills. However, there is no guarantee that the employees you train will stay with your company long enough to benefit from your investment.
Similarly, a strategic workforce planning approach can potentially reduce initiatives beyond the current workforce planning parameters, affecting creativity and flexibility.
How to make a workforce planning strategy work?
The basis of strategic workforce planning is to bring the right skills at the right time to the right place. Thanks to SWP and sound personnel management, companies can feel safe and confidently navigate talent challenges in the future.
To help you implement the best strategic workforce planning, we’ve put together four helpful tips to keep in mind.
Use data to plan labor demand and supply
Your company is a living organism. It changes and expands its scope, workforce, culture, and all the aspects that affect the process of strategic workforce planning. Therefore, it’s essential to collect and constantly monitor the changes taking place in your company and assess how these changes impact the quality of your workforce. These changes include skills, motivation, and productivity.
Thus, collect and track the following data:
- Full-time equivalent (FTE) and number of the workforce
- Age and gender distribution
- Turnover rate
- Indicators of internal mobility
- Performance metrics
- Average time to hire for critical positions.
This data will help you identify emerging patterns in your business and predict the talent market requirements.
Prepare a few scenarios to solve future challenges
Whether your goal is to close skills gaps and set up a company for future restructuring or digital transformation, strategic workforce planning will help you prepare.
You can simulate workforce scenarios, make the data-driven planning scenarios reasonable, identify skills gaps, and develop talent management interventions to transform the workforce.
The developed modeling determines future labor demand based on business development and identified operational models in the next stage.
Continue tracking the labor market situation
Our world is changing fast, and it’s vital to keep track of changes — here and now. Therefore, when choosing tools for strategic workforce planning, make sure you can obtain information regarding the labor market:
- What are the upcoming trajectories in your industry?
- How do the trends affect job demand and skills?
- What skills and professions of the future are emerging in your field?
- What models of work appear in other organizations?
Labor market data reveals the best vacancies for your competitors (in different industries) and gives you info about the skills and positions your competitors are looking for.
Eliminate SWP misconceptions to retain support from your colleagues
When implementing strategic workforce planning in your organization, a team of dedicated people is ready to work with you to carry out changes in the workforce. You should be ready to fight misconceptions to support your colleagues, managers, and supervisors.
Ensure that you know or can anticipate the objections executives or top managers have in mind (something like strategic workforce planning is the sole responsibility of the HR department). Outline the benefits of strategic workforce planning in the language of business and profits for your C-suite. Explain to managers why HR planning cannot be the responsibility of HR and why it is crucial to work together.
Step by step instructions in strategic workforce planning
According to the CIPD, workforce planning processes can reduce labor costs, respond to changing customer needs, and improve employee retention and work-life balance. Strategic workforce planning includes steps to analyze the current workforce. It identifies future needs, gaps between status quo and destination, implement solutions to achieve goals, and implements a strategic plan through the proper use of talent.
Step 1: Supply analysis
Analyze the current state of the company along with external factors such as the market and economic condition to see how the business environment functions.
Internal factors determine how the workforce is structured regarding gender, age, specialization, and location. Another internal factor is labor costs and other expenditures. Internal factors include information on how the recruitment process works.
External factors function by PESTLE analysis:
- P — Political (any prerequisites for changes in legislation, taxation, wages, etc.).
- E — Economic (inflation rate, labor outflow rate, etc.).
- S — Social (number of students and graduates in the district, social changes such as quarantine and social distancing, etc.).
- T — Technology (e.g., digital transformation and automation of HR processes).
- L — Legal (changes in legal norms or requirements).
- E — Environment (e.g., ecology, ethics, etc.).
Step 2: Demand analysis
Given the strengths and weaknesses of your team, you can assess whether it can achieve current and future goals set on the ground.
By recognizing the best performers and those with the highest potential, you can design future promotions and encourage leadership positions. You can also consider whether the current team comprises primarily aging talents who may soon retire and leave gaps in the workforce.
