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Workforce planning

Last updated 22 Mar 2021

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For most businesses, large or small, the task of identifying what work needs doing and who should do it is a continuous challenge! Workforce planning is the approach most businesses take to address this challenge.

It is rare that a business of any size operates for long without having to recruit or remove employees.

For example, consider why a business might need to recruit staff:

  • Business expansion due to
  • - Increasing sales of existing products
  • - Developing new products
  • - Entering new markets
  • Existing employees leave:
  • - To work with competitors or other local employers
  • - Due to factors such as retirement, sick leave, maternity leave
  • Business needs employees with new skills
  • Business is relocating – and not all of existing workforce want to move to new location

The world of work is also changing rapidly:

  • Increase in part-time working
  • Increased number of single-parent families
  • More women seeking work
  • Ageing population
  • Greater emphasis on flexible working hours
  • Technology allows employees to communicate more effectively whilst apart
  • People rarely stay in the same job for life

Businesses need to understand and respond to these changes if they are to recruit staff of the right standard – and keep them!

So what is workforce planning?

Workforce planning is about deciding how many and what types of workers are required

There are several steps involved in workforce planning:

  • The workforce plan establishes what vacancies exist
  • Managers produce a job description and job specification for each post
  • Job description
  • Detailed explanation of the roles and responsibilities of the post advertised
  • Most applicants will ask for this before applying for the job
  • Refers to the post available rather than the person

Job specification

  • Sets out the kind of qualifications, skills, experience and personal attributes a successful candidate should possess.
  • A vital tool in assessing the suitability of job applicants
  • Refers to the person rather than the post
  • Workforce planning
  • Flexible working

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Taking the time to plan and make decisions as part of a broader strategy improves every aspect of your business, including your workforce. Despite the size or type of company, workforce planning is a valuable HR process that ensures you have the staff to execute your business strategy.

Learn what workforce planning is, how it helps with goals and produces positive outcomes, the benefits it can offer, five key steps in workforce planning, and what it looks like in practice.

  • What is workforce planning?
  • Primary workforce planning criteria
  • The goal of workforce planning
  • How workforce planning affects HR processes
  • The benefits of workforce planning
  • The five core workforce planning steps

What is Workforce Planning?

Workforce Planning is the process of analyzing existing employees and planning for future staffing requirements through talent gap assessment, developing employee management procedures, and setting recruitment strategies.

With effective workforce planning, your business is always staffed with the necessary talent, knowledge, and experience to produce positive business results.

Workforce Planning requires developing an appropriate and cost-effective strategy for retaining, recruiting, and training your workforce while also continually assessing employee performance.

A survey by the American Productivity & Quality Center (APQC) shows 89% of 236 organizations integrated workforce planning into their business operations.

The plan for your workforce, what it will look like moving forward, and how to strategize for specific goals are unique to your business and depend on many factors. Typical components that affect workforce planning include:

  • Talent availability
  • Business growth
  • Age of the existing workforce
  • Current knowledge/skill gaps
  • And much more

Strategic Workforce Planning

Strategic Workforce Planning is a proactive approach to managing staffing needs and aligns HR processes to business-wide goals. It guides future employee plans and decisions, ensuring they adhere to the company’s long-term vision.

Strategic workforce planning tends to take place at the senior leadership level and focuses on big picture goals such as:

  • Structural organization
  • Employee redeployment
  • Succession planning
  • Staffing budgets
  • Maintaining capacity
  • Reducing risk

Operational Workforce Planning

In contrast to strategic workforce planning, operational workforce planning focuses on the business’s immediate priorities. For example, which staff level can efficiently meet the current deadlines and objectives?

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Primary Workforce Planning Criteria

Criteria to consider when planning for your company’s future workforce include:

  • Employee numbers : getting the correct workforce size so the business is not overstaffed and inefficient but not too small to hinder growth and fail to match demand.
  • Skillset : having the right mix of skills, capabilities, knowledge, and experience to perform effectively and achieve your goals.
  • Budget : finding the optimal staffing expenditure to achieve a high return on investment from employees and maximize profits.
  • Flexibility : developing your workforce to be agile and adapt quickly when changes in the market occur.

The Goal of Workforce Planning

The primary goal of workforce planning is to create a strategy for your staffing needs that ensures you can meet strategic objectives both now and in the future.

To achieve this goal, workforce planning requires an in-depth understanding of your existing workforce, employee skills, experience, load capability, and potential talent gaps.

Through performance tracking and employee assessment, you can take a birds-eye view of your entire workforce and create actionable plans for the future.

Workforce planning allows companies to understand and design their workforce effectively and efficiently with long-term objectives in mind. It prevents problems from developing and allows management to spot issues early, creating plans to remedy them. Examples could include:

  • Identifying understaffed departments and potential bottlenecks
  • Staffing requirement to scale operations
  • Excess employees for redeployment or termination

How Workforce Planning affects HR Processes

Recruitment and employee development.

Workforce planning provides the game plan for your company’s recruitment and employee development .

With a clear understanding of your existing workforce and your future goals, you can profile the skills, experience, and knowledge required to meet your needs and develop hiring and training processes to match.

Companies are constantly competing for the same high-end talent. With appropriate workforce planning in place, you can better identify future top employees for your business and develop talent acquisition strategies to attract them to your company.

Plus, workforce planning analysis can help companies formulate proper training and employee development to fill talent gaps while also finding individuals capable of excelling with the correct professional development in place.

This leads us to succession planning and ensuring you maintain successful leadership across your company.

By recognizing the leadership positions currently open or soon to be available, companies can begin assessing existing employees for promotion or targeting outside hires with the right mix of skill and experience.

Workforce planning together with succession planning creates a smooth transition for the critical roles in your company so you can provide an uninterrupted, seamless service or product for your customers.

Performance management

A significant outcome of workforce planning is managing the performance of your employees to increase productivity and efficiency.

With workforce planning, you can understand and develop strategies that get the most out of your employees to increase output and get a higher return on investment from your staffing expenditure.

The Benefits of Workforce Planning

1. preparing for the future.

With workforce planning, you have a roadmap for your staffing requirements to prepare for the future.

This could mean increasing the number of employees to match growth forecasts or pivoting to a different business model and finding the staff you need to accomplish this.

2. Discovering workforce gaps

Understanding the gaps of your current workforce informs your future personnel strategy in terms of recruitment, redeployment, and training.

