Headcount planning and forecasting have a broad influence, impacting everything from production and customer service to employee morale and turnover, as well as job market trends and budget planning. Without the right tools, headcount planning and forecasting can be faulty and inefficient, making it difficult to fill workforce and skill gaps.
Workforce planning connects directly to recruiting intelligence and acquisition strategies to build a future-proof workforce. It helps organizations meet short-term and long-term business needs while remaining within specified workforce budgets.
To operate efficiently and save resources, every organization requires just enough skilled employees to meet its goals without overhiring. These goals and required skills may often change, so it's essential to accurately anticipate future employee needs and plan to meet them.
Headcount forecasting and planning are more than just filling vacancies. We use these strategies to identify current and future skill needs, attract and retain the right talent to meet those needs and plan to reduce attrition across the organization.
Improving the quality of hires is a top priority for recruiters worldwide. In fact, 59% of L&D professionals say they have their focus on reskilling and upskilling moving into 2023. Without this approach to headcount planning and forecasting, the skills gap widens.
To meet your business goals and recruitment needs, combine workforce forecasting strategies with employee L&D. Let’s review the most common workforce planning reports to help you determine the best way to build your headcount planning model.
- Build your headcount planning models on organizational data and involve all department heads, senior management, HR and finance professionals in the process.
- The most common reports you will need to generate from your workforce planning and forecasting model will include headcount reports, compensation reports, performance reports, recruiting reports and variance analysis reports.
- Effective headcount planning strategies include gathering all applicable data, analyzing current headcount statuses, evaluating your current workforce, developing a headcount plan and executing strategies.
- Benefits of effective headcount planning include better budget adherence, improved workforce management and streamlined headcount reports.
- Headcount planning enterprise analytics help your organization create a single source of truth (SSoT), harness the power of data visualization, unlock augmented analytics and predict future outcomes more accurately.
Headcount Planning Models
Building headcount planning models require the most accurate organizational data. These models combine and analyze required data points, including:
- Number of workers needed to cover labor hours to optimize productivity
- Anticipated new employee growth through the next year
- Expected churn over the next year
- Costs per new hire
- Time investment in hiring
- Current and predicted skills gaps
- Skills potential
- Hiring sources
- Labor budgets
- Worksite occupancy
You need to involve all department heads, senior management, HR and finance professionals when developing your headcount planning model to ensure an easy transition to the new model. These entities can offer invaluable insights into which data sources are the most reliable and accurate for building these models.
When developing your model, begin a new tab on your forecast spreadsheet and label all named positions by division. That way, all payroll and benefits changes in this tab flow through the predictive model.
A workforce planning template will simplify this process. However, you can set these functions on any spreadsheet. Once you have done this, group each department into rows and place inputs on the left side of the tab and outputs on the right (i.e., wages, taxes, other payroll liabilities and FTEs).
Headcount Model Inputs
If you are following our model so far, the left columns should include department, name (from the employee roster), position/title, full-time or part-time, hours, wage, benefits rate, payroll taxes and medical rate. You must also include the start and end dates of employees (we’ll explain shortly).
Some organizations calculate medical expenses according to headcount using forecasting models. We discourage using the percentage of wages to calculate medical expenses. It isn't accurate and will cause faulty numbers.
Whether an employee makes $20K or $200K annually, providers set medical premiums under fully insured plans. To determine the average rate for every employee, divide the total medical expenses by the number of plan participants for a more accurate figure.
You can customize this model to suit your organizational needs. However, your headcount planning tool must have fields such as full- or part-time, total hours, wage rates, taxes, start and end dates, and medical and benefit rates.
Start and end dates are critical to your headcount planning and forecasting model. If an employee begins on the 15th, the model will calculate earnings for the days remaining in that month. The same is true for ending dates should an employee leave the company before the last day of the month.
With these required fields, you can also easily aggregate worth and income inflation surges in their own row for straightforward and accurate reporting.
Headcount Model Outputs
Once we complete the inputs, the headcount planning model will forecast monthly wages along with the headcount, any FTEs and medical premiums. If you are building your own model, place a total row at the bottom of the model and sum these outputs by department using the Excel function SUMIF.
A template should have summed this up for you. Double-check to ensure this calculation is correct. If the cell reads an error, it means some data is missing in your model.
