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The Ultimate Guide to Workforce Planning

June 1, 2021 Tanya Goncalves  
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People—from your in-house employees to the contractors you bring in to get a job done—drive your business. They keep your company moving towards its goals, ensure your customers stay satisfied and make certain your product and services are delivered on time and on budget. 

They’re at the heart of every business. Which is why making sure you have the right people, with all of the right skills, is a critical part of any HR team’s role. Workforce planning empowers you to do that, helping you plan your team now and for the future. With an effective workforce planning process, you’ll be able to stay on top of your day-to-day People needs while keeping an eye ahead—on potential market and industry changes and the skills or headcount you’ll need to meet your business goals. 

But workforce planning can also be a major investment of time and budget—which means getting it right the first time is key. That success is built on a commitment to accuracy and an attention to detail. And for that, you need to consider every element closely,  starting with the following:


What Is Workforce Planning?

Workforce planning is the process of analyzing your workforce and forecasting and planning for your business’s current and future needs. It helps your organization stay on track with its goals by ensuring you have the right people in place to accomplish those objectives—and that the people you do employ are equipped with the skills your business needs.

With that in mind, workforce planning typically considers:

  • How your workforce is positioned to meet current and future business objectives
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  • The skills your team needs for the future and where it may be lacking
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  • The best talent acquisition and talent management programs to fill those gaps 
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  • Any outsourcing requirements you might have and the best ways to fill them
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  • The costs of maintaining and developing the workforce you need

By drawing on all of the tactics available and analyzing the data along the way, workforce planning keeps you on the path your organization has set and allows you to forecast the future. All so that you can put a plan and budget in place that allows you to stay on top—and ahead—of your business’s needs. 

Operational vs. Strategic Workforce Planning

There are actually two levels of workforce planning—one that looks ahead and one that makes sure you stay on track in the moment. Consider both in turn:

Operational Workforce Planning

Operational workforce planning is all about the short term. It helps you keep up with your day-to-day workforce needs, putting employees on task, making any necessary tweaks along the way and addressing seasonal and project-based headcount requirements as they come up. Usually a function of HR or of the managers within each relevant team, operational workforce planning should be part of their daily workload, with processes in place to keep everything running smoothly. But it’s only one part of your workforce planning efforts.

Strategic Workforce Planning

Strategic workforce planning looks ahead—usually up to five years into the future. As such, it concentrates on your larger goals and how they align with your business strategy—as well as any long-term obstacles that may get in the way. It’s this kind of planning that will help you determine where the skills gaps in your company exist and allow you to identify how you might fill them. It’ll also help you put plans in place to attract the best employees and contractors and build the skills you already have in-house. While your strategic workforce planning is usually led by HR, involvement from your executive team, board of directors, finance and operations teams and department heads will help keep everything on track. 

Contingent Workforce Planning

But your workforce planning doesn’t stop with your in-house team. While data varies, more conservative numbers show that at least 1 in 5 U.S. jobs is fulfilled by a contract worker. Using freelancers and contract workers can save money in the long run, but keeping on top of those workers requires its own processes, administrative tasks and hiring procedures. 

And with contingent workers often needing to be scaled rapidly (think of those being brought on for seasonal work or a big project) and spread across several departments, they come with challenges of their own. Yet Deloitte found that only 29% of organizations track these workers’ compliance with work contracts and only 32% track their quality of work. 

But there are planning and operational best practices that enable you to optimize your contingent workforce:

  • Start them out with a trial period or small project to see how they fit with your organizational culture.
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  • Give them identifiable goals, processes of communication and training that let them stay aligned with your business and empower them to continually succeed at their jobs.
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  • Offer programs that help them build their skills and potentially earn more, while giving you the chance to bring additional skills to your business. 
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  • Continually forecast ahead to determine future contingent labor needs in order to identify where you may need to add new contractors to meet your goals.
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  • Focus on your workers’ experience with your organization. Making them feel like part of the team can add to their productivity and general effectiveness. 

While contingent workers may not be full-time employees, they can provide significant value to your workforce and fill in gaps in the skill sets you have available. As such, managing and developing this workforce should be a key part of your planning process.

The Workforce Planning Process

So where do you start your planning—and how do you successfully align it to your goals? These six steps will help guide you through the workforce planning process and help you get the most from your efforts:

Step 1: Strategic Direction

Determine your business goals and the top-down strategy your executive team has set—then consider how you can align your workforce to those goals. As you do, look at all of the tactics at your disposal: talent acquisition and headcount planning, training and development programs, outsourcing and so on can all help you fill your workforce needs. 

