Workforce Planning: A Practical Guide for Businesses

Workforce planning helps an organisation make informed decisions about the people and skills it needs to achieve its business objectives.

A business may have enough employees today but still experience a shortage of skills when it expands, introduces new technology, opens another location or loses key employees.

Workforce planning helps management look beyond current headcount and consider future workforce requirements.

What Is Workforce Planning?

Workforce planning is the process of assessing an organisation’s current workforce and determining what people, skills and capabilities may be required in the future.

It connects workforce decisions with business plans.

For example, if a company plans to open a new branch, management needs to consider:

• How many employees will be required;
• Which positions will be needed;
• What skills are required;
• When employees need to be appointed;
• Whether existing employees can fill some positions; and
• What additional recruitment or development may be necessary.

Why Is Workforce Planning Important?

Effective workforce planning can help businesses:

• Anticipate staffing requirements;
• Identify skills gaps;
• Prepare for growth;
• Manage labour costs;
• Reduce unexpected vacancies;
• Support succession planning;
• Improve recruitment planning; and
• Align people decisions with business objectives.

It can be particularly valuable for organisations experiencing rapid growth or significant operational changes.

Workforce Planning vs Headcount Planning

These concepts are related but not identical.

Headcount planning focuses primarily on the number of employees required.

Workforce planning considers both the number of employees and the capabilities the organisation needs.

For example, a company may determine that it needs ten additional employees.

Workforce planning asks a further question:

What skills must those ten employees have?

Workforce Planning and Business Strategy

Workforce planning should begin with the business strategy.

Management may have plans to:

• Increase production;
• Enter a new market;
• Introduce technology;
• Expand geographically;
• Reduce operating costs;
• Launch new services; or
• Restructure operations.

Each of these decisions can affect workforce requirements.

Current Workforce Analysis

The first step is understanding the workforce the organisation currently has.

HR can analyse:

• Headcount;
• Departments;
• Roles;
• Skills;
• Qualifications;
• Experience;
• Employee tenure;
• Labour costs; and
• Workforce movement.

This provides a baseline for future planning.

Understanding Workforce Capacity

Headcount alone does not explain workforce capacity.

Two organisations may each have 100 employees but have very different capabilities.

HR should consider:

• Skills;
• Experience;
• Productivity;
• Working hours;
• Operational requirements; and
• Role responsibilities.

This helps management understand what the current workforce can realistically deliver.

Future Workforce Requirements

The next question is what the organisation is likely to need.

Management should consider:

• Expected growth;
• New products or services;
• Technology changes;
• Customer demand;
• New locations;
• Operational changes; and
• Expected employee departures.

The planning period may vary from one organisation to another.

Identifying Skills Gaps

A skills gap occurs when the organisation does not have enough of the capabilities it needs.

For example:

The organisation may plan to implement a new technology system but have very few employees with the necessary technical skills.

Management then needs to decide whether to:

• Train existing employees;
• Recruit new employees;
• Use external expertise; or
• Combine several approaches.

Skills Inventory

A skills inventory provides information about the capabilities available within the organisation.

It may include:

• Qualifications;
• Technical skills;
• Professional registrations;
• Experience;
• Management capability;
• Language skills where relevant to the role; and
• Other role-specific competencies.

The inventory should be kept current because employee capabilities can change over time.

Workforce Demand

Workforce demand refers to the people and skills the organisation expects to require.

Demand may be influenced by:

• Business growth;
• Customer demand;
• Production requirements;
• Technology;
• Projects;
• Seasonal activity; and
• Strategic plans.

For example, a business expecting a significant increase in customer demand may require additional operational staff.

Workforce Supply

Workforce supply refers to the people and capabilities available to meet the organisation’s needs.

Internal supply can include:

• Existing employees;
• Employees who could be developed;
• Potential successors; and
• Employees who may be able to move into different roles.

External supply can include the wider labour market.

Comparing Supply and Demand

One of the most important parts of workforce planning is comparing expected workforce supply with future demand.

For example:

Future requirement: 20 qualified technicians.

Current available technicians: 14.

Potential internal development: 3.

The organisation may still have a potential gap of four technicians.

This gives management time to plan rather than react after the shortage occurs.