5 Workforce Planning Reports Your Organization Will Need
Now that we have collected the workforce planning metrics, we can create our reports. Workforce planning reports serve two main purposes: to determine if we have enough human resources to meet productivity needs and to provide insights for informed decisions on labor and costs quickly and accurately. Let’s look at the reports you can create to assess workforce requirements and labor costs.
Your company's most essential resource is its employees. That's why acquisition and retention are such high priorities for senior management. A headcount report does more than tell you how many employees you have, their tenure and turnover and retention rate by department. It also shows the average cost per employee, which is around $5,000 before training.
It can help you decide whether to allocate funds to recruitment or skills development based on which will best suit your organization's needs at any given time.
Regardless of your organization's headcount, compensation reports are valuable tools, especially compensation structures that vary by employee. These reports will deliver insights on the salary, paid overtime, commissions, bonuses and benefits of all employees. We create these reports to determine payroll deductions and when and how much PTO each employee has taken.
Performance reports deliver valuable insights regarding what value new employees bring to the table. These reports indicate whether they are meeting or exceeding position objectives and expectations.
It allows you to see which team members consistently reach their goals without exceeding their budgets. It also delivers critical insights into each employee's performance.
Additionally, performance reports identify which staff display the greatest potential for advancement and which managers develop their teams' talents best.
Recruiting reports provide critical data regarding open assignments, recent hires and the number of applications and prospects interviewed for each position.
The report also provides the average time to fill each position and the average cost per hire. It ensures that talent acquisition teams can identify qualified candidates faster and on budget.
Variance Analysis Report
Creating a headcount planning model will enable your finance team to put together a variance analysis to help senior management and stakeholders determine whether their budgets match their actual expenses. Inevitably, the CEO will ask questions such as:
- Which teams have the most top performers compared to our predictions?
- How much are we spending on talent acquisition next year?
- How does that compare to last year's budget?
With a variance analysis, you can obtain these answers quickly and accurately.
6 Effective Headcount Planning and Forecasting Strategies
The key to headcount planning and forecasting is to avoid being reactive and to be proactive. If you desperately need new hires and staff turnover is outrageous, you're going to have a hard time keeping up.
Tight labor markets often spell disaster as skilled talent is scarce and the recruitment door widens, impacted by the rolling recruitment door. Being future focused and playing the long game of talent acquisition and retention will help in this case.
Templates are a good starting point. Get the numbers to predict your staffing needs for next year while tracking hiring progress by department, recruiter and hiring stages with a customizable, downloadable, free workforce planning template.
Your strategy should have carefully laid steps to get your business from point A to point B. Follow the steps below for your workforce and headcount planning strategy.
1. Gather Applicable Data
In this first step, collect and access the short-, mid- and long-term corporate plans for the organization. Examine the strategic goals and budget to establish noteworthy insights on critical headcount metrics. Review the following datasets as you build your headcount planning and forecasting model:
- Position requirements
- Income data
- Worker data including skill sets and diversity stats
- Departmental performance ratings
- Organizational hierarchy
- Frequency of attrition rates
- Benefits and retirement eligibility
Once your teams have established these benchmarks, track critical metrics over time. Doing this will make your headcount planning and forecasting more accurate.
2. Analyze Current Headcount State
Get a 360-degree picture of the current state of your workforce by running a headcount planning exercise. You will be able to present a clear visual of your employees’ skill gaps, the organization's hiring priorities and the total costs of your workforce to help you predict future headcount challenges and needs.
3. Evaluate the Current Workforce
Build a profile of what your organization's ideal employees look like for each department and in every role. This allows you to drill down and granularly evaluate your current workforce. Use the following items to build an employee profile:
- Departments with critical roles that remain empty for too long
- Attrition patterns
- Competitive salary and benefits
- What employees to consider as "flight risks"
- Potential or current workforce skill gaps
- Promotion opportunities
4. Develop Headcount Plan
Identify exact business challenges that can impact the organization’s headcount needs in the coming months or years. Consider the following:
- Shifting consumer trends and demands
- New methods for identifying top talent
- Talent source and availability
- Regulatory industry changes
- Planning for scaling and growth
5. Align Execution Strategies
Before executing strategies, determine if your budgets align with your workforce requirements. If not, you will need to make adjustments and tailor strategies for special circumstances.
