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Its workforce is a business’s most valuable asset. As listed in an article published in Forbes, there are several reasons for this. Not only are employees the face of the company and the most important brand ambassadors, but the cost of employee turnover is so high that it’s in every company’s best interest to put an effort into retaining talented workers. At the end of the day, it’s the employees who make a business successful.
However, as well as being the greatest asset, a company’s workforce is simultaneously its biggest liability. Not having the right people or failing to manage their workforce properly can quickly lead to a business’s demise. Unfortunately, the latter is the case in many organizations, leaving them unprepared for future workforce changes.
In a piece about the importance of workforce planning published by the SHRM, Peter Louch writes that “organizations are not sufficiently aware of the current or future workforce gaps that will limit execution of business strategy”, stating that it’s necessary to move workforce planning “to the domain of operational effectiveness”.
In order to maximize the potential of their workforce and align their hiring and employee training practices with the overall business goals, companies need a clear strategy. The key to get there is strategic workforce planning.
This guide will cover everything you need to know in order to make strategic workforce planning a reality in your organization, including:
Definition of strategic workforce planning
Importance of a strategic approach to workforce planning
Benefits of strategic workforce planning
Key principles of strategic workforce planning
Steps in strategic workforce planning
Workforce planning is all about analyzing a company's current and future staffing requirements and developing a strategy to make sure these requirements are met by assessing existing and potential talent gaps.
Strategic workforce planning takes this process one step further by aligning workforce planning and company strategy to make sure recruitment plans and processes match the business’s long-term vision.
Therefore, strategic workforce planning is also to be seen as a long-term strategic approach to workforce management and planning - in contrast to operational workforce planning which is centered around the business’s acute staffing needs.
The purpose of strategic workforce planning is to avoid being surprised by sudden shifts in the company’s workforce that can cause disruption in its operations and growth projections.
This is done by developing a workforce plan that takes into account the current talent and skills distribution in the business and outlines the necessary actions to make sure staffing needs are also met in the future. The latter is accomplished by comparing current talent and skills availability to potential future scenarios.
There are numerous reasons why having a strong strategy in place to meet current and future hiring needs is crucial. Basically, businesses that don’t have the right people with the right skills working in the right positions when they need it will find it almost impossible to thrive and keep up with the competition. But there are more aspects to consider.
First of all, even companies with a strong, talented workforce need to recognize that this workforce is aging, leaving behind talent and skill gaps as they retire. Second, in this day and age where employee attrition has become a major problem, businesses need a strong talent management strategy to ensure their staffing requirements are met.
Third, in a highly competitive business environment, reducing costs is crucial. This also includes workforce costs, which can be lowered by making staff changes to allow for more efficiency and productivity.
There are many benefits that are associated with strategic workforce planning. The most important ones are listed below.
In times of economic uncertainty, it’s more important than ever for businesses to plan for all eventualities. Businesses which have a roadmap in place are better prepared and won’t be surprised by sudden changes affecting their workforce. What’s more, they set themselves up for success by adapting their staffing plans to match their growth targets.
Both current and future workforce gaps can have a major negative impact on business growth. Without the right talent to support the intended growth, targets can’t be hit. Strategic workforce planning allows businesses to discover potential workforce gaps both in the present and future and plan accordingly.
Strategic workforce planning is not just about analyzing your current workforce and identifying any existing gaps, but it also involves employee training to prepare them to take over future leadership roles. Companies that don’t prepare for the day their current leadership team leaves to retire will face major disruptions. The key to avoid that is to have a detailed succession plan in place.
“Overhiring” is a common problem in organizations across all industries. Businesses that don’t have a workforce planning framework in place tend to overreact when they are surprised by sudden changes and often hire too many new members of staff to compensate for the experienced talent shortage. With a strategic workforce plan, impulsive hiring decisions can be avoided and recruitment costs reduced.
Since strategic workforce planning is all about aligning your strategic business goals with your recruitment strategy while simultaneously aiming for reasonable spendings, the process inevitably brings key stakeholders from different departments in the company to the table. This means that HR, Finance and the C-level are required to collaborate, which creates opportunities to discover interdepartmental dependencies and find solutions that are beneficial to the company as a whole - rather than to just one single department.
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Strategic workforce management is based on several key principles. Depending on whose approach you follow, it’s possible to identify up to seven criteria for effective workforce planning. Workforce Group CEO Foluso Aribisala differentiates between what he calls the “7 Rs of strategic workforce planning”. Namely:
Right people: commitment, values, ethics etc.
