Practicing The Discipline of Workforce Planning

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Practicing the Discipline of

Workforce Planning

Overview
Workforce planning is the process an organization uses to analyze its workforce and
determine the steps it must take to prepare for future staffing needs.

Any business plan deals with resource requirements, and, just as financial requirements
need to be addressed, the business plan needs to ensure that the appropriate
workforce mix is available to accomplish plan goals and objectives. In workforce
planning, an organization conducts a systematic assessment of workforce content and
composition issues and determines what actions must be taken to respond to future
needs. The actions to be taken may depend on external factors (e.g., skill availability)
as well as internal factors (e.g., age of the workforce). These factors may determine
whether future skill needs will be met by recruiting, by training or by outsourcing the
work.

Whether handled separately or as part of the business plan, workforce planning


involves working through four issues:

▪ The composition and content of the workforce that will be required to strategically
position the organization to deal with its possible futures and business objectives.
▪ The gaps that exist between the future "model" organization(s) and the existing
organization, including any special skills required by possible futures.
▪ The recruiting and training plans for permanent and contingent staff that must be
put in place to deal with those gaps.
▪ The determination of the outside sources that will be able to meet the skill needs
for functions or processes that are to be outsourced.

While many see workforce planning as purely a staffing tool for anticipating employment
needs, it can also be a critical tool for staff training and development and succession
planning. To be successful, organizations should conduct a regular and thorough
workforce planning assessment so that staffing needs can be measured, training and
development goals can be established, and contingent workforce options can be used
to create an optimally staffed and trained workforce able to respond to the needs of the
business.
Roles of HR and Senior Management in
Workforce Planning
Often, a workforce plan is completed simultaneously with organizational strategic
planning and is updated with the same frequency as the strategic plan. While the HR
department is typically responsible for the bulk of workforce planning initiatives, other
members of senior management may be involved in the workforce planning process,
including the CEO, COO, CFO and other leaders responsible for organizational
strategy. To ensure the effectiveness of a workforce plan, leaders should evaluate the
ability of the plan to anticipate and respond to future needs so that the organization can
make and execute sound business decisions. Performance indicators will include
standard organizational performance measures: profitability, ROI, productivity and so
on. An effective performance management system can have a positive impact on the
performance indicators of the organization. Benchmarks may also be established by
relying on industry data.

Tips for Effective Workforce Planning


For the workforce planning process to be successful, human resource professionals
responsible for leading workforce planning initiatives should make sure to:

• Designate a specific member of the HR team to manage the process.


• Find a high-level executive to champion the plan.
• Involve key stakeholders in the workforce planning process.
• Align the plan with the company's strategic business plan.
• Coordinate the workforce plan with succession planning and career development
initiatives.
• Make workforce planning an ongoing activity, with continuous evaluation of
changes in the internal and external environment that may affect the
organization's staffing needs.

Steps in the Workforce Planning Process


Several distinct analytical steps need to be taken in workforce planning:

1. The supply analysis, also referred to as the "supply model" or "staffing


assessment," involves an analysis of an organization's current labor supply.
2. The demand analysis, also referred to as the "demand model," includes a review
of future business plans and objectives.
3. The gap analysis compares the differences in the supply and demand models
and identifies skill surpluses and deficiencies.
4. The solution analysis focuses on how to address gaps in current staffing and
future staffing needs through recruiting, training and development, contingent
staffing, and outsourcing.

STEP 1: SUPPLY ANALYSIS


The purpose of the supply model is to analyze the organization as it currently exists—in
other words, the supply of labor and skill sets that are vital to an organization. This
analysis should encompass not only the number of employees and their skills, but also
factors such as workforce demographics and representation of protected classes.
Demographics may be especially important in workforce planning if the organization has
large numbers of workers nearing retirement age, or if it has large numbers of young
workforce entrants with turnover rates exceeding those of older, seasoned employees.
Representation of protected classes will have significance for federal or state
government contractors, which must comply with applicable affirmative action plan
requirements, as well as for organizations that have a voluntary affirmative action plans
and that wish to improve representation of underused protected classes. See How does
the use of trend analysis fit into the overall workplace planning process?