Close any skill gaps and offer upskilling and reskilling opportunities to retain high-value team members. Furthermore, close any temporary or seasonal headcount gaps with part-time employees, temps or contracted workers.
6. Evaluate, Revise, Repeat
Monitor your organization's workforce and headcount planning and execution over a set period. Evaluate progress against set benchmarks and revise plans as needed for a demanding and ever-changing market.
Evaluating, revising and repeating these steps can simplify headcount allocation, and redeploying forecasting and planning strategies can maintain job quality and suitably fill all positions.
Benefits of Effective Headcount Planning and Forecasting
Keeping your organization's productivity in line with business goals requires headcount planning. Here are some immediate benefits of implementing strategies based on the headcount planning models above.
Better Budget Adherence
Sticking to a budget goes beyond keeping new hires' salaries at a specific level. Headcount reductions, new hires and lost productivity can create additional labor costs and drain your budget.
If you struggle to keep recruiting in line with approved workforce budgets, it’s time to develop a headcount planning strategy that puts finance leaders and recruiters on the same page. Your headcount planning and forecasting model will ensure that you spend only what is necessary for every employee and project.
Improved Workforce Management
Space is a common challenge that organizations face when in growth mode. Restrictions on available workspace and equipment make scaling difficult, even in today's flexible work models that incorporate work-from-home schedules.
Headcount planning models can provide you with an at-a-glance view of what personnel work where and during what schedule. This allows you to budget for your organization's real estate needs, equipment requirements and IT infrastructure investments.
The planning models also aid recruitment efforts. For instance, you can negotiate with potential hires who might jump at a 5% pay cut in exchange for a remote or hybrid work schedule. Studies show that companies that offer these scheduling benefits retain their employees for the long term.
Many staffing strategies fail when employee types and schedules don't match the expectations of a standard 40-hour week. Proper headcount planning takes a holistic view of an organization's needs, leaving room for staff downtime and diverse schedules and employee classifications.
Some companies discover it is cost effective to hire seasonal workers or contractors during production peaks. Others find it more cost effective to reduce staffing needs and free up workers for more demanding tasks. Some companies are turning to automation for this.
Top Talent Acquisition
Organizations risk misaligning their talent acquisition strategies without proper planning and forecasting models. The execution of those strategies without effective headcount planning and forecasting models increases these risks.
This workforce planning makes it easier to recognize and fill available positions with the best hires and prevents the position from becoming vacant before the end of the year. It suits your hiring strategy and helps you build talent pipelines that deliver top candidates virtually on demand.
Making Headcount Planning Agile and Inclusive
Companies that have a formal headcount plan generally conduct these reports annually. However, due to COVID-19, we learned how quickly markets can change, so a truly strategic approach must be agile, comprehensive and iterative. In other words, headcount planning should be a living document.
Ideally, senior management should use real-time data to review and adjust their strategic workforce plans regularly. This allows organizations to respond more quickly to internal and external factors that might otherwise be disruptive.
Headcount planning teams should regularly seek insights from department and business unit managers, as well as HR, to uncover short- and long-term skills needs.
Headcount Planning and Enterprise Analytics
Headcount planning is essential for financial planning and analysis. It includes setting hiring goals, upskilling and reskilling employees, reducing churn and offering insights on recruitment practices.
Automation improves headcount planning accuracy and provides you with better employee analytics insights. It takes productivity and performance to the next level. Let's examine how.
Create a Single Source of Truth
Begin by connecting your organization's finance and HR data. Create a single source of truth (SSoT) for all datasets by integrating your FP&A tools with a central cloud-based database. Your database will house both live and imported data connections, giving your teams a holistic and harmonized view of your data sources.
With this seamless connection between finance, HR and your headcount planning model, you can consolidate your entire enterprise data. This promotes data governance compliance and establishes an SSoT enterprise wide.
Harness Powerful Data Visualizations
Open the pre-built HR headcount dashboard and begin analyzing your datasets using advanced analytics and visualization tools. By looking at various reports, you can evaluate the following:
- Expected headcount and costs
- Year-to-date time-offs
- Training spendings
- Diversity details
- Trends in hiring and attrition
You may soon see a high-level overview of your employee count. You can learn more from your headcount dashboard by adding country, location and department filters to your model. You can take your analysis even one step further by analyzing specific data such as experience and other qualifying factors to understand your headcount landscape better.
