Workforce planning: How to future-proof your business

What is workforce planning?

Workforce planning is a human resource management strategy that projects future workforce needs based on a company’s business goals, current workforce, and existing resources. It involves identifying talent gaps, tracking economic forecasts, analyzing recruitment data, evaluating employee performance, and creating plans to attract and retain talent.

Workforce planning has always been a smart strategy, but it’s now essential for businesses that want to keep budgets lean and stay competitive in a challenging economy. Strategic workforce planning ensures that your company has the right talent to achieve its current and future strategic goals.

What are the benefits of workforce planning?

The overarching benefit of workforce planning can be summed up with this well-known adage: Those who fail to prepare prepare to fail. Planning your workforce prepares your business for success by laying the groundwork for better employee retention, lower recruitment costs, and increased engagement. 

Let’s look at these benefits in more detail.

Higher employee retention 

With planned staffing, each position is filled with a candidate with the skills and experience to do the job well, and management knows what types of resources and support each role needs. This creates a strong team dynamic where everyone can pull their own weight and has access to the tools they need to succeed, making employees less likely to burn out and seek other employment opportunities.

Lower recruitment costs

The average cost of recruiting one new employee is $4,683. For a large company with a high turnover, that cost quickly becomes astronomical. By improving employee retention with workforce planning, you automatically lower recruitment costs by having to replace fewer people.

However, there will always be times when recruitment is necessary. Workforce planning can further reduce expenses by giving senior leadership a clear picture of the skills, experience, and, to an extent, personality needed in a candidate. This streamlines the recruitment process, making it easier to identify the right potential person out of a sea of candidates and reducing the risks of a costly bad hire.

Better employee engagement 

A team of highly engaged employees is one of the most valuable resources a company can have. Unfortunately, it’s not that common. A 2021 Gallup survey revealed that engaged employees account for only 20% of the global workforce. 

The top reasons for disengagement are:

• Unclear expectations
• Not having the right resources to do the job
• Not having an opportunity to do work that fits their skills 

These are all easy to address with workforce planning. It clarifies the business outcomes of each position, identifies what resources are available and what new resources are needed, and accounts for team members’ skills and long-term career goals. This creates a supportive work environment where employees are more likely to be engaged and high-performing.

How to plan your workforce

The workforce planning process is multifaceted, with each component working together to create an action plan to help your organization meet short-term and future needs. Here’s how.

Perform an environmental scan

Before planning your workforce, you must understand what internal and external factors may affect your company’s workforce and business objectives. This is called environmental scanning. Each environmental factor requires deep research and its own plan, and together they form the strategic direction of your workforce plan.

Here is a selection of important workforce factors to consider: 

• Employee expectations: What benefits and policies does your target talent expect? Schedule flexibility, remote work options, and diversity in leadership are common expectations for millennials and Gen Z workers. 
• Economic forecasts: Understanding the economic landscape can help you adjust your hiring strategies. During a recession, you may want to freeze recruitment and focus more on employee retention. 
• Employment competitors: Employees can make or break a business, so it’s crucial that your company can recruit the best job candidates. Know which companies you’re competing with for talent, and ensure you’re offering comparable (or better) incentives.
• Diversity, equity, and inclusion goals: Know your company’s DEI goals and create a plan to achieve them, such as providing employee development and leadership opportunities to underrepresented groups.  
• Workplace resources: Conduct a workplace audit to identify your resources and what may be needed as your workforce grows. What’s your current headcount? Do you have enough square footage to accommodate new hires? Are employees satisfied with the technology available to them? Answering these types of questions will ensure your employees have what they need to do their best work.

Use data to project future talent needs

To be effective, your workforce management plans must be based on data rather than assumptions. It’s important to track the following:

• Attrition rate: Knowing your company’s current attrition rate can alert leadership to issues if it goes up or confirm the success of retention initiatives if it goes down. 
• Recruitment process: By analyzing data such as time to fill, cost per hire, and source of hire, HR professionals can make more informed decisions about how to optimize hiring processes.
• Employee performance: Regularly evaluate employee performance data such as productivity levels and quality of work. Once you establish a baseline, you can compare it against new evaluations to find and reward improvements or recognize disengagement before it becomes a serious issue.
• Skills gap analysis: Skills gaps affect productivity and quality of work, and they’re a widespread issue. Over 80% of companies surveyed by ATD in 2022 reported skills gaps in their workforce. You can correct these by identifying gaps in employee skill sets and developing training programs to address them. 

No one can predict the future, but this data can help your HR team identify trends and make smarter decisions for the future of your workforce.

Optimize your teams with strategic planning

A workforce planning model is a powerful talent management tool to help you recognize staffing needs and optimize your teams to meet your strategic objectives. It’s an ongoing process that requires regular environmental scanning and data analysis to ensure you have the right people with the right skill in the right jobs at the right time. Though it is a time-consuming process, it brings a significant ROI by reducing recruitment costs, increasing productivity and engagement, and future-proofing your workforce with a smart, flexible plan.