Read: Skills gap and skills gap analysis

3. Effective succession planning

By identifying and developing employees with the potential for future leadership roles, you can effectively plan for staff leaving with minimal disruption.

Succession planning can also have a positive effect on employee engagement. Surveys show that:

  • 62% of employees would be “significantly more engaged” if they had a succession plan at their company.
  • 94% of employers said having succession plans in place positively impacted employee engagement .

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4. Improved Retention strategies

Effective workforce planning gives you a clear understanding of employee skills and where they can be the most successful in the business.

So rather than terminating employees, you can retain valuable staff through well-planned redeployment.

5. Flexibility

A clear workforce plan with recruitment and training structures in place can make your business more agile, with the ability to efficiently anticipate and react to change.

You can reduce your overall staffing costs by developing plans to:

  • Increase your productivity and workforce ROI
  • Retain talent and reduce costs associated with employee turnover
  • Develop a flexible workforce that can meet customer demand in different circumstances

Labor costs can account for up 70% of total business costs . Workforce planning allows you to map talent to value and ensure you are getting the best results for the costs .

The 5 Core Workforce Planning Steps

Successfully implementing new workforce planning strategies is an extensive procedure. However, businesses can break down workforce planning into five core steps to simplify the process.

1. Deciding strategic direction and goals

Workforce planning is a top-down process requiring clear organizational direction and defined strategic goals to inform and guide future decisions.

  • What direction do you see your business going in?
  • What are you hoping to achieve through workforce planning?
  • What are the primary goals/milestones you are targeting?
  • Why does your business need new workforce planning structures?

These are vital questions to ask yourself before analyzing your workforce and implementing new employee management strategies.

It is also important to remember that every process in your business affects another. Therefore, your workforce planning must be an organization-wide endeavor and include effective communication between HR and other departments.

Your new workforce plan must be produced with a collaborative approach that generates a consensus amongst all invested parties. Without organizational buy-in and a rationale for new strategies, you cannot reap the benefits of workforce planning.

Consider this step setting the “soft” workforce planning framework that will define the overall strategy to assess future information rather than the plan’s specific details.

2. Analyze existing workforce

The next step is to properly assess your existing workforce.

Common strategies used in this step include:

  • Demand Planning – Determining the number of employees needed for each role required to reach your goal. Demand planning requires accurate business forecasts to determine your workforce’s future number, structure, and composition.
  • Internal Supply – Internal supply planning needs accurate talent evaluations, an understanding of the expected employee turnover rate (retirements, resignations, etc.), and the design of training and professional development programs.
  • Gap Analysis – Identifying the gaps in your workforce and making plans to close them through recruitment, redeployment, and training.

These strategies help to answer the following questions:

  • Do you have the right-sized workforce?
  • What skills, knowledge, and experience do your current employees have?
  • Do your employees need additional training?
  • What new resources can improve workforce performance?
  • Is your workforce correctly structured? (This includes organizational design, departments, communication channels, etc.)
  • What is your current employee turnover rate?

What you have now is the starting point for future workforce plans. You can begin developing workforce planning strategies when you know what you have (step 2) and where you want to be (step 1).

A common pitfall of workforce planning is ensuring it is based on high-quality information from within the organization and external sources. Workforce planning defined by inaccurate forecasts and undeliverable future goals cannot be successful.

3. Develop your plan

This is where companies must take their overall goal, input the assessment of their existing workforce and produce a concrete plan for the future.

Businesses must plan their workforce to reflect the value and revenue it produces. A simple example of workforce planning in action could be:

A company is manufacturing two models of cars. Model A is the business’ flagship car, selling the most and bringing in the most revenue. However, model B is showing significant growth, and the income from model A is beginning to stagnate.

The car company can produce a simple revenue table based on 2023 figures and 2024’s forecasts.

The revenue per employee for model A is $250,000, and the revenue per employee for model B is $300,000.

Based on growth forecasts, you can estimate that staff working on model B will need to increase by 57 to match increased demand. This process assumes the forecasts are accurate and there are no sudden changes in sales or production. At the same time, model A will likely begin to have a surplus of staff in 2024 and need a reduction of 8 employees.

With workforce planning structures in place, you can develop plans to retrain and redeploy staff from Model A to Model B during 2023. This kind of planning minimizes disruption and reduces employee turnover.

Of course, this is just a plan based on forecasts and does not mean you should immediately move eight employees from model A to model B and hire 49 more. Instead, the business should put redeployment, hiring, and training plans in place to execute when key revenue indicators are met and take a gradual approach that matches the shift in focus of their business.

4. Implement workforce planning

Successfully implementing workforce planning requires:

  • HR personnel to clearly understand their new roles and responsibilities.
  • Strategies and processes for recording all relevant data and information.
  • Effective communication channels between all invested parties to support the plan.
  • Defined measurement and evaluation criteria to assess the plan’s success.

While the future HR plans for managing your workforce are specific to your business, they will involve some or all of the following:

  • Recruitment
  • Redeployment
  • Outsourcing
  • Deploying new technology

With many new processes to implement, workforce planning does not transform your company overnight. Instead, it is a gradual endeavor that optimizes each procedure for the given circumstances to get your business closer to your long-term goals.

5. Monitor results

It is crucial to remember workforce planning is an iterative process whereby progress is monitored and measured against specific milestones and long-term goals.

Post-implementation, your workforce planning processes may need adjusting due to unexpected factors within your business or to meet new realities of your industry.

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workforce planning a level business

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Workforce Planning

Understanding Workforce Planning

  • Workforce planning is a continual process used by organisations to align the needs and priorities of the organisation with those of its workforce.
  • It involves identifying current and future workforce requirements in terms of quantity, quality, and location of staff.
  • Helps organisations to anticipate change and to manage the human resource implications of organisational strategies.
  • Its objective is to ensure that businesses have the right staff at the right time who can effectively carry out their assigned roles.

Phases of Workforce Planning

Strategic Planning Phase

  • This phase involves assessing current staff, future needs and the external labour market situation.
  • It involves strategic management decisions about the direction of the organisation, how it will achieve its objectives, and how changes in its external environment will impact its plans.

Operational Planning Phase

  • Develops detailed action plans about how the organisation will acquire, develop and retain the workforce it needs.
  • Involves recruitment, selection, training and performance management.