Step 2: Supply Analysis

Analyze your workforce and where it might change. That is, where you might see turnover and movement without any interventions or major business shifts. What does your workforce look like as a whole—how many employees are there, what skills are they bringing to the table and what do the overall demographics look like? Are there workers headed to retirement? Employees you expect to see turnover for other reasons? Finally, what skills are your organization relying on and how will that predicted turnover affect how you do business?

Step 3: Demand Analysis

But interventions are necessary if you want to grow—so you need to consider those as well. What business strategies, product releases, industry changes, geographic expansions, etc. do you need to prepare for? Where may your current team fall short in supporting those goals? And what’s the best way to make sure you’re ready for what’s around the corner? 

Step 4: Gap Analysis

This is where you analyze any skills gaps that exist. Can your current team keep up with the future your company has planned? Will additional training be enough to fill those gaps? Or will you need to recruit new talent? What about your HR and labor budgets—will you have the resources to keep up, or do you need to focus your efforts on the roles with the greatest future impact?

Step 5: Solution Analysis and Implementation

Next, it’s time to take the actions you need to meet your workforce goals and fill the gaps you’ve identified. That might mean introducing a recruiting strategy to add the skills you’re missing, building your in-house team or outsourcing new contractors or contingent staff. It might also mean restructuring or redesigning the jobs you have or adding training and development programs that help you fill in some of those missing skills in your current team.

Step 6: Monitoring Your Progress

Of course, you don’t stop planning even after you start to implement your workforce changes. Rather, continue to monitor and measure the results of your changes and their impact on the organization itself. Are you on the right path towards your future goals or do you still see gaps that need to be filled?

A Workforce Planning Example

For an example of how to get the most out of your workforce planning efforts, consider Saddle Creek Logistics, one of the largest third-party logistics firms in the U.S. Headquartered in Florida, Saddle Creek has 5,000 employees across 50+ locations throughout the United States.

Saddle Creek integrated their workforce planning, revenue planning, OpEx and CapEx into a single database, allowing them to work from a single source of truth. The result was an end-to-end budgeting process and smarter, data-driven decision making. Templates helped drive the process, freeing executives’ time for more granular analysis. “Tasks just flow from one person to the next without any manual intervention,” says Paige Williamson, Saddle Creek’s Associate Director of Fixed Assets and Systems. 


Learn how Vena helps the Kansas City Chiefs meet its workforce planning needs.

Aligning HR Strategy With Your Business Goals

Aligning HR with your corporate strategy is a crucial part of the workforce planning process. From your learning and development programs to your talent acquisition strategy, you’ll see better results if you keep in mind your business goals. But alignment happens on more than one level so consider the following:

  • Vertical alignment happens between the various levels of your business. If the executive team has built out a set of business goals, for instance, it’s up to your HR team to align their goals and actions to them, to maximize all of your people and resources and ensure everyone is working towards the same set of outcomes.

  • Horizontal alignment happens between departments and teams—and it’s just as important. After all, it’s not unusual for departments to use competing strategies to meet the same goals—wasting both time and resources. By aligning with other departments, HR can better determine which actions and projects to prioritize and where resources should be allocated. 

Four best practices can help you better align along both levels:

1. Don’t Be a Silo

Collaborating and partnering with your executive team and other departments and understanding the market and industry at large, will get you to your goals faster and ensure you have the right support along the way.

2. Know Your Culture and Budget

To ensure you’re hiring people likely to thrive in your business environment, your workforce planning tactics should be built with your organizational culture in mind, while the right HR budget can mean the difference between success and failure.

3. Put Your Data To Work

Through accessible HR dashboards and integrated company-wide data, you can begin to visualize your most critical metrics—analyzing where you’re falling short of your goals and where you’re thriving. 

4. Align Your HR Activities and Team

By identifying the targeted actions you need to achieve your goals—and assigning the right people to make them happen—you can get on a clearly defined path toward making your business strategy a reality. 

When HR is aligned with your business goals, you make better decisions around talent acquisition, retention strategies and training needs—fueled by a better understanding of any gaps that exist. 

Find out more about how to align HR strategy with your business goals.

The Role of a Skills Gap Analysis

The skills we rely on to keep up with our business demands are always changing. Understanding the skills you no longer require—and anticipating those you’ll need in the future—is part of ensuring you have the right team for your business. And that’s where a skills gap analysis comes in.