A supply analysis also involves making projections of attrition (due to resignations,


retirements, internal transfers, promotions and involuntary terminations) over the
planning horizon being used, so that attrition is taken into account in considering the
future supply of labor and skill. From this information, the workforce planner can
develop a profile of current staff as it would exist in the future if no action is taken in
recruiting, training or outsourcing.

STEP 2: DEMAND ANALYSIS


The purpose of the demand model is to forecast the organization's future workforce
composition. This forecast should take into consideration a broad range of business
issues, including new product lines, competitive forces and expansion/constriction in
global marketplaces, anticipated workforce availability within geographic boundaries,
and myriad other issues.
Internal and external factors need to be considered in the demand analysis. Analyses of
internal demand influences may focus on the following questions, among others:

• Will the current workforce, with minimal retraining, have the skill sets necessary
to perform new duties with a new product line?
• Will current employees remain loyal to the organization if it has anticipated
changes in mind?

Analyses of external demand influences may consider these questions:


• Is labor readily available that possesses the skills and abilities needed by the
evolving organization?
• What external pressures will change demand for goods and services that may
ultimately affect internal business decisions and, thus, workforce planning
needs?

The future composition of the workforce must also be analyzed. This analysis will seek
answers to the following questions:

• How many employees will be necessary to achieve business plan goals and
objectives?
• What skills and competencies will be required for the new business?
• What is the composition of the available workforce population?
• What will the organization need to do to attract prospective employees?
• What will the organization need to do to attract and retain a diverse group of
workers?

STEP 3: GAP ANALYSIS


The next step in the process seeks to compare the supply model with the demand
model to identify gaps between the composition of the current workforce and future
workforce needs. The workforce planning professional may want to categorize a variety
of future scenarios and then select the future that is most likely to occur, with
contingency planning for alternative futures. When conducting this analysis, the planner
should identify the additional number of employees needed who have the requisite skill
sets, as well as the employees who will no longer be needed due to limited skill sets.

STEP 4: SOLUTION ANALYSIS


Solution analysis involves the development of strategies to close the gaps identified in
the previous step. Approaches for meeting future workplace demands may include
recruiting, training and retraining, using contingent staff, or outsourcing. The
approaches selected will be dependent on whether the organization will need to
expand, contract, restructure or rely on contingent staff to meet new workplace
demands.

Recruiting. When external staff is required to meet a workforce expansion due to


demands of new product lines, expanded production or service offerings, or new
geographic areas to be served, external recruitment may be the logical strategy to
address gaps. Recruiting may also be required as turnover occurs, whether due to
employees leaving to find other employment opportunities or to retirement, which may
be the case for organizations with large numbers of employees nearing retirement age.
Employers can choose among a wide variety of tactics for executing their recruiting
strategy. These tactics vary depending on market conditions, the type of targeted
candidates, diversity-related issues and other factors. Cost and time are major issues in
recruitment. Even if the recruitment process is efficient, it typically costs more and takes
longer to find, hire and train a new person than to "recycle" a current employee through
internal recruitment. So, in many instances, external recruitment should be the
workforce planning strategy of last resort. See Recruiting Internally and Externally.
Training and retraining. Instead of filling the skills gaps through external recruiting,
human resource professionals may choose the less costly solution of employee
development, particularly for key high-value positions. Employee development builds on
current intellectual capital, retains the corporate culture, and motivates and stimulates
the workforce. As skill sets become obsolete due to new technology, new services,
additional product lines or other competitive forces, the organization should focus on
updating skills and capabilities of their employees as a critical workforce planning
strategy. Training, retraining and development may include many methodologies, such
as classroom training, on-the-job training, e-learning, webinars and job aids. These
activities may concentrate on specific job duties and tasks or on leadership and
managerial skills for new leaders.
Contingent staffing. When the current number of employees or their skills sets are
insufficient to accomplish the work, given the anticipated business future, contingent
staffing may be used to fill that gap. This approach makes sense when the demand
model indicates that the numbers of employees will vary significantly and cannot be
leveled out through resource allocation strategies. Contingent staffing is often best used
when the future is likely to be fluid or highly dynamic; in these circumstances, it may be
a better alternative than hiring full-time employees who may not be needed on an
ongoing basis. Contingent staffing options include temporary employees, part-time
employees, contract workers and consultants. Discussion of each of these types
follows.

