Workforce Planning: The Ultimate Guide

Effective, strategic workforce planning is essential for any high-performing organisation.

Evolving organisations typically walk a thin tightrope between the twin dangers of overstaffing and understaffing. 

Too many staff and your company becomes bloated with profit being lost on unnecessary salary costs. Too few, and you’re unable to sustain growth, or struggle to keep up with demand.

We’ve prepared the ultimate guide to staff planning, with four detailed steps to help you analyse, predict and implement a world-class workforce plan.

Here’s what we’ll cover off:

• What is workforce planning?
• Terms to know
• Why create a workforce plan?
• The 4 steps of resource planning
• An example of workforce planning

What is workforce planning?

If there’s one word to remember with resource planning, it’s talent. By talent, we mean the various skills and proficiencies of your workforce. The plan helps to ensure that you always have the right amount of talent to meet your company’s needs.

The art (and science) of strategic planning consists of correctly assessing the difference between talent demand/supply and the difference between talent needs in the present/future. Correctly assessing present and future talent shortfalls is a great way to start building a workforce plan. 

It’s important to note that this article is a guide and not a definitive plan, this is because strategic planning is an ongoing, ever-evolving process. Plans need to be under constant review and adapting to new information and market changes in real-time.

Terms to know

As with most things in life, recruitment strategies can be full of jargon. The CIPD refers to “hard” and “soft” planning. We’ve distinguished these terms for you:

“Hard” planning: Is cold, hard, data. For example, what’s the exact cost of maintaining your current workforce? How many people are employed in which skills? How many of your staff are close to retirement? Understanding these figures will help you produce a strategic workforce plan when analysed in context.

“Soft” planning: Is information that cannot be quantified. Things like overall strategy, prediction, and management. Often referred to as strategic workforce planning, when coupled with hard planning it can be pivotal in getting real results for boosting your company’s performance.

Why create a workforce plan?

There are a number of potential dangers along the way that strategic planning can steer you clear of. We’ve detailed the three critical risks below:

1. Skills gap: Technology, culture and markets are always changing. Many jobs that exist today are unlikely to exist in the future. Many of the skills we have are easily replaced by more efficient computer programs. As more platforms and markets emerge do you have the talent to capitalise on changes?
2. Overspending: On the other hand, you shouldn’t make the mistake of investing in more talent than you need. Overstaffing and overskilling mean overspending, and this will hurt your bottom line. Savvy planning can help you identify when to recruit, train or promote talent, and when not to.
3. Inability to grow: One of the most frustrating scenarios for a CEO is when the workforce just isn’t capable of meeting the company’s increased demand. Growing future leaders is notoriously difficult so by analysing the possibility of nurturing existing talent and the availability of the right external hires, you can work out how to scale up before it’s too late.

What are the benefits?

The potential benefits of planning are almost limitless. Here’s just three:

1. Stay one step ahead: The information generated by staff planning data should help you to anticipate changes in your market. If you start training, talent pooling and hiring early, you can get ahead of the competition in lucrative new areas. 
2. Recruit the brightest and best: Having the foresight to begin scouting for skills that are becoming increasingly important means that you can avoid rushing to recruit at the last minute – and paying the associated costs. You will also get ahead of the competition to recruit the brightest and best by recognising new skills as and when they emerge. 
3. Maximise your potential: When market forces work in your favour you want to maximise your ability to take advantage. Having on-demand talent alongside steady recruitment of new skills means your business will be able to quickly and efficiently gear up to meet increasing demand.

The 4 steps of resource planning

There are plenty of different guides, rules and principles for staff planning out there. The simplest and most informative guide we’ve found is Stanford’s four steps to workforce planning. 

The 4 steps consist of: analysing your talent, considering the future, identifying the gaps, and finding the solution. We explore these in detail below:

1. Analysing your talent

Begin by taking stock. What are you already doing well in talent acquisition, talent management and development?

It’s not as straightforward as it might seem. There are a number of things to consider to get a full picture of exactly where your company is right now in terms of talent.