Your HR and workforce planning teams will use a skills gap analysis to identify—and eventually fill—the skills shortages that exist in your company, in order to meet current and evolving needs and pave the way for future plans. Such an analysis will help you determine where those changes may be necessary within your organization, to let you better keep up with emerging technology and industry changes and keep pace with your future business demands. Specifically, it can help your organization:

  • Recognize where important skills are missing 
  • Identify individual growth opportunities in your employees
  • Better target your recruitment efforts
  • Plan ahead for your workforce and growth goals

For a successful skills gap analysis, either consider each employee individually and the skills they bring to the table or focus on the overall gaps in your departments or business as a whole, to figure out which skills you need to add. From there, follow a series of steps:

1. Determine Your Business Goals 

Consider where your organization is going in the near and long terms and which strategies you’re going to use to get there—as well as the skills you need for that to happen. 

2. Look Into the Future 

Take a look at where your industry and the workforce itself are going, modeling for future scenarios—then determine what skills you’ll need to maintain a competitive edge. 

3. Dig Into the Data

Create a single source of data—drawing from employee KPIs, surveys, skill assessments, 360-degree performance reviews and other sources—to create a full inventory of skills. 

4. Fill the Gaps 

Add the missing skills you need through learning and development programs, job redesigns, outsourcing and recruitment. Don’t stop there, though. Ideally, your skills gap analysis should be an ongoing part of your annual HR budgeting process and the forecasting you do throughout the year. 

Find out more about how to make a skills gap analysis work for you.

HR Budgeting: How To Plan Your HR Costs 

Without the resources to fuel your workforce planning efforts, you won’t get far—and you might find you have to prioritize your efforts according to the resources you do have available to you. Which is why filling your skills gap, achieving your HR goals and meeting all of your workforce planning needs starts with your HR budget. 

Your budget should take into consideration three main components:

1. Compensation and Benefits 

This will likely represent the largest allocation of resources by far. And since salaries and benefits both hugely influence your ability to maintain and attract talent, keeping on top of industry and job-level expectations will also be critical.

2. Learning and Development 

The best learning and development programs not only ensure your team members continue to grow and stay challenged in their roles, but also help you avoid potential turnover and keep up with future skills gaps. 

3. Recruitment

Your HR budget will have to incorporate not only the costs associated with advertising any new jobs, but allocate for relocation costs and background checks, while also incorporating any interview periods or onboarding training. 

Either a zero-based budgeting approach or an incremental budgeting approach will allow you to keep your budget in balance, while regular check-ins and adjustments will ensure you’re staying on track throughout the year. 

Get the most out of your HR budget with these five best practices

Workforce Planning Metrics

As with most business planning processes, workforce planning success means measuring your ongoing progress. Measurement will fuel every aspect of the process, allowing you to better determine where your skills gaps exist, the headcount planning you need to do to fill them and any other programs you decide to focus on. 

To stay on top of your workforce needs, then, these are some of the metrics you might want to consider:

Productivity

Are your teams able to get their work done? And if there are productivity problems, what might be the cause? Are teams struggling because they don’t have the skills they need to accomplish the tasks at hand? Is there too much on their plate to finish or do you have employees who aren’t carrying their load?

Turnover and Attrition

What does employee turnover and attrition look like at your organization? Why are employees leaving and who, exactly, is jumping ship? Attrition happens naturally in any company, but knowing what it looks like at your organization—and at what point turnover can lead to potential problems in reaching your goals—can assist you in your planning efforts. You’ll be able to identify what you need to do to retain your highest performers and most critical employees, plan recruitment and offboarding programs and determine where contingent workers might help create a better transition along the way.

Diversity, Equity and Inclusion 

How diverse is your workforce? Diversity across race, gender and age—spread across all levels of your organization—brings a range of perspectives to your business. It can also lead to improved innovation and better financial performance. But to create a healthy workforce, it’s important that all of your employees feel like they belong, which means working DEI into your workforce planning efforts, from recruitment to training.

Salary 

How are salaries distributed throughout your organization? Do you have senior-level members everywhere you need them, to lead your individual teams towards their goals, and are you paying them enough to stay in those roles? Are you fairly compensating the skill sets and teams you expect to rely on to meet your future business objectives and offering competitive salaries in those areas you’re looking to recruit new talent?

Engagement

How engaged your employees are (or aren’t) with their work can help predict future turnover, as well as overall productivity and absenteeism. All of which can let you better understand where you may need to invest in your current team—through learning and development, upskilling, reskilling or other programs. 

Performance

Are your employees meeting their objectives—and are they doing so on schedule and error-free? How do their managers and colleagues rate them in their performance reviews? Do they show potential for advancement? Performance metrics like these let you identify the top performers in your business and those with potential for leadership roles.

Revenue

Understanding your company’s revenue as divided by your total number of employees can help you calculate how much each employee, on average, is contributing to your company. It will also let you better understand the cost of turnover so that you know how much to invest in keeping your employees happy and engaged.