Workforce Planning and Recruitment

Recruitment should be based on actual workforce requirements.

Workforce planning can help HR determine:

• How many positions may need to be filled;
• Which skills are required;
• When recruitment should begin; and
• Which roles should receive priority.

This can make recruitment more proactive.

Workforce Planning and Training

Not every skills gap requires external recruitment.

Existing employees may be capable of developing the required skills.

Training can therefore form part of the workforce plan.

For example:

Current capability: Basic data analysis.

Future requirement: Advanced workforce analytics.

Potential response: Targeted development programme.

Workforce Planning and Internal Mobility

Internal movement can help organisations fill future roles.

Employees may move through:

• Promotions;
• Transfers;
• Secondments;
• Job rotations; or
• Expanded responsibilities.

Internal mobility can also provide employees with career development opportunities.

Workforce Planning and Succession

Succession planning focuses on preparing potential employees to take over important roles.

Workforce planning provides a broader view.

It asks:

What roles and capabilities will the organisation need?

Succession planning asks:

Who could potentially fill important roles in the future?

The two processes can therefore work together.

Workforce Planning and Employee Turnover

Employee turnover can affect workforce supply.

If an organisation regularly loses employees from particular roles, this should be considered when estimating future workforce requirements.

For example, if a department consistently loses several employees each year, management may need to account for expected replacement requirements.

Retirement and Workforce Planning

Retirements can create predictable workforce changes.

HR can identify roles where experienced employees may leave over the planning period and assess:

• Whether successors exist;
• Whether knowledge needs to be transferred;
• Whether recruitment will be necessary; and
• Whether additional development is required.

The focus should be on workforce continuity rather than assumptions about individual employees.

Critical Roles

Some positions have a greater operational impact than others.

A critical role may involve:

• Specialist knowledge;
• Key customer relationships;
• Important operational responsibilities;
• Leadership;
• Regulatory responsibilities; or
• Skills that are difficult to replace.

These roles may require greater workforce-planning attention.

Workforce Planning and Labour Costs

Employees are a significant cost for many organisations.

Workforce planning can help management estimate future workforce costs by considering:

• Planned headcount;
• Vacancies;
• Salary structures;
• Overtime;
• Benefits;
• Recruitment costs; and
• Training requirements.

Workforce plans should therefore be connected to financial planning.

Scenario Planning

The future is uncertain.

Rather than creating only one workforce forecast, organisations can consider different scenarios.

Growth Scenario

What happens if the business expands faster than expected?

Stable Scenario

What workforce is required if current operations remain relatively consistent?

Downturn Scenario

What happens if demand decreases?

Scenario planning helps management prepare for different possibilities.

Seasonal Workforce Planning

Some businesses experience predictable changes in demand.

Examples include:

• Retail;
• Hospitality;
• Agriculture;
• Logistics; and
• Certain service businesses.

Seasonal planning can help determine when additional employees may be required and how long those requirements are expected to last.

Workforce Planning for Business Expansion

Expansion can create several workforce requirements.

Before opening a new location, management may need to consider:

• Managers;
• Operational employees;
• Administrative support;
• Technical roles;
• Recruitment timelines;
• Training; and
• Employee relocation where applicable.

Starting workforce planning early can reduce pressure during the expansion.

Technology and Workforce Planning

Technology can change the skills an organisation requires.

Automation may reduce the need for certain tasks while increasing demand for other capabilities.

HR should therefore consider:

• Which roles may change;
• Which skills may become more important;
• Which employees require development; and
• Whether new roles may be needed.

Technology should be considered as part of workforce strategy rather than only as an IT issue.

Workforce Planning and Organisational Restructuring

Restructuring can significantly affect workforce requirements.

Management may need to assess:

• Current roles;
• Future roles;
• Skills;
• Reporting structures;
• Workforce costs; and
• Operational requirements.

Where restructuring may affect employees’ employment, organisations should obtain appropriate professional advice and follow applicable requirements.

Workforce Planning Metrics

HR can monitor several indicators.

These may include:

• Headcount;
• Vacancy levels;
• Turnover;
• Time to fill;
• Skills gaps;
• Internal promotion rates;
• Critical-role coverage;
• Training completion; and
• Labour costs.

The most useful measures depend on the organisation’s objectives.