• Tenure: You might have the right talent right now, but how long do they typically remain in the business? Expiring contracts and an ageing workforce nearing retirement can creep up on you if you don’t keep track. If talented people are on the way out, make sure there are people in the pipeline who can take their place. Of course, it’s important to remember that not all employee turnover is bad.
• Availability of talent: Even if you are currently happy with your staffing levels, it’s important to be aware of the potential availability of talent. If the right skills are hard to come by, recruitment can be a long process.
• Cost of hiring: What kind of costs are incurred when hiring outside talent. Beyond salary, this includes the time it takes for them to become familiar and productive in their role, and any onboarding/administrative costs. To work out your hiring costs, read our article on how to calculate cost per hire.
• Cost of training: Training current staff is usually cheaper than hiring. As such, it’s important to consider what costs training programs and promotions will cost.

Together, this information should paint a comprehensive picture of where you are right now, and what it will cost to adapt.

2. Consider the future

What changes are likely to occur in your workforce in the short and long term?

You might be upscaling and need to increase your number of employees. If diversification is on the agenda you might need to source a new skill set in your workforce. It’s also worth considering the possibility of short-term, unforeseen changes. Resignations caused by outside factors can never be ruled out. 

What’s your overall business plan? This is important to know so that all the departments of your company can move in the same direction. Clarity is your best ally in implementing a plan that’s in sync with your business plan. Your recruitment and training should adapt to meet the expected demands of your business. Remember, if you plan for failure, you could be defeated by success.

3. Identify the gaps

Analyse what you have learned from steps one and two. What’s the difference between the talent and skills you have now, and your best prediction for what you’ll need in the future? It’s unlikely that you’ll get it exactly right so if possible, quantify this difference. Use data to forecast how much workforce changes will cost and exactly how many people you need to hire or fire.

The gaps could be anything from small to very large. For example, for a successful rebrand, you may have an absence of marketing talent that requires you to make external hires. If you’re diversifying your product range; there might be a need for a whole team with new skills. Even if you’re not planning on radically changing your business model in the foreseeable future, it’s very unlikely that your market or competition will remain stationary. Factor this in as well!

4. Find the solution

Of course, there’s no prescriptive guide for this last step. Although we can’t tell you what solutions to implement, there are a few key things to remember when creating your workforce plan:

1. Lead: As we’ve already said, there are particular insights into the future of the market and your company that only you know. Trust your judgement and utilise your unique position as a workforce planner to streamline your staffing plan to ensure that everyone is moving towards a common goal.
2. Delegate: part of being a successful leader is being able to delegate. You’ll need input from HR, L&D and all Talent and Recruitment functions. Get each area to provide their own insights into your current workforce and availability of potential future hires as well as highlighting potential issues such as staff attrition and training requirements.
3. Ask for help: For something as important as effective planning, it’s sometimes valuable to have external advice. There are many consultants who will help you gather data, predict the needs for the future and implement changes. Don’t hesitate to seek them out if this is something you’re unfamiliar with, or if it’s too large a task to complete alone. An external perspective can bring new ideas to the table, especially if they have industry sector knowledge.

An example of workforce planning

Let’s see how this four-step plan works out in a small hypothetical example. Say your business has three senior members of staff in finance who share one administrator. 

1. Analyse your talent: You work out how much it costs to pay for three staff managing finance. You see that they are working hard and doing a good job. For the time being this situation is perfectly fine to get the job done.
2. Consider the future: You don’t foresee any big changes in your industry or imminent expansion for the company. However, HR informs you that two of the three finance staff are looking at retiring within five years. 
3. Identify the gaps: Your workforce plan has highlighted that you will develop a skills gap in finance within five years. You can now take steps to prevent this.
4. Find a solution: You consult with HR. You are confident that the administrator could be trained to a suitable level within a couple of years, however, no one else in the company has the required skill-set. Therefore you can begin recruiting early for a new administrator and a new finance executive, with plenty of time to interview and employ the brightest and best for your company.

In closing

‘Failure to prepare is preparing to fail’ is an overused adage but true nonetheless. It’s vital to have a plan, especially when you have a large company that needs to hire for hundreds of positions a year. Like oil tankers, large companies are at risk of becoming too large to adapt to changes quickly. A workforce plan will help to identify talent challenges on the roadmap ahead and begin to steer the company away from danger before it’s too late. 

The four steps we’ve detailed here are a good guide to effective planning, but remember that only you have the insight to formulate the right plan for your company.