Right skills: skills to execute the company’s strategy
Right shape: workforce structure and manager-employee ratio
Right size: headcount needed to execute set business strategy
Right time: HR changes are made when they are needed most
Right place: availability of talent in geographic area where location-dependent business activities are carried out
Right cost: striking balance between budget, competitiveness and fairness of employee compensation
In most cases, however, the aspects to consider when developing a strategic workforce planning model are reduced to four main criteria, which are:
Correct number of staff members
Right mix of knowledge, experience and skills
Workforce budget set to allow for high ROI and maximum profitability
Agility and flexibility to respond to sudden market changes
Other leading principles in strategic workforce planning include the alignment of the workforce plan with the overall company strategy, the use of scenario planning to forecast future staffing needs and the use of data insights gained from workforce analytics.
So, now we know the key principles of strategic workforce planning. But how can they be used to create an actual workforce plan? Here are the different workforce planning steps businesses should follow.
The first step towards strategic workforce planning is analyzing where the business currently stands in terms of talent availability and skill sets held by current employees. This involves a qualitative as well as a quantitative analysis which should answer questions such as:
What talent is currently available in the workforce?
Is the current workforce large enough to respond to the business’s demands?
What is the level of skills and experience of current employees?
Performance tracking and employee assessment are good ways to gain insights into the quality of the work provided by your current workforce. However, when analyzing the state of their current workforce, businesses also need reliable quantitative data. One useful set of data which can be leveraged for strategic workforce planning is a company's payroll data. For instance, overtime and sick leave patterns are good indicators for which departments are understaffed and should be prioritized when setting the next hiring budget.
Following the initial analysis of the status quo, businesses need to set clear goals they want to achieve and develop a strong corporate strategy that outlines how to get there. This step is crucial to make sure your strategic workforce planning framework supports your business strategy since it’s impossible to hire the right people at the right time without having a roadmap that tells you where you are headed.
Think of workforce planning as a top-down process. The overall strategy needs to be defined first before it can be executed on a lower level. Possible questions businesses will have to answer during this step of the workforce planning process include:
What is the general direction the business is moving in?
What are the main goals the company wants to achieve?
How can strategic workforce planning help hit these targets?
What is the expected outcome of improving the workforce planning process?
Together with the initial analysis of your current workforce, having a clear long-term vision of which direction the business is going in provides a solid basis to start working out a strategic workforce plan. The next step is to leverage scenario planning to create different future scenarios to see how company needs are expected to change in the future. Possible scenarios should account for different attrition drivers such as employee demographics and external economic conditions.
By comparing existing internal supply as well as current and future demand, businesses can identify potential workforce gaps they need to prepare for. Questions that should be raised during this step include:
Is additional training needed?
Is it necessary to hire more staff?
Can employees be redeployed to move to different positions that will be crucial in the future?
How many employees are expected to leave the company and how can they be replaced?
Next, organizations need to work out a plan on how to address the workforce gaps they identified in the previous step. This action plan needs to be tailored to the business’s individual needs, but will usually involve a combination of different strategies for closing workforce gaps, including recruiting new members of staff, succession planning, redeploying current staff or providing additional training to prepare existing employees to move to a higher position. Talent retention as well as restructuring possibilities and the use of enhanced technologies are further factors to be considered.
Making a plan and implementing it are two very different things, which is why the implementation phase should be considered as a separate step in the workforce planning process. Implementing the workforce plan means making sure that roles and responsibilities are clearly defined, communication between the different departments is enabled, KPIs are defined to measure the plan’s success, and that the HR team has the necessary resources.
However, strategic workforce planning doesn’t end with the implementation of the workforce plan, but should rather be considered as an ongoing process that needs to be monitored. Therefore, the workforce plan should be checked regularly to ensure it is still in line with the corporate strategy. If the latter changes, the workforce plan needs to be adapted as well.
Strategic workforce planning is all about enabling smooth business growth and operations by ensuring a company’s staffing requirements are met at all times and in the most cost-effective way. Nethertheless, businesses will find that the workforce plan they have drawn up so carefully after carrying out all the necessary preliminary analyses is bound to fail if they can’t find the talent their business needs.
Many industries are currently facing severe talent shortages, making it hard for companies to fill open positions. Expanding the geographical reach of a company’s recruitment strategy can solve the problem of local talent shortages and create a more diverse workplace environment in which employees can thrive.
Lano’s global employment solution allows you to recruit the best talent anywhere in the world. Quickly hire and onboard remote employees in over 150 countries with our network of trusted Employer of Record partners, and don’t let talent shortages stop you from putting your strategic workforce plan into action. Book a demo with our expert team to find out more about how Lano can help you hit your growth targets with global talent.
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