As you may have noticed, most staff training courses focus on managers and accounts, neglecting new hires who may then perform poorly due to insufficient training. You can then use these insights to develop fresh training programs for these employees. These insights will also indicate which employees could use reskilling or upskilling.
Unlock Augmented Analytics
For more insight into your workforce planning, harness the power of AI and machine learning (ML) in your headcount planning model. Insights from AI and ML can help you understand the key drivers of a given data point more quickly without manually analyzing your datasets.
For example, AI and ML can use data from your headcount planning model to assess appropriate labor costs. If your model indicates that administrative support and executive level are the biggest contributors to labor costs—and they are—you can reduce headcount costs.
To reduce labor costs, consider increasing the number of account managers for lower-level management duties. AI and ML can automatically run these scenarios for you.
Evaluating your data will also help you understand attrition rates and their impact on performance and costs. Ask yourself questions such as the following:
- What is each quarter’s target attrition?
- What is each age group’s target attrition?
- What are the total salary and bonuses per age group?
Using your model, search for insights that provide answers regarding charts or numeric values. Add them to your current dashboard to get the data you need for making data-based decisions on the fly.
Predict Future Outcomes
Picture having your headcount plans and performance in one location that enables continuous, event-based churn and budget forecasting rather than quarterly or annual planning cycles.
Predicting staff turnover with features that lead to meaningful conversations with management is the number one driver of turnover. It drives more discussions between employees and managers across the organization to guide leaders to make better personnel-related decisions.
With the tools to better anticipate unpredictable losses, you can improve headcount forecasting, giving you the tools to research crucial influencing factors to take immediate and proactive action.
How To Use Workforce Planning Tools To Grow
At Vena, we leverage Excel and combine it with advanced modeling capabilities to streamline your headcount planning processes. Through data integration and our Executive, HR and Workforce Management templates, we help you automate your manual processes. Here's how Vena Workforce Planning Solutions will help streamline your organization's growth:
Integrate Data From Your HRIS
Vena allows you to integrate employee data with your HRIS into your processes and templates. Using our headcount planning models, you can deliver more accurate FTE tracking and improve labor cost predictions and manage your employee data easier than ever.
Plan for any scenario and gain confidence in your numbers by connecting your cloud applications with your source systems, including:
Report and View All Your Key Metrics
Visual dashboards enable you to view labor costs enterprise wide, discover underlying employee data, forecast revenue per team member and report on all employee expenditures. You get all of this from pre-built templates that you can customize to meet the needs of your organization.
Automate Tasks and Protect Your Data
Data governance continually evolves—with unique challenges, new methods and technological advancements that change how we view and manage data. Headcount planning models can help protect your data while also automating tasks to streamline workflows.
Our workflows enable your organization to distribute templates to every entity and control the submission and review processes. Vena's best-in-class data security restricts access to sensitive employee information—such as payroll data—to help you remain compliant with all data governance regulations.
Plan for Any Scenario With Dynamic Modeling Capabilities
To boost efficiency, we integrated our Workforce Planning platform with the most dynamic modeling capabilities available and used dynamic modeling to map out changes to your organization's payroll, taxes and benefits packages. With Vena Workforce Planning Software, you can evaluate the role of reorganizations and notice how changes within salaries or driver rates impact your bottom line.
Improve Headcount Planning Processes With Vena
Discover a more intuitive way to manage your workforce with headcount planning and forecasting solutions from Vena. Vena's V365C Excel Add-in makes it easier than ever to manage labor costs while streamlining planning in areas such as ad hoc, variance analysis and reporting.
Our collaborative Workforce Planning Software can help your organization predict recruitment needs while ensuring quality of hire and improving retention. It enables you to manage employee transfers, report labor expenses and cost allocations while improving workflows with more detailed employee-level planning.
You can build a talent acquisition pipeline and remain proactive against churn with better tracking of upcoming hires, transfers and terminations across your entire enterprise. Vena’s Excel interface delivers advanced data integrations, modeling capabilities and easy-to-use dashboards to help with your headcount planning and forecasting processes.
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