Monitoring and Revision Phase

  • Changes in external or internal conditions could require a change in workforce plans.
  • Effective workforce plans are regularly reviewed, monitored, and adjusted as necessary.

Benefits of Workforce Planning

  • Ensures organisations have sufficient staff to meet their operational requirements.
  • Helps to identify the gap between the existing workforce and future needs.
  • Enables strategic resourcing, staff development and retention strategies.
  • Reduces the risks associated with having too few or too many staff.

Challenges in Workforce Planning

  • Inherent uncertainty about future organisational requirements and external labour market conditions.
  • The need to integrate with strategic and other functional plans.
  • Requires the involvement and commitment of managers across the organisation.
  • Effective workforce planning requires HRM expertise in assessing workforce metrics, identifying workforce trends, undertaking scenario planning and developing effective workforce strategies.

A Guide to Workforce Planning: Process, Strategies, & Template

workforce planning

Because talent is such a crucial asset for any business, workforce planning is one of the most important factor in organizational growth. Unfortunately, many organizations still don’t fully understand their current and future workforce needs. This can severely limit a company’s ability to reach key goals, stunting growth.

With well-executed, strategic workforce planning, companies can more accurately predict needs to better ensure resources are used in the right place at the right time.

What Is Workforce Planning?

Workforce planning, also referred to as strategic workforce planning, is a process that helps to ensure the right person is in the right position at any given time. It requires an organization to analyze, forecast and plan out its future staffing needs while factoring in whether existing employees or outside talent can fill those needs. This focus on planning typically requires talent management solutions which can help make those determinations and help fulfill its business objectives.

Why Is Workforce Planning Important?

Talent management is a persistent challenge for any organization, but workforce planning helps to minimize — and where possible, eliminate — current and future staffing issues. For example, an aging workforce can create talent shortages for certain roles due to mass retirement and a lack of appropriate skills. Considering skilled workers can give an organization a competitive edge, hiring and keeping employees who are both ambitious and skilled creates a pipeline to replace departing staff, ensuring long-term success.

Businesses today must innovate faster than ever before, and they need talented employees who can handle those demands. This forces organizations to work more efficiently, finding ways to keep costs down (including the expenses that are a product of an aging workforce) and maximize their budget without compromising quality.

Benefits of Workforce Planning

Effective workforce planning ensures that a company is not simply reacting to risks like a talent drain due to retirements or employee attrition. Most business already plan for these potential events. It is a constant strategic evaluation of how talent risk can impact an organization’s finances, product development and customer relationships.

Benefits of workforce planning include:

  • Metrics that allow leadership to identify risks before it impacts the organization’s goals.
  • Tools and reports that articulate the impact of decisions, so you can better manage future investments in your workforce.
  • A clear view of supply and demand challenges by location and expenses.
  • Identifying and rectifying issues that may limit productivity.
  • A competitive advantage.
  • Consistent reports of outcomes to assess meaningful and measurable results.

Workforce Planning and HR Analytics

Workforce planning can be considered one piece of HR analytics, which are what an organization uses to shape its people management strategy. However, strategic workforce planning focuses on the more long-term initiatives behind hiring and retaining employees. People or talent analytics, while also a data-driven approach to employee management, concentrates on evaluating relationships between talent and business outcomes.

6 Tips for Effective Workforce Planning

To effectively implement workforce planning, HR leaders need to be inquisitive and strategic and collaborate with executives from across the organization. A plan should be tied to your company’s overarching objectives and include all relevant factors that can impact your hiring and employee management.

Here are six steps you need to take to create an effective plan:

  • Establish concrete current and long-term business objectives. The more concrete and detailed you can get with your business objectives, the better. That way, you’re able to identify and measure the most relevant metrics after you launch this effort.
  • Lean into HR analytics. People analytics can offer insights into your current workforce, looking at your employees' demographics, work contracts and seniority profile. You can also see the performance and quantity of staff members on hand.
  • Identify skills gaps. Analyzing skills gaps allows you to anticipate long-term needs and the potential challenges that come with that. This can give you a head start in finding possible solutions, like training existing employees to cover the gaps, hiring more workers or shifting to a different employment model.
  • Conduct workforce scenario planning. It’s impossible to be ready for every contingency, so preparing for different scenarios is key. Model different scenarios that could potentially impact your business and determine what that might mean for your workforce.
  • Ask for outside advice. Leaders can lean into their network and seek out the advice of others who are in similar positions. They can also hire outside help, such as a consultant who specializes in strategic workforce planning. This person can work alongside you for parts or all of the project.
  • Monitor your plan. Your workforce strategy is a fluid plan, so you must monitor results in real time and make quick adjustments based on what you’re seeing as necessary.

Workforce Planning Process

The workforce planning process starts with building basic guiding principles and then following an ordered list of steps. This not only gives your team a roadmap to follow and keeps you organized, but has proven to increase the effectiveness of this initiative.

Principles of Workforce Planning

There are three general guiding principles for strategic workforce planning:

  • Align the plan with the organization’s objectives or strategy. This guideline helps you determine the direction you want your organization to head in the next five to 10 years.
  • A long-term focus. Workforce planning ensures an organization looks at both tactical and strategic decisions.
  • It focuses on an organization’s most important roles. Since a select amount of work has a disproportionate effect on an organization’s overall success or failure (think Pareto Principle), the company’s most critical roles should be its primary concern. Then, the focus can turn to overhead and management.

4 Steps in the Workforce Planning Process

Since the workforce plays a central role in an organization’s future, here are steps you can take to ensure your workforce planning strategy aligns with your broader vision for the company.

  • Supply Analysis: Look at how your current and future workforce will change due to trends such as attrition or market growth. Consider how well the existing workforce supports your current strategy, the number of employees at each level, the difficulty of filling certain positions and whether any local talent pools or recruitment partners could help provide the specific talent you need.
  • Demand Analysis: This stage helps you understand your organization’s current and future talent requirements. Consider the number of staff needed to complete key tasks and any anticipated changes in regulations or policies that would affect your business, opportunities to leverage resources and how the organization’s workload could change.
  • Gap Analysis: At this stage, you compare supply and demand to identify workforce gaps and then prioritize the most critical ones. Consider how the business can address these gaps to remain competitive, what jobs have hard-to-find skills, how retirement affects employee numbers and how to improve workplace diversity.
  • Solution Analysis: This is when you implement activities and interventions to close your workforce gaps and ensure your organization meets its goals. Consider how to develop planning capabilities, how to use data to identify action steps, what metrics best monitor risks and the biggest workforce planning needs. You’ll also need to look at different staffing options such as recruiting, training (or retraining), contingent staffing, hiring part-time or temporary employees and outsourcing (with personnel like contract workers or consultants).