Cost

How much is your organization spending on your workforce? An understanding of where your money is going—considering everything from compensation and benefits to recruitment and training costs—can help inform your HR strategy and budget. 

5 Workforce Planning Reports

After you’ve assembled your workplace planning metrics, it’s time to create your reports. Your CEO’s asking you questions, such as: “Do we have the talent required to achieve our short-term business goals? In which departments do we have a talent deficiency? What’s the ongoing cost of our current workforce?”

What’s your process for delivering these answers quickly and accurately? Here are five common workforce planning reports you can use to get your CEO the information they need:

Headcount Report

Your CEO knows your organization’s most important resource is its people. They also want to know if the company is acquiring—and more importantly, retaining—them. On average, it costs $4,129 to hire an employee. That’s before training. A headcount report is an HR report that provides clarity on your headcount, employee tenure, which departments experience the greatest turnover and which have stronger retention.

Compensation Report

No matter your headcount, the compensation report is valuable—especially when your organization’s compensation structure varies by employee. It shows salary, benefits, overtime paid, bonuses and commissions, payroll deductions and when and how much paid time off is taken.

Performance Report

What value has that new employee (who cost approximately $4,129 to hire) added? A performance report reveals which employees are meeting objectives, which teams are reaching their goals without exceeding their budgets and each employee’s performance grade. The performance report also identifies which employees display the greatest potential for advancement as well as which managers are best developing their team’s talent.

Recruiting Report

Successful recruiting may be the difference between success and failure—especially during a candidate’s market. A recruiting report highlights positions open and recently filled, number of applications and interviewees per position, average time-to-hire and average cost-to-hire. The recruiting report helps the talent acquisition team remain on budget and identify qualified candidates faster.

Variance Analysis Report

Your CEO will inevitably approach you with more questions, such as: “How much are we spending on employee benefits next year? Who are our top performers? Which teams have the weakest retention?”

 

Now that you have five common human resources and workforce planning reports, you can get those answers—quickly and accurately.

4 Workforce Planning Best Practices

Successful workforce planning will keep your business running smoothly, with the right people on hand to pave the way. To get the most out of your workforce planning efforts, consider four best practices for keeping your process on track:

1. Ensure You Have the Support You Need

Your workforce planning process isn’t going to get anywhere without the right people supporting and championing its ongoing success. While HR traditionally steers the ship—hopefully with one specified leader at the helm—finance and operations will play important roles in making sure the resources are available to support your goals. Executive support is also critical to seeing those goals build momentum throughout the company and integrating them into the overall business strategy. Getting key stakeholders from every department on board will help ensure company-wide support.

2. Choose the Right Technology

The right technology is also critical and can keep the entire workforce planning process moving smoothly. Automating the more repetitive, manual functions will let you focus on analysis and planning, while dashboards and reporting will enable you to visualize the ongoing results. Meanwhile, a single source of truth—with data integrated from throughout the company—will make it possible to track the entire process.

3. Keep an Eye on the Data

Data should help drive every stage of your workforce planning process—enabling you to make decisions on which gaps to prioritize and how to fill them and allowing you to evaluate your success in building towards your business goals. Your integrated in-house data can help you keep track of key metrics such as workforce costs, revenue per employee, employee performance and rate of turnover, while market and industry data will ensure you’re on top of salary expectations, benefit expectations and upcoming market changes.

4. Never Stop Looking Ahead

Workforce planning doesn’t have a finish line. Your workforce is always changing, as is the market and your business strategy. That means your workforce planning should be continuous as well. Even as you work towards your goals, you should be measuring the effectiveness of your actions and making any necessary tweaks along the way—and looking at the market to see if anything outside of your organization is changing that might affect the strategy you have underway. 

While there’s a lot to consider, successful workforce planning can mean the difference between having the team you need to fulfill your business goals and falling short on the skills you require. Done right, it can play an integral role in your business success.


Get the most out of your workforce planning with Vena.

Recap
The Ultimate Guide to Workforce Planning
  • Workforce planning is the process of analyzing your workforce and forecasting and planning for your business’s current and future needs. It helps you stay on track of your business goals by ensuring you have the right skills in place.
  • There are two levels of workforce planning. Operational workforce planning helps you keep up with your day-to-day workforce needs, while strategic workforce planning concentrates on your larger future goals and how they align with your business strategy. 
  • Aligning HR with your corporate strategy is a crucial part of the workforce planning process—both vertical alignment (between various levels of your organization) and horizontal alignment (between departments and teams). 
  • A skills gap analysis helps you identify—and eventually fill—the skills shortages that exist in your company, both now and based on future goals. 
  • Your HR budget helps ensure you have the resources available to meet your goals, while the right metrics will help measure your ongoing efforts.

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