what is workforce planning and why is it important?

If your company, like many across the globe, is concerned about securing the talent it needs to successfully navigate a post-pandemic market, you’re not alone. According to a recent survey of nearly 1,500 global executives, talent-related challenges remain the number one concern for the upcoming decade.

This comes as no surprise, considering the ongoing labor shortage is plaguing industries around the world. In fact, in the United States, 11 million job vacancies remained unfilled in October 2021, while the UK reported nearly 1.2 million job vacancies in August to October

The labor shortage is not the only challenge facing employers. First, the growing skills gap spurred by the demand for digital skills due to the advancement of automation and technology in the workplace has been concerning employers well before the pandemic. Secondly, the effects of the pandemic have significantly shifted workers’ expectations.

While no one could have predicted the onset of the pandemic or the disruptions it would cause to workplaces around the globe, it did highlight the importance of having a workforce planning process in place. Due to these factors, many employers now understand the need to better plan for their current and future talent needs. Yet, they still lack a full vision of what this looks like.

If this sounds all too familiar, one of the best ways your company can use to position itself for future success is to develop a strong workforce planning process. We have created this article to help you better understand exactly what workforce planning entails and how it can add value to your company. Additionally, we have provided a list of actionable steps your organization can take today to create a viable workforce planning model.

what is workforce planning?

Workforce planning is the ongoing process of assessing your current and future talent needs in an effort to identify competency gaps as well as develop, implement and monitor a structured workforce management plan that meets the company’s human capital needs for today and the future.

There’s a good chance that your company is already conducting some type of workforce planning, even if it solely focuses on the current talent needs of the company. To build and maintain a skilled workforce for today and the future, however, your company must develop a structured workforce planning model that involves your HR team, managers and executives.

"Only 40-50% of all employers have a long-term plan in place"

- SHRM

operational vs strategic workforce planning

Effective workforce planning involves both operational workforce planning and strategic workforce planning (SWP). While these two types of workforce planning models are very different, they are both still crucial to the overall talent planning process. Before you start planning, it’s important to understand these differences.

operational workforce planning

Operational workforce planning involves meeting the current talent needs of the company. It’s a short-term planning process that closely looks at the day-to-day operations of the company, such as scheduling and filling current vacancies. This type of planning typically is handled by the HR department and hiring or operations managers.

Nearly all employers have some type of operational workforce planning process in place, as it’s a necessary step in the talent acquisition process. Unfortunately, some employers solely rely on an informal, less structured operational workforce planning process that does little to drive results. If, however, your company wants to improve hiring results, you must create a well-developed process for meeting your current hiring and workforce management needs.

strategic workforce planning

Strategic workforce planning, on the other hand, deals with meeting the company’s long-term talent needs. It involves predicting the future labor and skills needs of the company and developing a plan to acquire the skills and talent it needs in the next, 2, 3, 5 or 10 years. For strategic workforce planning to be effective, it must involve collaboration between HR, the financial department, managers, executives and other key players.

Even though strategic workforce planning can be linked to future business success, estimates reveal that only 40-50% of all employers have a long-term plan in place. If your company doesn’t have a strategic workforce plan in place or if it’s been a while since this plan was assessed, now is the time. And according to another research conducted by HCI, 38% say their organization lacks the appropriate investment in time, people, and money to support strategic workforce planning efforts (SWP).

how workforce planning adds value to your organization

It’s crucial to understand the value of workforce planning and the benefits it provides for your company. It’s only through this understanding that you can secure a buy-in from your executive team, which is paramount for success. There are several ways in which workforce planning can add real value to your organization, including:

prepare for the future: The most obvious benefit of strategic workforce planning is that it can help prepare your company for the future. While no employer can predict every future workforce challenge, having a structured plan in place can help the company mitigate the effects of any obstacle.

close the skills gap: According to a recent study, 60% of HR professionals state that their top priority is building critical skills and competencies in their workplaces. You can take a variety of steps, including selective hiring, upskilling and retraining, to secure skills for the company. If, however, these steps are not done in alignment with a structured workforce planning strategy, they could prove futile. Instead, a well-developed workforce planning strategy can help you start to close the skills gap for today and for years to come.