Workforce Planning Example

Let’s say a company has two different product lines and is debating whether to add a third. Sales for the first product line are slowly declining, whereas the second one is taking off, with forecasts predicting continued growth.

Using data such as current revenue, expected annual growth and the number of sales and support staff, leaders can settle on a goal for revenue in the upcoming year. This is a simplified way to assess how staff should grow based on these goals and current data.

Assuming staffing costs are equal for both product lines, it’s safe to think the first product line isn’t as profitable. Therefore, there probably isn't a need to increase staff. If there are "excess" workers, then they work on the second product line, assuming their skills remain relevant there (if not, the business could consider retraining them). Leaders can also plan and retrain employees anyway, anticipating future needs for the second product line, reducing hiring costs.

Based on the numbers, leaders also predict the second product line will remain more profitable. The organization can then look at the growth percentage to estimate the number of additional staff required to support that rise. These hires can happen immediately or over time, depending on how these projections play out.

Keep in mind that this is a simple example that only takes into account a few basic factors. More information will make your plan more useful and relevant, but also more complex.

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Role of Succession Planning in Workforce Planning

Succession planning can offer insight when it comes to workforce planning. It provides reports to identify employee skills, leadership qualities, potential for growth and any gaps in key roles. Armed with data, current leaders can take steps to reduce gaps. It may also help you reduce costs if you notice that you may not have to hire new talent to replace employees in current positions.

How Human Capital Management (HCM) Systems Can Help

HCM systems can automate much of the data gathering process and increase data accuracy. These solutions can offer valuable insights, such as productivity analytics and employee progress against individual goals. This information can make the workforce planning process much more feasible and less daunting.

Choosing the Right HCM

When choosing an HCM system , finding the right fit means looking at the type of data you need to ensure a more thorough and effective planning process. While most HCM systems store basic data such as the number of employees and payroll information, businesses should look for solutions that are more robust with a goal of taking advantage of additional functionality as they grow. Look for a system that can run user-defined reports and map out multiple workforce scenarios so you're more prepared.

Ultimately, workforce planning aims to help businesses put the right people in the right jobs at that particular time. It means leaders need to understand their current workforce, plan multiple future scenarios and determine their business objectives.

While it’s a complex process that requires a lot of time and thought, workforce planning is well worth the effort. It gives your organization a competitive advantage because you’re better prepared for the future, so you’re not left scrambling when needs arise. Workforce planning helps an organization plan for the future. Managers can make data-driven decisions based on a role’s importance and individual performance, and the business can evaluate the impact of different work. Meanwhile, business leaders will benefit from workforce planning because they will be able to plan ahead.

Workforce Planning FAQs

What is the goal of workforce planning.

The goal of workforce planning is to ensure the right amount of people are in the right position at the right time. This allows an organization to work more efficiently and effectively and is especially beneficial for larger companies.

What are the steps in workforce planning?

Workforce planning involves finding gaps between future organizational needs and your current workforce. The remainder of the process is centered on finding and executing on ways to minimize these gaps.

How does workforce planning improve productivity?

Workforce planning enables businesses to respond more strategically and nimbly as leaders see needs develop, whether due to changes in their industry, organization or the working population at large. It also ensures workers have the relevant skills and knowledge needed to be a good fit for and excel in their position.

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Workforce Planning Is Essential to High-Performing Organizations

In today’s talent-based economy, the workforce itself is arguably the most important tangible asset of most organizations. Despite its importance, this asset is often not carefully planned, measured or optimized. This means that many organizations are not sufficiently aware of the current or future workforce gaps that will limit execution of business strategy. Yet at the same time, boards of directors, CEOs and chief human resources officers will frequently declare that workforce planning and data- driven decision-making is a top priority for their organizations. While it is difficult to understand this apparent gap between intent and execution, the most obvious cause is a lack of consistent objectives regarding the outputs of workforce planning, and a lack of consistent process by which organizations conduct workforce planning and predictive modeling. Organizations need an approach that moves workforce planning from the domain of “futurists,” where only a few people live, to the domain of operational effectiveness, where management is accustomed to spending its time and energy.

This article outlines what a pragmatic and operational workforce planning process should look like—as well as predictive tools that help organizations measure and respond to their workforce gaps. Using this model and tools, high-performance organizations can use workforce planning to ensure that they have the required talent to drive business objectives.

Overcoming Traditional Barriers to Workforce Planning

Workforce planning has topped the wish list of HR executives for years, but it has consistently been one of the most difficult programs to launch within HR. There are myriad reasons, but the most common are:

  • Time frame. Many managers are focused on executing current-year results, but workforce planning has typically addressed a longer time frame and doesn’t show immediate gains that can help meet this year’s results.
  • Data integrity concerns when “getting out of the gate.” Managers are reluctant to review future plans when they feel that they can’t get a proper view of current head count.
  • Control. Some managers have gut feelings and don’t want to reference data without a compelling data story. There is no opportunity to shift this stance until managers experience the actual pain that could have been avoided through workforce planning.
  • Detail. Organizations have a hard time settling on the appropriate level of granularity of workforce planning, or their job taxonomy. It’s generally understood that a workforce plan has to distinguish one type of job from the next, but is it sufficient to look at broad labor categories, narrower job families, individual jobs, or actual skillsets? So many organizations get into self-imposed delays in rolling out their planning program by trying to find the perfect level at which to plan. From a planning perspective, however, if organizations could start by planning out high-level job categories, this is a great start, and may be enough.
  • Forecasting. Traditional forecasting methods are poor at predicting the actual individuals at risk for turnover and retirement, and, thus, are not sufficiently actionable.

