10 min read

What are the steps in workforce planning

Speaking of workforce planning strategy, we can draw an analogy with the lighthouse: the strategy tells us the direction. It can show the stones and rocks that are on the coast, but only the ship’s captain decides how to guide his boat past the rocks to his destination. In this blog post, we’d like to deep dive into workforce planning and its planning stages.

What are the steps in workforce planning

What to start with

Workforce planning has a straightforward purpose and reasoning behind it. It must ensure that your company has the right people and those people have the right skills. It’s an integral part of HR management and provides the context for other HR activities like talent acquisition and employee development.

The planning process must be enterprise-wide. It requires effective communication between the HR team and top management as well as input from key stakeholders.

We agree with CIPD: Workforce planning processes, when done right, can reduce labor costs, respond to changing customer needs, improve employee retention, and their work-life balance.

Unfortunately, despite its importance, the workforce planning asset is often not carefully planned, measured, or optimized, SHRM states. Many organizations are not sufficiently aware of the current or future workforce gaps that will limit business strategy execution.

Where this process starts and ends or what to consider when workforce planning

Consider the following factors during the workforce planning process:

  • Right size: how many people you need to hire
  • Right form: the critical competencies/skills you need
  • Right budget: how much it costs to hire
  • Technical feasibility

Workforce planning encompasses such processes as analyzing the current workforce and determining future needs, identifying gaps between status-quo and destination point, designing and implementing solutions to accomplish the goals, and finally, fulfilling the strategic plan through the proper use of talent.

Step-by-step guide

Step 1: Supply analysis

At this step, analyze the current company’s state and the external factors like market and economic situation to understand the business’ environment.

Internal factors determine how the workforce is structured at the current moment in terms of gender and age rates, specialization, and location. Another internal factor is labor costs that incur wages and other workforce-related costs. Internal factors include organizational structure, i.e., how the recruitment process works.

A vital internal issue is attrition rate, i.e., how many people leave you and for what reasons. Flow analysis also belongs to internal structure – how the workforce moves within the company and how positions change.

External factors are best estimated via PESTLE analysis:

  • P stands for politics (any preconditions for changing the legislation, taxation, labor remuneration, etc).
  • E for economics (inflation rates, labor outflow rates, etc).
  • S for social (number of students and graduates in the area, social changes like lockdowns and social distancing, etc).
  • T for technology (for example, digital transformation and automation of HR processes).
  • L for legal (changes in legal norms or requirements).
  • E for environment (like ecology, ethical norms, etc).

Step 2: Demand analysis

At this stage, you forecast the future HR needs: workforce skills a company needs to cope with market challenges, number of employees, their roles, and possible HR scenarios.

Earlier, to define the HR strategy and the employee skills gaps, you had to talk to line managers.

Even now, when asked, “What skills should your employees learn to be more effective a year from now?” the top managers often answer generically, e.g., “Communication” or “Time management.” But in reality, they need a particular skill on a more senior basis. What does a person have to do to make you assess a “good level of communication” for that particular function? English proficiency/customer relationship building/sales skills/non-conflict communication skills?

Step 3: Gap analysis

In this step, you analyze the competencies a business needs and what skills are at your hand. A recent Future of Jobs report states that by 2022, almost 54% of all employees will require considerable re- and upskilling.

Here are a few gaps you can analyze:

  • Skill gap. Vital for the company’s future growth as you assess your current competencies and skills you’ll need to succeed in the future. Also, knowing new skills and upskilling will help the employees perform more functions. It also helps to make all skills visible.
  • Opportunities gap. It includes opportunities, style of interaction with both clients and colleagues, and behaviors that boost efficiency. It empowers internal talent mobility, opens new possibilities for your employees, and motivates them to learn.
  • Distribution gap. Talents may be focused at one department, while other departments may lack A-Players. Look at how talents are distributed in the company and where the gap may be.
  • Diversity gap. For example, all key employees are in the same location or age group. What happens when the time to retire comes? Think about how you can allocate talent.
  • Deployment gap. Imagine you need to develop company departments in the regions. You must know precisely how you will move the talent there and whether you will be able to hire locally.
  • Time. Time-to-hire of a rare specialist can take up to 9 months, or even longer. If you decide to close the need for certain specialists through training and retraining, you must know how long it will take to get the top talent and preselect the candidates.
  • Cost gap. Besides, there is also cost-to-hire for the right talent and the costs for developing, retraining, or upskilling the workforce.