develop an effective succession planning strategy: Every employer should have a succession plan in place for all key members of the company. Aligning this plan with your overall workforce planning strategy will not only create a smooth transition process, but it will also ensure that your company is moving forward and adjusting, as necessary, with each transition.

improve operational efficiencies: Business operations are at the optimal output when equipment, supplies, logistics and talent are in sync. If one of these areas is underperforming, operational efficiencies are affected. For example, during the pandemic, the combination of quarantines and illnesses reduced the workforce, which decreased production rates. Additionally, even companies who were able to maintain enough workers to keep production rates up often struggled with supply chain disruptions that hindered their ability to move the product to the consumer.

spur business growth: The reality is that managing a business without a workforce planning strategy in place will hinder company growth at some point. The skills gap is expected to only widen over time, while technology will certainly continue to advance. Without taking steps now to prepare for the future, your company may not be able to acquire the talent and skills needed to move forward.  

realize cost savings: There are several ways having a strategic workforce plan in place can help your company save money. First, the right plan enables your company to maximize the use of its current workforce. Secondly, through strategic training and development programs, your company can secure some of the emerging skills it needs from within, which can significantly improve retention rates. Thirdly, you can reduce hiring costs by improving your recruitment efforts based on the projected needs of your company.

5 steps of workforce planning    

Workforce planning is a structured process that should involve all key players, including HR, finance, line leaders and supervisors and executives. This high level of collaboration can improve overall results and ensure that these results align with company goals. Below is a look at the five steps every effective workforce planning model should follow.

1.  align workforce planning with business objectives

The first step of the workforce planning process is to set your company’s overall goals and objectives. It’s important for the entire planning team to meet and discuss the short and long-term goals of the company and to set the direction for the plan. Consider factors, such as where does the company want to grow in the upcoming years, what new products are being launched and what is the company’s overall vision for the future.

Without the right alignment, you will have a difficult time developing a workforce planning strategy that drives the results your company requires to secure the skills and competencies needed for the future.

2.  conduct a workforce analysis

The next step is to conduct a comprehensive workforce analysis. This process requires your team to assess the current skills and competencies within the workplace as well as predict the future needs of the company. You can determine current skills by evaluating job descriptions, meeting with workers and managers, and by evaluating the various tasks within your workplace. Tracking emerging industry trends and standards as well as conducting competitor research can help your company get a better understanding of the future needs of the company.

Once this analysis is complete, it’s important to compare your current talent attributes, such as skills, size of the workforce and workplace structure, with the projected future needs of the company. This comparison will enable your team to identify potential gaps between your current talent attributes and the company’s future needs.

For example, your workforce analysis may reveal that your company significantly lacks the tech skills required for the future. On the other hand, it may also show that due to increased automation, your overall workforce may be reduced by 10% over the next five years.

3.  develop an action plan

Once you have completed a comprehensive workforce analysis and identified any looming skills gaps or anticipated shifts in the workforce, your team can begin to devise an action plan. This plan should address as many of the needs revealed in the workforce analysis as possible. For example, your workforce planning strategy could include:

• upskilling or retraining
• career development
• success planning
• recruitment
• outsourcing
• company restructuring

This is just a sampling of some of the strategies that may need to be included in your company’s action plan. It’s important, however, to realize that each organization must develop a customized action plan that addresses the unique needs of the company.

4.  implement an action plan

Implementing your action plan is likely to be the most difficult step of the workforce planning process. It requires  a strong commitment from your operational managers  as they are the ones often tasked with implementing the plan.  On the other hand, a buy-in from the executive team is necessary to secure the resources, such as the technology needed to develop an effective plan.

Communication is another key element of implementing the plan. For example, depending on the outcome of your workforce analysis you might need to communicate to employees about career transitions and your recruiters should know exactly what type of candidates the company wants.  

5.  monitor, assess and adjust

Workforce planning is not a one-time process, but rather an ongoing practice that must be monitored, assessed and adjusted as needed. Milestones and set measurements should have been developed during the first step of the process. You can now use various metrics to measure the success of your workforce planning strategy or to adjust the current plan to better meet the company’s talent needs.

Periodically, your team will also need to revisit each of these steps to ensure your workforce planning strategy is up-to-date and able to meet any emerging talent demands, including new skill sets.