8 best practices for workforce planning

People are among your company’s most important assets. They put the work in, day in and day out, to deliver on your organization’s goals and mission. And while good employees are at the foundation of any successful company, personnel are still one of the most significant costs of running a business. Ensuring that you’re getting the most value for your money while ensuring every necessary role is filled depends on a process called workforce planning.

What is workforce planning?

Workforce planning is a data-driven process that boils down to minimizing the operating costs associated with your workforce while maximizing the value it brings to the business. It’s not just about getting more from your existing employees, but optimizing your hiring process, accurately forecasting your talent needs, and keeping employee turnover to manageable levels—especially for high-value roles.

What is workforce planning software?

Workforce planning software feeds you the data you need to properly evaluate your organization’s workforce needs, plan for the future, and react to sudden changes in the marketplace—such as emerging industry-wide headwinds.

This software can take many forms. A financial performance platform, for instance, can easily handle workforce planning needs for large businesses with a complex organizational structure. Meanwhile, project management tools with built-in workforce planning features should only be used on a project-by-project basis or for very small organizations. 

Workforce planning vs. headcount planning vs. personnel planning

These terms are often used interchangeably—especially by people who aren’t too familiar with workforce planning. While there is some overlap between them, there’s a key difference between workforce planning and the other two that can help clear things up. Headcount planning and personnel planning are both elements of workforce planning, each focused on a specific part.

• Headcount planning is about keeping an accurate count of the number and type of employees at a company. This count will be compared to the organization’s ever-evolving needs to prevent serious gaps from forming.
  
• Personnel planning is primarily focused on meeting the demands of specific projects and teams. You can think of workforce planning as an initiative that happens more on the strategic level while personnel planning zooms in at the team and project levels.

8 workforce planning best practices

Like any other organization-spanning process, workforce planning can be challenging and resource-intensive. Here are some best practices to get the most out of it.

1. Determine your current headcount

Before you undertake any kind of workforce planning, you need to ensure you have an accurate headcount. Keep in mind that whether you work in a large organization or one that's growing rapidly, that headcount can change from week to week. Be sure to update your headcount before any workforce planning initiatives.

2. Forecast attrition

Many factors can cause your workforce to decrease more quickly than it can be replaced. Forecasting for this is essential. High-performing organizations are leveraging data analytics to determine the risk of turnover, retirement, and workforce mobility. They also evaluate external economic conditions to predict what employees might do. Taking into account these variables will help you determine your workforce supply risk and, if desired, allow you to target high-risk areas and positions for retention.

3. Forecast demand

As market conditions evolve, it’s important to ask how your organization’s needs will change over the coming weeks, months, and years. Being able to forecast the answers to these questions accurately can save a fortune in hiring costs and employee expenses while ensuring your organization still has enough staff to maintain productivity. At the core of successful demand forecasting are driver-based processes. These drivers should be relevant to your industry. For example, call centers could use calls received, warehouses could use trucks unloaded, and professional services firms could use hours billed as personnel drivers.

4. Perform a gap analysis

The end result of workforce planning is having the right combination of people and skills the organization needs to reach its goals. A gap analysis is all about identifying and detailing the gap between where the organization’s workforce and mix of skills is currently and where it needs to be. From there, leaders can make better-informed decisions regarding the organization’s workforce, from hiring to restructuring the business.

5. Run workforce planning scenarios

Closely related to gap analysis is the process of running workforce planning scenarios. Of all the best practices for personnel planning, scenario planning is perhaps the most critical in times of change and upheaval. Some variables to consider when preparing your personnel scenario analysis are:

• Ratio of contractor and outsourced workers to in-house employees
• Ratio of full-time to part-time workers
• Relocation, openings, and closing of operations
• Pay strategy and merit increases
• Reorganizations, promotions, and lateral transfers
• Changing in productivity, ramp-up time, and driver ratios
  

The goal with personnel planning is not to find your optimal workforce mix, rather it’s to understand the actions you can take when certain situations arise based on a well-structured model.

6. Develop a hiring plan and set expectations

After you’ve made sure your headcount is exact, you’ve forecasted demand and attrition, identified your workforce gap, and run a few scenarios, you’ll have enough data to create a robust, thorough hiring plan. This allows leaders to optimize recruitment and other internal resources, while having the information they need to answer any questions that team leads and department heads may have about specific hiring choices.

That’s because having a data-based hiring plan in place is the best way to set expectations and handle potential objections from team leads.

Instead of a plan that was designed in a silo, you can show every data point that went into designing it. This creates more transparency and allows everyone to understand the strategy involved.

7. Integrate workforce planning into your business strategy

Your business strategy already depends on dozens, if not hundreds of data points. So why not make workforce planning part of it as well? At its base, workforce planning is similar to evaluating supply and demand in other aspects of your business, only for your employees. Here are a few examples of how workforce planning can be applied to your business strategy:

• Your professional services firm receives a 50% increase in proposals for a specific service. With workforce planning, you can anticipate hiring more professionals skilled in that service to meet demand.
• A manufacturing company learns, after looking at its workforce, that attrition always increases in the summer. This leads to an increase in overtime, decreasing profitability in the summer months. Leaders can thus react to this appropriately.
• A tech company, flush with cash from a recent investment, needs to quickly bulk up its software development team to upgrade its product drastically and capture an emerging market. With workforce planning, it can find the best possible use for every dollar, restructuring as needed.

8. Remember the human factor

With processes like workforce planning, it’s all too easy to see employees as roles, salaries, and expenses. But it’s important to remember the people behind the roles. That means treating any decisions that come out of workforce planning with great care while accounting for qualitative factors that can’t be tabulated in a spreadsheet.

For instance, not all employees are motivated by the same things. While some may hop from company to company to maximize their salary—meaning that retaining them just requires regular raises—others are motivated by more intrinsic factors, like company values they believe in.

Every aspect of workforce planning should account for the human factor in one way or another to avoid potential surprises that spreadsheets can’t forecast.

Best-in-class workforce planning

Whether you’re planning a recruitment drive, restructuring your business, or trying to fill a specific skill gap, the early stages usually involve workforce planning. But to ensure you have all the data you need, you should use the best platform available. For most mid-market to enterprise-sized businesses, that’s Prophix. See how you can use Prophix for workforce planning, people planning, financial performance management, and more.