Two recent trends serve to moderate—and sometimes even eliminate—these potential roadblocks. The first is a broad-scale acceptance of data-driven decision-making that is infusing the culture of organizations and making workforce planning inherently more attractive. The second involves recent advances in predictive analytics and modeling technology. These advances provide more compelling near-term actionable information about granular employee-level supply risk, while simultaneously helping with demand-based scenario planning. Coupled together, these trends have a profound ability to move workforce planning from a “nice-to-have” status to a critical program for high-performance organizations. Diagram 1 outlines a workforce planning process that combines end-user-based demand planning with predictive supply analytics.

workforce planning a level business

Following the workforce planning activities outlined in the diagram results in these benefits:

  • Aligns strategic planning with head count and talent planning.
  • Creates a clear view of talent demand and supply issues by expense area, reporting relationship, and by location.
  • Provides managers easy-to-use reports and tools to determine the impact of their talent decisions and prioritizes future workforce investments.
  • Provides leaders the right metrics—identifying talent risk before it impacts business objectives.
  • Helps control unplanned talent costs and highlights issues that limit employee productivity.
  • Builds competitive advantage through planned versus reactive talent management.
  • Gives business leaders consistent reporting of results to quantify measurable and meaningful outcomes.

The concepts of planned versus reactive risk management, and developing the right metrics are perhaps the most crucial levers to drive support for workforce planning. By shifting workforce planning from a top-down strategic exercise that is only geared towards provoking thought about the future to an operational exercise designed to manage talent risk, workforce planning becomes a concrete activity with specific financial implications. By providing metrics to quantify the risk, it provides something even more concrete for leaders to manage.

Demand Planning

Within the demand planning component of workforce planning, an organization determines the head count it needs in each job role for each organizational unit. Traditionally, a single person has conducted this work or a center of expertise has created plans and reports for internal customers. However, the future is inherently uncertain.

According to Peter Cappelli in his research on workforce planning, “The error rate in the U.S. on a one-year fore- cast of demand at the stock keeping unit (SKU) code or individual product level, for example, is over 30 percent” (“A Supply Chain Approach to Workforce Planning,” Organizational Dynamics ). Considering this uncertainty, centrally-generated reports and plans are interesting, but understandably have not resulted in the business gaining long-term adoption of the plans, or the workforce planning process.

There are two keys to moving beyond this demand planning impasse. The first is cultural. Organizations should avoid confusing planning with the plan, and should value planning as much, if not more, than the actual plan. The plan will not happen. The future is far too uncertain. Planning, however, is a competency that helps managers deal with such uncertainty more quickly and effectively.

The second key is to move from top-down planning to bottom-up planning, which requires technology that al- lows end users to evaluate various factors and define talent demand for their business area. This bottom-up planning can be rolled up for various corporate-wide outputs such as the corporate workforce plan, the budget feed, the real estate plan, the reforecast, and more. But, it also can be conducted as needed as part of a frequent recalibration of talent needs based on the state of the business.

According to Quinn Thompson, global director of Talent Acquisition and Diversity at International Paper on the shift to user-defined input driving their workforce planning process: “It starts with the benefits created by a center of excellence (CoE), but is based on software that allows end users to create their own workforce plans and end-customers to leverage predictive analytics for their customized gap analyses.”

A lower-performance organization will have managers decide in a vacuum on their need for talent. In this setting, the industry experience of managers and the amount of data available to make the decision defines the quality of the output. In a high-performance organization, managers are guided through the decision-making process.

For example, a manager may be led through a decision tree based on strategic objectives and job criticality. Alternately, a manager may be provided with demand drivers and conduct what-if scenarios that help determine the appropriate number of workers for the workload based on a combination of historical staffing levels and productivity objectives.

In the ideal situation, a manager could be provided a detailed proforma demand plan that describes the staffing level for job roles based upon how the organization typically staffs against work volumes and other demand drivers. Then the manager can be led through decision- making to ask questions such as:

  • Do we typically staff against demand correctly? Specifically, do we hire too soon, too late, too much, too little—because knowing how the business is likely to behave in its staffing approach does not mean it’s the correct approach. It’s just a great starting point of the decision-making—and not the end, as there may be a need to not only know, but also optimize staffing levels.
  • When we examine our business strategies and look at the specific ways we want to create value, does that describe certain roles that should be staffed up?
  • Conversely, when we look at those strategies, are there certain staff areas that are relatively low risk for understaffing. Because it is not possible to staff everything generously, where can we “understaff” with minimal risk to the business?

In summary, a technology-enabled bottom-up approach to demand planning creates a more accurate plan and enables a planning culture where managers use data to make staffing decisions – and are more equipped to evaluate how changes to business objectives and environment should impact staffing levels.

Internal Supply Analysis

Within the internal supply analysis component of workforce planning, an organization evaluates whether it has the supply internally to meet its demand. On a quantitative basis, the process is to evaluate talent supply by job role after attrition: turnover, retirement and internal job movement. On a qualitative basis, it is important to also look at capability and performance, even within jobs that are fully staffed.

To derive a supply forecast, a lower performance organization will simply carry forward historical turnover rates or use industry benchmarks. This approach is not sufficiently actionable—at best it is only interesting data to consider as part of workforce planning; at worst, it is incorrect.

A high-performance organization will use predictive analytics to identify the risk of turnover, retirement, and workforce mobility of specific individuals. Machine learning statistics packages allow an organization to conduct complex multivariate analysis that incorporates employee demographics, employer actions and workplace conditions, and external economic conditions. Diagram 2 illustrates some of the factors that can be used for predicting turnover, retirement and mobility, as well as the rough importance of such factors in predictive studies.

workforce planning a level business

Diagram 2. Drivers of Attrition.

An accurate internal supply forecast can thus be aggregated by any dimension and provide a much clearer line of sight into supply risks that need to be closed to fully meet talent demand requirements. Knowing which individuals are at highest risk for turnover provides an organization the lead-time to address future workforce gaps with minimal disruption to the business, enabling the following outcomes:

  • Creation of targeted replacement planning and knowledge transfer for critical roles.
  • Understanding which talent gaps are largest, highest priority and/or most difficult to fill externally.
  • Proactive sourcing by the recruiting function based on prioritization of gaps.
  • Road map of future open positions that can be fi through promotions and developmental assignments.
  • Managed attrition programs that avoid costly work- force reductions for job roles that have a reduced staffing requirement.