Temporary workers

Temporary workers may be found internally or externally, depending on the needs of


the organization. Although temporary staff is often hired to perform traditional clerical
duties, the desire for additional flexibility, as well as early retirement, has resulted in
higher-level experienced individuals seeking temporary assignments to meet their
personal goals. Today's temporary workers can be hired to work in virtually every level
of an organization, including CEOs, controllers, accountants, consultants, IT, marketing
and HR.
To maximize the benefits of using temporary workers, human resource professionals
should consider whether to use an agency or internal resources, determine selection
criteria, ensure successful onboarding, set expectations and effectively manage
performance. Organizations will also want to ensure that policies or procedures are
established for issues such as screening and selecting temporary agencies, temporary-
to-regular employee classification, discipline, work behaviors and legal compliance
activities.

Part-time employees

Part-time employees are those who typically work less than a full-time schedule. Many
of these employees work a partial day every workday; some work part-week, and some
may work part-month. Some may even job-share with another part-time employee. Part-
time work can be used to attract diverse workers, including students, parents of young
children, older workers and others who need or want to work but do not wish to work a
full-time schedule. Most organizations require part-time employees to follow all policies
and procedures that their full-time employees must follow. Fewer or different benefits
may be offered to part-time employees than to full-time employees.

Contract workers and consultants


Sometimes an organization may need workers who have specialized knowledge or
expertise to help meet new business requirements. Independent contractors and
consultants may be used to meet these special requirements. Employers should take
care in properly identifying contract workers and consultants, as misclassification of
these workers can result in violations of the Fair Labor Standards Act or Internal
Revenue Service regulations. Classifying a worker as an independent contractor should
always be an informed and bona fide business decision, not a subterfuge to avoid the
employer's legal obligations to employees. Independent contractor arrangements have
drawn increasing scrutiny and significance with the proliferation of workplace laws
covering "employees" and the growth of the contingent workforce. Misclassification of
an individual as an independent contractor can give rise to a variety of
liabilities. See Employing Independent Contractors and Other Gig Workers.

Outsourcing

Organizations may determine that certain noncore business functions would be better
accomplished by outsourcing them to an organization that specializes in those
functional areas. Jobs that are prime targets for outsourcing are those that require a skill
that is critical, in short supply and needed only periodically. If such needs can be
handled through contingent staff—for example, by using retirees—the organization will,
of course, be ahead. However, many high-demand, low-supply, leading-edge skill
needs may be met only through outsourcing to specialized contractors.

To ensure that outsourced functions are properly managed, HR should consider:


• Selecting the right firm.
• Establishing guidelines for a partnering relationship.
• Communication methodologies and protocols.
• Metrics for measuring and ensuring business results.

Companies and providers should work to structure an outsourcing contract that can
adapt to the client's changing needs. See Outsourcing the HR Function.

Succession Planning as a Workforce Planning


Tool
Another aspect of effective workforce planning is succession planning. Succession
planning is used by organizations to identify and prepare suitable employees to fill key
positions when current employees leave their jobs. An effective workforce planning
process will include a review of key leadership and business-critical roles and will
identify key incumbents able to progress into these roles. Having a succession plan in
place generally ensures a smooth continuation of business when key players leave due
to retirement, resignations or transfers within the company.

The types of positions included in a succession plan vary by organization. Traditionally,


these plans included only executive-level positions. In recent years, however,
companies have been selecting successors for positions throughout the organization.
During times of economic upheaval, when the economic security of organizations and
their staffs may be uncertain, the need for up-to-date succession plans increases. With
a wavering economic outlook, downsizing, mergers and acquisitions become more
likely. With these events leading to potential increases in turnover, implementing a
succession plan is a key strategy an organization can use to reduce turnover costs and
ensure smooth transitions. In addition, a succession plan can help foster employee
commitment because it demonstrates to employees that the organization supports their
development and internal growth.

Organizations use a variety of models for succession planning, which may range from
self-identification or nomination to highly sophisticated software tools that maintain
information about individual employees' development plans, training and education
completed, classes taken, performance evaluations, and recommendations for future
development. See Engaging in Succession Planning.

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