Common Workforce Planning Mistakes

Planning only for current needs

Current staffing does not necessarily meet future requirements.

Focusing only on headcount

The organisation may have enough employees but lack critical skills.

Ignoring employee turnover

Expected departures can affect workforce supply.

Recruiting before analysing internal talent

Existing employees may be able to fill some future positions.

Ignoring business strategy

Workforce plans should support organisational objectives.

Creating unrealistic forecasts

Workforce planning involves assumptions and uncertainty.

Failing to review the plan

Business conditions change, so workforce plans should be updated.

A Practical Workforce Planning Process

Step 1: Understand the Business Plan

Identify expected organisational changes.

Step 2: Analyse the Current Workforce

Review headcount, roles, skills and workforce trends.

Step 3: Forecast Future Requirements

Determine the people and capabilities likely to be needed.

Step 4: Identify Gaps

Compare current workforce capacity with future requirements.

Step 5: Develop Solutions

Consider recruitment, development, internal mobility, technology and other appropriate responses.

Step 6: Prioritise

Focus on critical roles and significant workforce gaps.

Step 7: Implement

Assign responsibilities and timelines.

Step 8: Review

Update the workforce plan as circumstances change.

Simple Workforce Planning Example

A company currently employs 50 people.

Management expects the business to expand over the next year and estimates that it will require 65 employees.

HR identifies:

• 50 current employees;
• 5 potential internal candidates for expanded roles;
• 3 expected departures; and
• 13 additional positions required.

The organisation therefore needs to consider both replacement requirements and additional workforce demand.

The precise recruitment requirement will depend on which internal employees can be developed or moved into the required roles.

This illustrates why workforce planning involves more than simply adding future headcount to current headcount.

Workforce Planning Checklist

☐ Understand the business strategy

☐ Review current headcount

☐ Identify current skills

☐ Review workforce costs

☐ Analyse employee turnover

☐ Identify critical roles

☐ Forecast future workforce demand

☐ Identify potential skills gaps

☐ Consider internal talent

☐ Consider training and development

☐ Plan recruitment requirements

☐ Consider succession needs

☐ Develop different scenarios where appropriate

☐ Establish responsibilities and timelines

☐ Review the plan regularly

Final Thoughts

Workforce planning helps organisations move from reactive staffing decisions to more deliberate workforce management.

The objective is not to predict the future perfectly.

Instead, it is to understand the organisation’s direction, identify likely workforce requirements and prepare for potential gaps.

A strong workforce plan considers both how many people the organisation needs and what capabilities those people must have.

When workforce planning is connected to business strategy, recruitment, development, succession planning and financial planning, HR can make a more meaningful contribution to organisational decision-making.

Frequently Asked Questions

What is workforce planning?

Workforce planning is the process of assessing current workforce capabilities and planning for future people and skills requirements.

Why is workforce planning important?

It helps organisations anticipate staffing and skills requirements rather than responding only after vacancies or shortages occur.

Is workforce planning only for large companies?

No. Small and medium-sized businesses can also benefit from planning their future workforce requirements.

What is a skills gap?

A skills gap exists when an organisation does not have sufficient employees with the skills or capabilities required to achieve its objectives.

Does workforce planning only involve recruitment?

No. Workforce planning can involve recruitment, training, internal mobility, succession planning, restructuring and other workforce strategies.

How often should a workforce plan be reviewed?

It should be reviewed when significant business or workforce circumstances change. Many organisations also review workforce plans periodically.

What is the difference between workforce planning and succession planning?

Workforce planning considers the organisation’s broader future workforce requirements, while succession planning focuses more specifically on preparing potential successors for important roles.

Can HR use workforce data for planning?

Yes. Data such as headcount, turnover, vacancies, skills and labour costs can support workforce planning.

Disclaimer

This article is provided for general informational and educational purposes and does not constitute legal, financial or professional advice. Workforce planning should be adapted to the organisation’s strategy, workforce structure, operational requirements and circumstances. Where workforce planning involves significant organisational restructuring or changes to employment arrangements, appropriate professional advice should be obtained.

Devhulon Business & People Solutions provides HR consulting and people-management support to businesses seeking practical assistance with workforce planning, HR strategy, recruitment, employee development and broader people-management processes.