As with demand planning, technology is a key enabler for internal supply analysis, since it provides a forecast of attrition and movement risk on an employee-by-employee basis. Furthermore, this approach helps organizations that are not currently proficient at demand planning to move towards proficiency by highlighting problems that require consideration of the importance of that problem, i.e., the demand. For example, if a certain employee is known as highly likely to turnover, a manager can ask what’s the risk to my work unit of this likely turnover event? Will we still get the required work completed? If the answer is no, is it because of the necessity of the role or the performance of the individual? If the answer is yes, is it because we are overstaffed in this role? Can we eliminate the role with the likely turnover event and hire for a more critical need? In short, reviewing turnover, retirement, and movement risks helps this hypothetical manager conduct demand planning on a micro level, and with the right tools and training, the manager will improve talent decision-making.

Gap Analysis and Action Planning

Within the gap analysis and action-planning component of workforce planning, an organization evaluates its gaps and determines what actions it can take to close those gaps. Traditionally, those actions consisted of recruiting, development and transition, but with modern predictive technology, an organization can also model the prospective impact of potential interventions in HR policies and talent management actions.

A lower performance organization may not understand its gaps, except in the most qualitative sense. This organization can have qualitative action-planning discussions that educate leaders about some workforce risks, but cannot quantify those risks or change any organizational behaviors based on these gaps.

A proficient organization can combine its demand planning and internal supply analysis as described above and gain a much clearer picture of the size, type, and timing of gaps between demand and supply. These gaps will lead to a high-quality directional recruitment plan and will highlight areas where an organization may wish to beef up its developmental programs where there are large and consistent gaps. This gap analysis will also highlight where there are job roles that are subject to career transition in one part of the business (demand less than supply) and requiring recruitment in another part of the business (demand greater than supply), so that an organization can reallocate resources and avoid some of the costly cycles of staffing up and down. Each of these responses to the demand-supply gap represents valuable organizational action-planning to address gaps, but do not go as far as making specific interventions to change and control the demand-supply gaps.

A high-performance organization will build upon the specific quantitative plan for build-buy-lease as discussed for a proficient organization and will also use technology to conduct what-if analysis to evaluate specific management interventions. The organization will understand how a number of factors drive retention, engagement and organizational performance, including:

  • Pay strategy and annual merit increase.
  • Career ladders and working structures.
  • Promotions, lateral transfers and reorgs.

By understanding these relationships, a high-performance organization can seek to close gaps not only through the traditional means of build-buy-lease, but also achieve higher retention and performance by optimizing its workforce policies around those desired outcomes.

This organization will not only be creating the appropriate plans to address gaps between its forecasted demand and supply, but will be selectively addressing potential retention and performance risks of critical resources and roles, and will manage those risks through individual action planning measures.

There is now an approach for high-performance organizations to develop and sustain high-quality workforce planning programs, and break down the traditional barriers to effective workforce planning. The organization must foster a data-driven planning culture and be willing to value the planning process as much as the actual plan. The managers who participate in this planning process will then be better equipped to make decisions as business results and forecasts change—and more skilled at simulating how changes in business objectives and conditions require different talent sets. The organization must also invest in workforce planning technology that supports predictive supply analytics, bottom-up demand planning, employee- level action-planning, and summarization of gaps.

By taking this approach, a high performance organization will be able to conduct gap analysis on the work unit, business unit, and on the organization as a whole. At the work unit level, managers will be better at planning and responding to changes in the business. Managers will also be able to make data-driven decisions that move gradually from blanket HR policies to targeted HR interventions based on the importance of a role or the performance of the individual. Business units and the total organization will also reap the benefits of the workforce planning pro- gram. Finance and real estate will have the information needed to construct their budgets. Human Resources will be able to make better high-level decisions about recruitment, development, redeployment, and transition pro- grams. And, senior leadership will be able to monitor the people health of the organization and the organizational capacity to meet present and future business objectives.

About the Author

Peter Louch is the founder and CEO of Vemo, a software and services organization that is pioneering the new way to do workforce planning. As founder of Vemo, he works with customer executive teams and ensures that Vemo’s road map for technology and services are geared to provide simple and elegant solutions to the most complex and highest-impact customer problems. Louch also works with select global customers and industry leaders to provide consulting/advisory services and build requirements for complex engagements. Prior to Vemo, he led the Talent value Management practice area of Right Management Consultants and The Empower Group, divisions of Manpower. He has also held successive sales and leadership positions with the Advertising & Communications division of TMP Worldwide. He graduated with high honors from University of California at Berkeley with a degree in astrophysics. He can be reached at peter.louch@vemoworkforce.com .

Copyright 2014 International Association of Human Resource Management. Used with permission.

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How Workforce Planning Contributes to Business Success

January 27, 2020

by John Kearney

workforce planning a level business

Disruptive change is taking place across practically every industry today, and technology is driving it.

As customer needs have evolved, organizations have been provided with little choice but to implement new technologies that enable them to meet these growing expectations.

More than half of all startup enterprises have developed a digital business strategy , followed by just over one third of established organizations. And while there is an almost never ending list of technologies that can bring value to modern businesses, some of the most widely adopted solutions today include big data analytics, mobile tech, cloud computing, and the Internet of Things (IoT).

It is clear that today’s businesses need to stay on top of the latest technologies and keep adapting their processes in response to changing customer behaviors if they are to remain competitive. However, implementation of new tech is also creating a new problem. That is, businesses are changing, but their people are not. There’s a disconnect between business and employee, and workforce planning can help.

What is workforce planning?

While technologies like big data and IoT focus on the business side of change, workforce planning focuses on the often overlooked people side of change. Simply put, workforce planning is a people strategy that creates a business-driven workforce.

workforce planning definition

Is workforce planning a new way of thinking?

Despite all the recent talk of workforce planning and the growing trend workplace efficiency, the concept is far from new. The idea of workforce planning was actually first discussed a number of decades ago, but popularity began to decline during the 1980s, primarily due to the challenges in forecasting. Workforce planning relies on the anticipation of future business needs, and this hasn’t always been easy.

Workforce planning is back on everyone’s lips, and the reason is the big data capabilities of modern businesses which make forecasting easier than ever before. Businesses now have both the tools and the data they need to predict their future requirements, yet adoption of workforce planning is slow.

“Overall progress in workforce planning and the capability of supporting functions is slow, with most organizations focusing on the requirements for shorter-term horizons” according to a report by PwC. It is understood that only one third of today’s businesses use any form of advanced workforce planning or predictive analysis , despite these methodologies contributing towards overall business success.

