Workforce planning ensures you have the right people in place that meet your budgetary and skills needs. Learn the key phases of workforce planning and my recommended best practices.
Workforce Planning: Definition, Key Phases & Best Practices
This article is part of a larger series on How to Do Payroll.
Key Takeaways:
- Workforce planning identifies gaps in skills and talent and improves your hiring processes.
- Part of workforce planning is evaluating your current employees.
- Upskilling your employees gives the biggest boost to productivity in your company and can reduce your recruitment costs.
What Is Workforce Planning?
Workforce planning involves analyzing and forecasting the need for talent in anticipation of future business demands. It is a strategic process that aligns human resources needs with overall business goals to help you identify skills gaps and talent shortages before they become a critical issue.
Rather than viewing workforce planning as a one-off task, you should see it as an ongoing process that evolves alongside recruiting and employee training. Part of your planning should be evaluating current employee skills and finding areas where upskilling will enhance their knowledge and performance.
Types of Workforce Planning
There are two types of workforce planning: strategic and operational. Each can help you build a strong workforce that helps to meet your future needs.
Strategic Workforce Planning
This approach is not just reacting to market trends but anticipating shifts and preparing your workforce accordingly through tailored training programs and succession planning that nurtures internal talent.
To perform strategic workforce planning, start with a broad assessment of current capabilities. This involves not just an inventory of skills and roles but also understanding how your company is evolving. Using data and predictive analytics can highlight gaps between existing talent and anticipated requirements, helping identify which competencies need development.
This proactive approach not only keeps your talent aligned with company goals but also empowers them to be integral players in your company’s objectives rather than just spectators.
Regularly checking workforce trends can help with your strategic planning.
Operational Workforce Planning
This approach incorporates data, such as performance metrics, turnover rates, and industry benchmarks, to target training programs to fill skills gaps or reallocate talent to high-demand areas. Using advanced analytics can also provide insights that will help you determine areas within your company that are missing essential personnel.
This ensures your operational workforce has the training required to keep your business running on a day-to-day basis.
Benefits of Workforce Planning
Knowing what makes your employees want to work hard and stay at your company is important to future workforce planning. According to a 2024 Workforce report, the top reasons employees stay with a company are as follows:
- Money and Perks
- Flexible Hours
- Job Security
- Nice Colleagues
- Great Manager
- Learning and Development Opportunities
Workforce planning helps your business by setting the direction for your recruitment needs both now and in the future. Additional benefits include the following:
- Preparing your business for future challenges: Evaluating your current workforce can help you anticipate future needs and avoid talent gaps.
- Reducing costs: Planning for your workforce’s future can reduce hiring costs because you will be prepared for the type of talent you need.
- Identifying gaps in talent: Instead of waiting until your team is too far behind to realize new talent is needed, workforce planning evaluates these gaps on a regular basis.
- Improving hiring processes: When you have a clear picture of what talent is needed in your company, your hiring processes will run more smoothly.
- Aligning company goals: Knowing in advance the skills and talent you need can help illuminate your company goals.
- Improving productivity: When your employees have the skills they need to perform their jobs and your company is fully staffed, productivity will increase.
- Increasing employee retention: Good workforce planning reduces the likelihood of burnout among employees since work is evenly distributed.
Key Phases of Workforce Planning
Six key phases of workforce planning (Source: FSB)
1. Strategic Direction
Strategic direction involves aligning workforce strategies with broader business objectives to ensure every hiring decision aligns with your company’s vision. It isn’t just filling roles but creating an overall talent ecosystem using data to assess current capabilities and predict future skill requirements.
In this phase of workforce planning, you will discuss emerging trends with key stakeholders, discuss your budget, evaluate your current staffing level, and make calculated decisions based on your specific company needs. I recommend you include diversity in your discussions. Prioritizing diversity is not just an ethical initiative but also a competitive advantage in creating your workforce.
2. Current Workforce Analysis
Once you know the future direction of your workforce, you should focus on your current workforce. This includes evaluating skills needs and providing professional development. It’s about understanding what drives productivity and engagement and aligning your employees’ passions with your organizational needs. This fosters a culture of growth.
Conducting employee assessments can reveal strengths within your team while also highlighting areas that need improvement.
3. Demand Analysis
This phase of workforce planning identifies talent shortages. It requires analyzing your current workforce to determine where gaps exist and where additional employees are needed. It’s about forecasting your company’s future employee needs.