Step 3: Gap analysis
In this step, you analyze the competencies needed by the business and what skills you have on hand. A recent report, the future of job report, states that in 2022, almost 54% of all workers will need significant retraining. Pay attention to these gaps:
- Skills gaps. Knowledge of new skills and training will help employees perform better and ensure that all skills are visible.
- Opportunity gaps. Provides internal mobility of talents, opens new opportunities for your employees, and motivates them to learn.
- Distribution gap. See how you distribute talent in the company and where there may be a gap.
- Time. Hiring a hard-to-find specialist can take up to nine months or more. You may consider covering the need for certain specialists through training and retraining.
- Diversity gap. This analysis helps combine your good intentions towards diversity with real cultural change. It’s one way to make your organization a reliable place where people work towards their professional goals.
Step 4: Solution analysis
Strategic workforce planning isn’t just about recruiting. It may apply not only to employees’ potential and the coherence of business units. In addition, strategic workforce planning should also recognize the potential and inclusion of employees and be intertwined with the technological map of the company:
- Time and money you need to work with identified shortcomings
- Method of organizing and conducting training
- Resources you engage
- Recruitment strategy (hire experts or entry-level workers and train them; hire internally or externally).
What tools to use for strategic workforce planning?
Strategic workforce planning tools help you complete the four steps listed above to help you effectively plan and develop your workers from start to finish.
However, how to choose software and tools that will help you eliminate routine work, achieve your goals, and quickly customize your team? When choosing a smart workforce planning software, there are five factors to pay attention to:
- Step 1: Start with a top-level organizational strategy
- Step 2: Evaluate your current workforce
- Step 3: Create data around the workforce
- Step 4: Identify ways to improve or optimize it
- Step 5: Plan for a diverse future.
Tools and methods for strategic workforce planning
Strategic workforce planning map
Strategy mapping aligns workforce and business strategies to achieve a common goal. It allows different company departments to support each other, improving communication and reducing friction. The workforce planning map creates a graphical representation that aligns each employee as an integral part of the organization and its goals.
Each team member is evaluated and displayed in one of nine squares along the X and Y axes to populate the grid. The X-axis evaluates past talent outcomes, and the Y-axis evaluates their potential outcomes. Depending on each team member’s position in the network, management can easily plan their development and progress. The map can also identify highly effective and potential leaders and improve the organization.
Compensation and benefits of job analysis
Analysis of company-wide compensation such as wages, health benefits, and paid leave helps the organization better understand how to reward employees. The analysis means that employees receive competitive wages and ensures they attract and retain the right employees.
Scenario planning can ensure that HR makes the right decisions, such as allocating resources and developing the workforce. A dedicated tool for strategic workforce planning can help companies develop contingency plans, address skills gaps, assess budget requirements, and more.
smartPlan is a SaaS platform for strategic workforce planning. The platform helps organizations consolidate workforce data, analyze it, detect skills gaps and determine activities to close the skills gap. You can model your future workforce and plan the company’s or department’s headcount based on various demand and supply scenarios.
These methods and tools help HR managers align their strategy with the organization’s changing needs, supporting business goals and long-term work relations.
Workforce planning examples
The global economy, technology, and changing public sentiment constantly influence how we provide our organizations with resources. The need for the right people with the right skills and the proper budget is more critical now than ever.
Given the concerns about skills shortages and growing competition for key talent, strategic workforce planning is essential for keeping businesses ahead. Here are some examples of using a workforce planning program and examples from well-known companies.
- Forecasting and assessment
- Recruitment and hiring
- Embracing diversity
- Identifying job and competency needs.
The uses where HR planning may be applied and the benefits of HR and all organizations aren’t limited. Maintenance, productivity, leadership, and many other vital areas can be addressed and improved in organizations through a strategic workforce planning approach.
Not sure if current HR planning can help with your specific HR task? Contact us, and we will be happy to help you! In the meantime, learn more about strategic workforce planning software that makes life easier for many HR executives like you.