6 stages of creating a workforce planning strategy

Now, let’s explore the six stages of creating a top-notch workforce planning strategy in more detail.

1. Understanding the organization

First, it’s important to understand that there is no ‘one size fits all when it comes to workforce planning. A workforce planning strategy is developed in line with a business’ own needs and future requirements, so these strategies are typically unique to each individual organization.

Understanding what the organization needs are and how the business defines success is, therefore, a key prerequisite to creating an effective strategy.

2. Workforce analysis

Analysis of the existing workforce, and of existing ways of working, forms an integral part of any good workforce planning strategy. It tells an organization where it is now, and creates a starting point for getting to where it needs to be.

However, it is clear that analytics progress has been slow. Few businesses are going above and beyond basic operational levels of analysis such as HR tools and metrics. In fact, only 11% admit to analyzing at a planned level and just 1% at strategic level.

analytics progress

3. Predict future needs

The overall aim of workforce planning is ensure a business has a team onboard that helps them to meet their goals, so when developing a strategy the future workforce needs of the business need to be taken into account.

Unfortunately, this is where many organizations fail, with around 60% admitting that they do not look further than three years into the future. Additionally, 72% lack confidence in their ability to predict future workforce needs.

4. Identify gaps

Organizations may have the workforce they need to continue operating using their existing processes, but when developing a workforce planning strategy it’s essential to consider where skills gaps may appear as the business changes and adapts. It’s about understanding what the business has, and what it’s likely to need to meet predicted requirements. 

5. Generate strategy

Once an organization has determined business needs, conducted analysis of the existing workforce, predicted future workforce needs, and identified potential skills gaps, a workforce planning strategy can be designed and implemented.

The strategy should draw upon real data and data analysis to assign, redeploy, and utilize workers in a way that optimizes employee performance , as well as helps HR teams to recruit strategically. It is also important to offer support for line managers during periods of change and consider if upskilling and reskilling employees is a viable option to be included in the strategy.

6. Assess action

Developing a good workforce planning strategy doesn’t end with implementation of the plan. It’s important to review the strategy in action to ensure it is having the desired effect. Businesses should be clear on what key performance indicators they will use to measure the success of the strategy.

There are a number of valuable KPIs for this purpose, including measuring the percentage of strategically critical roles without a successor, the number of open strategic positions, and presence of underperformers. 

Benefits of workforce planning

While creating an effective workforce planning strategy can require some effort, research suggests that having a strong plan in place is worth the initial work. It is estimated that businesses who deploy these strategies are around 66% more likely than their counterparts to successfully boost the performance of their human resources without increasing headcount, offering greater productivity without the cost.

Reduce labor costs

Labor costs across the United States have been on the rise, with a 2.9% year-over-year rise in 2018 marking the biggest increase in a decade. They have fast become one of the biggest challenges facing growing organizations today, but workforce planning could prove to be an effective solution. Deloitte presents a case study of a large financial services company who, after using a workforce planning strategy to redeploy extra staff, noted an average $6 million saving for every 100 employees who had been reassigned under the scheme.

Respond to changing customer needs

At a time when customer needs, preferences, and expectations are changing and evolving at a rapid rate, a workforce planning strategy can help businesses to better respond to these needs through comprehensive scheduling analysis.

A strategy can help to deploy staff effectively in line with predicted demand (assigning more staff to busier periods, for example), resulting in improved customer care, higher levels of satisfaction, and boosted brand loyalty; three factors which have become urgent priorities for businesses as they strive to stand out from the crowd amidst a competitive landscape.

Identify strategies for people-focused development

Perhaps one of the biggest benefits of implementing a workforce planning strategy is that it not only highlights what a business is doing right, but also demonstrates what it could be doing for a bigger effect on profits and revenue.

Workforce planning makes it easier for organizations to design progression pathways based on individual workers’ own unique skill sets, rather than simply what they’re expected to achieve within the confines of any given role. By placing less priority on traditional workplace roles, and giving more focus to people development, firms can derive more value from their employees.

Target inefficiencies

Almost all businesses will have in-house processes and standard ways of working which, while familiar, may not facilitate optimal performance amongst employees. These are inefficiencies, and one of the biggest inefficiencies affecting businesses today is taking a reactive approach to situations.

Deloitte research reports that reactive approaches to skills gaps within the workforce can result in a 3 to 5% rise in labor and labor-related costs . Workforce planning is based on the concept of accurate labor forecasting , and helps businesses to understand how they can fully utilize their data to predict and be proactive.

Improve employee retention

Employee retention is becoming a growing concern across the United States, with the average employee typically spending less time in a role than ever before. The forms a financial obstacle for organizations, with the cost of hiring falling at somewhere between 1.5 and 3 times the annual salary. But businesses could successfully reduce the need to fill vacancies and extend the lifespan of their workforce through proper workforce planning and workforce management .

By focusing on people, by drawing upon the unique skill sets of the individual, and by re-assigning workers to suitable environments, it is possible to significantly boost job satisfaction.

Enhance employee experience

Of course, employees are more likely to remain in a position if they have a positive employee experience, and this is yet another area where workforce planning can be used. More than half of all HR leaders believe that the key to employee engagement is a shared mission between the employee and the business, which is what a workforce planning strategy sets out to achieve.

By using data analysis and prediction to utilize employees in the most valuable way, businesses are working to align organizational goals with personal goals and, ultimately, are helping employees feel more connected to the company.

The future of workforce planning

Although reports suggest that adoption of workforce planning has been slow, we can reasonably expect the concept to take off over the next few years as a new generation of employees enters the workforce. It’s estimated that managers from the younger generations are up to three times more likely to prioritize workforce planning than older managers, and with the younger generation expected to make up more than half of the workforce by 2028, marking a nearly 40% increase from today’s figures, it seems safe to say that we can expect to hear much more about the benefits of workforce planning in the future.

Additionally, in the United States, there has been a sharp rise over the past five years in the number of HR professionals promoting their analytics skills , suggesting that collaboration between HR and IT/core business is already underway. Workforce planning is the next big trend for modern businesses, and really can contribute to business success. 

Now that you understand workforce planning in and out, find the best  workforce management software for your company's needs. 