You may be working with only one of these gaps. But this list helps you look at the question from different perspectives and double-check yourself. Understand what is valid for your company and what is not.

Step 4: Solution analysis

Well, the information has been gathered and analyzed. Now it’s time to think about strategies for overcoming difficulties:

  • Time and money you’ll allocate to work with detected gaps.
  • The way you’ll organize and implement training.
  • Locations you’ll consider.
  • Resources and mentors you’ll involve.
  • Hiring strategy: to attract experts or hire entry-level staff and train them; to hire internally or externally.

You should look at the organization holistically. Let’s give an example. A company X needs to rewrite an existing codebase into another programming language. They decide to actively hire a dozen of developers of a certain specialization. Six months later, it turns out that the strategic plan hasn’t been thought through, and the company hasn’t suitable positions for these people.

The mistake was that the company switched to hiring without thinking that there’s a large layer of developers inside the company whose specialization is losing its popularity and customer demand. They could have been retrained instead. At least, it would allow the company to reduce the recruiting costs, to save the existing employees, and, thus, to prevent the reputational risks.

Workforce planning isn’t just about recruiting. Mercer explains: “It can’t just be about employee capacity and business unit alignment, workforce planning must recognize employees’ potential and engagement and be intertwined with the company’s technology roadmap.”

The current state of workforce planning technologies

Earlier, the HR departments worked with Performance and Potential Matrix — the nine-box matrix or HR3P matrix, that displayed employee performance and potential in a single model. Today it is a doubtful approach since it evaluates the people too judgmentally. But can you imagine that… (Global Talent Trends Report 2020)

Two in five HR leaders don’t know what skills they have in their workforce today.

Sadly, not all companies have the HR process fully automated. Many still do not have an automated data warehouse and have to extract, process, and manually put together the data. That is much slower and risks losing important information.

It demonstrates, to assess the performance, potential, and future-orientation of your employees, you have better start using a smart workforce planning tool — HR dashboard. It is the most real, applicable, and effective tool for reflecting the existing skills, revealing the hidden talents, and forecasting your employees’ future needs.

On a conceptual level, an HR dashboard is filled with data from various sources, such as the payroll system, candidate tracking system, and other information systems used in HR. Based on this information, HR metrics are calculated and displayed. This data is then extracted; information is transferred and uploaded to a data lake or data warehouse. Finally, a specially designed software uses this information for reporting.

A quick test, let’s say you are a CEO. Can you answer three questions in 17 seconds as clearly and concisely as possible? — What percent of your workforce work for your long-term business goals? What amount of employees need to be up-skilled? How many people do you need to hire in 5 years? We tell you.

60% of companies say they need to improve workforce planning capabilities. And 25% of companies expect automation to lead to the creation of new roles in their enterprise.

World Economic Forum

Conclusion

Workforce planning is the process of analyzing an organization’s workforce and identifying the steps to be taken to prepare for future needs. This process helps you understand where to go and how to move, so you don’t have to spend your recruiting and HR team’s resources on something that the company doesn’t need.

The recent changes have created an urgent need for workforce planning in organizations of all sizes and industries. In this unprecedented situation, workforce planning will help you understand how best to support your business and workforce. In our webinarStrategic workforce planning, you will become aware of Big Data & AI benefits in SWP and will be able to guide your actions and optimize the future workforce structure. 

As you see, knowledge of hot skills, market demand, and own skill gaps help people to be ready for the new challenges. To achieve a smooth working structure that functions like a swiss clock, you have to conduct workforce risk analysis, i.e., demographics, retention, career bottlenecks. Then, you must identify and prioritize the workforce gaps, e.g., locations, job roles, skills. Finally, via visualization of insights, you will drive the strategic, data- and AI-based decisions.

Let´s start the rocket!