Workforce planning is a process that aims to forecast future employee needs for an organization that contributes to planning for appropriate recruitment, selection, training, deployment, and utilization of employees so that all operations function smoothly. Effective workforce planning is based on five simple key principles of having the right number of people with the right skills at the right cost, in the right place at the right time.
Workforce planning is a core business process and one of the most strategic activities that an organization can engage in. It can differ in complexity based on the size and maturity of an organization but helps firms to focus on challenges and issues that are facing the market and industry in order to prepare and support long-term business objectives. At its foundation, workforce planning is essentially a process of balancing labor supply and skills against the demand in the current, near, and potentially distant future.
Modern workforce planning is less about rigid forecasting, but more about contextual and flexible target ranges as organizations seek to be proactive and adaptable. The process can bring various benefits, such as identifying barriers or unrealistic targets in achieving strategic changes and providing solutions to mitigate risks. It can also impact the workforce by improving retention, productivity, quality outputs, and work-life balance. It can identify strategies for focused talent development and deliver strategic value through such employees. Finally, it can reduce labor costs to favor workforce deployment and flexibility. Workforce planning informs multiple HR practices such as succession planning, talent management, retention planning, job design, organizational design, reward and recognition incentives, and work-life balance initiatives.
There are various HR tools useful for executing effective workforce planning. One of the most common is the strategic workforce planning map, which utilizes a top-down approach to understanding the objectives of the organization and then identifying supporting objectives to achieve them. The workforce planning activities such as recruitment, performance management, and development are built around the general organizational strategy and allow for closer interaction between functions.
Another popular tool is the 9-box grid, which is a visual tool used for succession planning and talent management. Employees are mapped within one of nine boxes which assess employees on past performance and future potential. The diagnostic tool can help to calibrate criteria and expectations driven by planned employee development for the future of the organization, identifying potential top performers and leaders.
HR may also consider some hard data factors such as compensation and benefit analysis. This tool functions by setting an internal pay benchmark, and it groups employees based on being overpaid and underpaid. Performance data is then retrieved and compared to determine how overperforming and underperforming people are paid. Ideally, those performing well should receive more to remain with the organization, while those performing poorly should be paid less, and the firm may benefit from them leaving.
This approach also uses job market information and labor market statistics to evaluate the organization’s position and forecast future workforce needs in terms of salary. Finally, scenario planning is a commonly used tool as well, where HR develops various potential futures for the business, both predictable and those that are highly unanticipated. A strategy is then developed for highly impactful events, including from a workforce perspective and identifying driving forces of change.