Find the best Workforce Management Software on the market. Explore Now, Free →

John has a passion for technology and proven track record of building strong, solutions-focused sales teams. Currently the General Manager of our APAC business at Deputy , he owns the responsibility of managing and growing their current community of 180,000 workplaces that use Deputy platform.

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Tackling Talent Strategically: Winning with Workforce Planning

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COMMENTS

  1. Workforce planning

    Level: AS, A-Level Board: AQA, Edexcel, OCR, IB Last updated 22 Mar 2021 Share : For most businesses, large or small, the task of identifying what work needs doing and who should do it is a continuous challenge! Workforce planning is the approach most businesses take to address this challenge.

  2. Workforce Planning: Definition & Best Practices

    Workforce planning is the process of leveraging data to ensure that a business's workforce supports business needs, goals and strategic plans. By utilizing workforce planning, businesses can set ...

  3. Workforce Planning: Model, Process, Steps [Guide 2023]

    Workforce Planning is the process of analyzing existing employees and planning for future staffing requirements through talent gap assessment, developing employee management procedures, and setting recruitment strategies.

  4. Workforce Planning

    Workforce Planning - A Level Business CAIE Revision - Study Rocket Unlimited past paper questions on every topic ← Back to Library View topics (160) Limitations of Published Accounts Analysis of Published Accounts Variances: Adverse, Favourable The Role of Management in Facilitating Communication Business Objectives in Private and Public Sectors

  5. What is workforce planning, and why is it important?

    1. Reduce labor costs in favor of workforce deployment and flexibility Labor is often the highest cost for businesses outside of manufacturing. Some estimates put labor costs at 60% and even 70% of expenses. With these costs, planning to reduce costs while increasing flexibility is critical to continued success.

  6. Strategic workforce planning: Guide for people professionals

    Workforce planning This guide introduces you to workforce planning and provides you with an overview of how to do it. It examines the key stages involved in workforce planning and offers a practical structure for determining your strategy, with illustrative examples to guide practice.

  7. A Guide to Workforce Planning: Process, Strategies, & Template

    Human Resources A Guide to Workforce Planning: Process, Strategies, & Template Marc Holliday | Sr. Product Marketing Manager February 21, 2021 Because talent is such a crucial asset for any business, workforce planning is one of the most important factor in organizational growth.

  8. Strategic Workforce Planning 101: Framework & Process

    Strategic workforce planning (SWP) is a continual process of identifying gaps in the workforce and developing a methodical people plan to ensure an organization has the employees, skills, and knowledge needed to meet current and future business goals.

  9. Workforce planning

    Workforce planning is a core business process which aligns changing organisation needs with people strategy. It can be the most effective activity an organisation can engage in. It doesn't need to be complicated and can be adjusted to suit the size and maturity of any organisation.

  10. Workforce Planning: How to Do It on an Organizational Level

    Key stakeholders overseeing workforce planning on an organization level usually include the head of talent management and business leaders in top management. In contrast, workforce planning within individual BUs usually involves the HR business partners (HRBPs) and business leaders of the specific business segment.

  11. Practicing the Discipline of Workforce Planning

    Whether handled separately or as part of the business plan, workforce planning involves working through four issues: ... Find a high-level executive to champion the plan.

  12. Workforce Planning Is Essential to High-Performing Organizations

    October 3, 2014 | Peter Louch, Vemo Reuse Permissions  In today's talent-based economy, the workforce itself is arguably the most important tangible asset of most organizations. Despite its...

  13. Workforce Planning: Definition, Process and Principles

    Workforce planning, also known as strategic workplace planning, is the process of analyzing, forecasting and planning workforce supply and demand. It involves reviewing current staff, examining current and future personnel needs and identifying gaps between supply and demand. By identifying gaps, organizations may plan effectively to ensure ...

  14. How Workforce Planning Contributes to Business Success

    A workforce planning strategy is developed in line with a business' own needs and future requirements, so these strategies are typically unique to each individual organization. Understanding what the organization needs are and how the business defines success is, therefore, a key prerequisite to creating an effective strategy. 2.

  15. Workforce Planning: A Complete Practical Guide 2024

    Data is an essential input into effective workforce planning and, without access to that data, your workforce planning efforts will be futile. Harvard Business Review reports that "An inability to connect operational, people, and financial data to business outcomes impairs agility, according to 49% of leaders responding to a 2022 global ...

  16. The Levels of Workforce Planning: From Tactical Execution to Strategic

    Level 1: Talent Acquisition Planning. At the foundational level of workforce planning, talent acquisition planning focuses on immediate and short-term talent needs. This level involves tasks such as job analysis, recruitment strategies, candidate selection, and onboarding. While attention to detail and effective execution are necessary, talent ...

  17. How to Build a Workforce Planning Strategy that Delivers Business Value

    Workforce planning is a business activity. It is not an HR activity. In leading companies, workforce planning delivers millions of dollars to the enterprise through predicting where skills and workforce costs will be in the future and how to plan for them in the right locations, while managing existing costs. In research conducted in 2020 ...

  18. Strategic Workforce Planning

    Strategic workforce planning begins with business strategy. The first step in building an effective workforce plan is understanding the organization's business strategy and goals. HR leaders should partner with business leaders to understand strategic objectives and build a business case for the investment in a strategic workforce plan.

  19. 14 Essential Steps In Workforce Planning

    1. Ensure Alignment And Goal Clarity The most critical step in strategic workforce planning is alignment — alignment of business strategy, organization structure, people and results.

  20. A Step-by-Step Guide to Workforce Planning

    Step 2: Identify needs. Now that you know what your business objectives are, you can identify needs or gaps. For example, if you're looking to develop a new piece of software to launch within the ...

  21. PDF Workforce planning

    Workforce planning will also help a business: decide how many employees are and will be needed; manage employment expenditure by anticipating changes; ensure that suficient and appropriate training and development is provided; cope with peaks and troughs in supply and demand for diferent skills; deliver an improved service to customers;

  22. Tackling Talent Strategically: Winning with Workforce Planning

    Most companies still approach workforce planning as an annual exercise in which personnel spending is managed as a cost without considering the skills or talent needed to meet business objectives.

  23. How Strategic Workforce Planning Can Help Scale Your Business

    Strategic workforce planning is when businesses ensure that they have the right people to staff the right positions at opportune times for business growth. Business's needs are always changing, and forecasting what roles you will need filled months in advance can help you avoid bottlenecks.