To forecast your future workforce needs, start by analyzing your current workforce, skill sets, and performance metrics against your projected business growth. Tools, such as predictive analytics, can help identify patterns in hiring trends and turnover rates, allowing you to anticipate potential shortages or surpluses.
This approach not only enriches your understanding of existing personnel but also informs targeted recruitment strategies that align with long-term company goals.
For more information on how to hire employees, check out our guide.
4. Talent Gap Analysis
Talent gap analysis goes beyond simply identifying shortages in skills. It reveals deeper insights into your company’s readiness to adapt and innovate. By mapping current competencies against future needs, you can uncover talent potential within your current workforce, allowing you to nurture existing talent while also pinpointing areas where external recruitment may be necessary.
I recommend conducting a skills gap analysis to determine talent deficiencies within your company.
5. Solution Development and Implementation
Once you have identified skills gaps and areas where you need an increased employee base, it is time to develop the solutions needed to enhance your business goals. This is where you will determine which employees need further skills development and which departments in your company need additional employees.
Then, it is time to implement these changes. Set up professional development opportunities for the employees that need additional training and begin the recruitment process for the departments that need additional workforce.
6. Progress Monitoring
After you implement your changes, you aren’t finished. Continuous monitoring of your workforce is crucial for continued planning. This means you need to regularly evaluate the effectiveness of your current workforce.
To identify areas where adjustments may be needed, analyze the following:
- Employee headcount
- Retention rates
- Time-to-hire
- Skills gaps
- Future business needs
Part of progress monitoring is understanding how to manage your workforce. Workforce management software can help you streamline the day-to-day management of your employees, simplify shifts and scheduling, and help control labor costs.
Best Practices for Workforce Planning
When planning your workforce, you must consider hiring needs, performance, budget, and skills development. Below are some other best practices for successful workforce planning.
1. Plan for a Distributed Team
If your small business hires all over the world, your workforce planning should include ways to enhance your distributed team. These include the following:
- Prioritizing communication channels
- Establishing expectations during onboarding
- Using collaborative tools, like Slack or Monday.com, to manage projects
- Creating a culture of transparency
- Looking for excellent time management skills in candidates
- Holding regular virtual meetings
2. Respond to the Needs of Your Business
As your business grows, your need for additional employees will increase. If you have properly planned for expansion needs, you will be prepared and have the budget required to hire additional employees.
Additionally, I recommend offering effective training to upskill your existing employees. If they are properly trained, they may be ready to move into senior positions. This is excellent for small businesses because current employees already understand the company’s culture and dynamics.
3. Create Effective Schedules
Workforce planning will help you create better schedules for your business. But a good schedule doesn’t just inform your staff of their work hours; it helps reduce labor costs, increase customer satisfaction, and generate more sales.
Part of creating effective schedules is using forecasting, a strategic data and analytics tool that allows you to examine past trends to anticipate future demand or workload. This ensures the right number of employees are available at the necessary times to meet anticipated needs.
Check out our top scheduling tools that can assist with forecasting.
4. Upskill Your Current Employees
According to Mercer’s 2024 Global Talent Trends report, 51% of respondents agree that employee upskilling would give the biggest boost to productivity in your company. However, you can’t just jump right in. This is something that you must plan for. Have your managers review employees for areas where they could use additional skills training, especially areas where they could be cross-trained.
Upskilling and cross-training ensure that you always have a talented employee available to fill in gaps. If an employee is on vacation or extended leave, another employee could fill in during their absence. This would allow the work to continue to flow without the need to hire additional talent.
Workforce Planning Frequently Asked Questions (FAQs)
A workforce planner analyzes labor needs and aligns them with company goals. This role demands a strong understanding of current staffing needs and the ability to forecast future requirements based on market trends, skills development, and technological advances. Workforce planners identify potential talent gaps before they occur, ensuring their strategies are proactive rather than reactive.
Workforce planning is designed to ensure you have skilled workers to cover every business need, preferably before the need arises. When you plan, you ensure you don’t have too many or not enough people to handle your business’s needs.
Workforce planning helps small companies build seamless teams and retain good employees. It’s about hiring the right people with the skills needed for their roles at the time your business needs them. Without planning, your small business may not have the right number of employees to complete orders, which could lead to customer dissatisfaction and, ultimately, reduced revenue.
- Right size: Balances the number of employees with your budget and skills needs.
- Right shape: Organizes your workforce hierarchy for efficient decision-making.
- Right skills: Ensures your workers have the skills necessary to be successful in their roles.
- Right site: Puts your employees in roles that maximize their potential.
- Right spend: Aligns your budget with the need for qualified employees.
