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Workforce Planning and Why It’s Important

Workforce planning is the strategy of having the right people in the right place, at the right time, making the most of your workforce. Take a look at why its so important, and how you can achieve it!

Here at Celayix, we’ve spoken a lot about workforce management, and what steps you can take as a leader to get the most out of your people. Of course, workforce planning is a major part of this. The last 18 months have taught us how vital planning is in general, but particularly when it comes to your companies most important asset – employees.

What is Workforce Planning?

Simply put, workforce planning is a strategy. It is the strategy that businesses deploy in order to get the right people, with the right skill set, in the right place at the right time. It includes analyzing the current workforce, determining future workforce needs, and identifying the gap between the present and the future. Workforce planning also involves implementing solutions so that an organization can accomplish its mission, goals, and strategic plan, through its workforce. It takes a lot of planning to ensure that the right people are on board to align with and achieve those goals!

While some businesses do not see workforce planning as an essential strategy, we can assure you that it is. Consider the effort that goes into launching a new product or service. Now, imagine putting no thought into all of the people who will be connected to that launch – R&D, logistics, supply chain, operations, sales & marketing. Without workforce planning, that launch would not be very successful. Another reason to put time and effort into workforce management is when we consider that for most companies, people are the single largest expense. According to a study from EY, they account for 70% of operating expenses! Can you imagine spending 70% of your budget without any planning?

What are the benefits of Workforce Planning?

workforce planning

As mentioned above, effective workforce planning enables organizations to achieve their goals. Aside from that, there are many other potential benefits to creating and optimizing workforce planning processes;

  • Reduce labor costs
  • Identify and respond to customer needs as they change over time
  • Pinpoint inefficiencies in processes
  • Determine strategies for focussed people development
  • Improve employee retention

Let’s look at each of these benefits, and break down how they would apply to your organization.

Reduce labor costs

As mentioned above, labor costs are generally the single largest expense of any company. Workforce planning allows you to identify these costs, and opportunities to reduce them. Reducing labor costs doesn’t mean cutting salaries, low-balling employees, or reducing benefits. With workforce planning, the right people are in the right places, meaning they are being more productive, engaged, and competent. In turn, you will experience lower turnover, reduced absenteeism, and in turn, reduced labor costs.

Identify and respond to customer needs as they change

As you can imagine, workforce planning involves an element of prediction. In order to achieve accurate predictions, leadership, or HR (whoever is in charge of workforce planning) needs to work closely with other departments. This open communication is the key to identifying consumer trends. Through workforce planning, organizations can spot these trends, and get people in place to react to them proactively.

Pinpoint inefficiencies in processes

Most organizations, develop processes and leave them untouched unless a problem arises. The problem with this is that companies become complacent, and fail to spot inefficiencies. Workforce planning identifies these inefficiencies and aims to put the right people in place to fill gaps. It leads management to ask questions about what they should be doing, or what they should stop doing. More often than not, when we review processes, we discover inefficiencies.

Determine strategies for focussed people development

workforce planning - people development

The basic premise of workforce planning is recognizing that businesses change. With changes in business, people also need to change and adapt their skillset. Identifying talent gaps and developing plans to fill those gaps is a core premise of workforce planning. Through workforce planning, you can identify opportunities to develop the skills of your people to fill talent gaps. This might involve training, education funding, or graduate programs. This prevents having to hire externally, and utilizing your current workforce to its fullest potential.

Improve employee retention

If you’ve read any of our blog posts related to employee turnover, you’ll know how costly it is. Aside from the financial impact, high turnover leads to loss of company knowledge. Effective workforce planning prevents this from happening by creating career paths and providing opportunities for growth. Employee retention is not just about retaining for the sake of retaining. Workforce planning identifies the employees that have potential, and those that are not serving the needs of the company.

There are other benefits of efficient workforce planning. It can improve productivity levels, the quality of output, and also improve work-life balance for employees. Workforce planning will look different for every company, depending on their industry, the size of the workforce, and the resources available to them. Now, let’s take a look at how to develop workforce planning processes and strategies.

Developing Your Strategy

According to the CIPD (Chartered Institute of Personnel & Development) – workforce planning can be broken down into two aspects:

Hard workforce planning

This is all about numbers. The main goal of hard workforce planning is to predict/identify how many people with what skill set are likely to be needed down the line to achieve your goals. Using numerical and statistical data highlights cause and effect of patterns and trends. Although it might be easy to spot these trends, understanding them in context is what will truly make the difference.

workforce planning

Soft workforce planning

Strategy is everything. Firstly, a framework should be developed that will help you assess the information you’ve attained from hard workforce planning. Identifying the information is one thing, but being agile and responsive to it is critical to success. Developing these frameworks and strategies will help managers make better decisions, rather than being forced into action from them.

Successful Workforce Planning

With this in mind, let’s look at 4 key elements that will make your workforce planning a success.

Identify & understand company goals

The first, and likely most important step to getting started in workforce planning is identifying, and understanding the goals of the company. While these goals don’t have to be directly linked to the workforce, there will more than likely be a connection anyway. Imagine your company wants to expand into Europe, for example. A big part of that goal is having the workforce in place to research, market, and represent the company in the new market.

The key here is recognizing that your workforce directly impacts your goals and missions. Without the right people with the right skills, nothing would be achieved to the standard you are aiming for. Until leaders recognize this and invest the time and effort into workforce planning, they will struggle to meet goals. Not only do leaders have to recognize this, but the workforce should too. Make company goals clear to your employees, and ensure they understand them. Without that understanding, it can be hard for an employee to buy into the goal and dedicate themselves.

Analyze present gaps in the organization

Carry out a full business analysis to help identify and understand any gaps you may have. Although workforce planning is about your employees, you should be looking for gaps in all business areas. Whether it’s a process, equipment, resources, or training, your employees cannot be at their best without the tools they need to get the job done. This comes back to classic workforce management.

Getting a full picture of everything as it stands will give you a clear idea of what needs to be achieved, and how to achieve it. Managers are often hesitant to do this as it identifies weaknesses they may not have previously spotted. Admitting that there are gaps, and room for improvement is key to being a good leader.

Project for the future

As mentioned above, a big part of workforce planning is being able to identify and proactively respond to future trends. Speaking with company leadership, involving department heads, and carrying out research is critical for workforce planning.

Managers that can spot these trends are able to identify where growth will happen, or where resources need to cut. With this insight, they will be able to adapt the workforce to meet their needs. They will also be able to determine what skills the company will need down the line, not just now. That way, they can work to train the current workforce to have those skills or take the time to find the right people, and put them in the right place.

Conduct a future gap analysis

Okay, so you’ve analyzed how things are now, and you’ve identified what is likely to happen in the future. The final aspect of workforce planning that you need to nail down is spotting where gaps might occur in the future. Combining the 2 steps above will give you an idea of what your workforce will need down the line. Preparing as early as possible for this will mitigate the risk of being caught off guard.

Although no one could have predicted a global pandemic, there were companies out there who had considered the idea that working remotely needed to be a possibility. Those are the companies that were actively investing in workforce planning. You don’t have to be a fortune teller to be adaptable, prepared, and proactive. Flexibility is a major component of workforce planning, due to the nature of how businesses change. Having a plan is great, but being able to tweak that plan to suit both internal and external changes is what sets you apart as a leader.

Workforce planning isn’t easy, which might be why some leaders stay away from it. Shying away from the future won’t prevent it from happening. As a business owner, CEO, or manager, the best thing you can do is invest time and effort into workforce planning.

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