A Guide to Strategic Workforce Planning

Eric Mochnacz
January 26, 2023

What is Workforce Planning? 

Workforce planning are the methods by which a company forecasts its workforce needs, assesses talent gaps, and strategically develops and executes to meet short-term and long-term hiring needs. Effective workforce planning requires an assessment of your current employee population, your future business needs, and data-driven decision making to identify if those critical business needs will be met through hiring.  Simply put, you are aligning your business goals with your people strategy.  

The Benefits of Workforce Planning 

In a complex job market, with news of layoffs dominating LinkedIn feeds daily, companies need to be intentional and strategic in workforce planning. The takeaway from the deluge of people announcing their terminations on LinkedIn, and subsequent messaging from the CEOs, is companies overhired during the back half of the pandemic and found themselves with a financially unsustainable headcount.  By aligning business goals with the company’s P & L projections, companies use that information to make better, informed workforce planning decisions related to hiring and workforce growth.  This strategic, data-driven approach helps your company avoid making arbitrary hiring decisions that are unsustainable should the market or customer needs shift.  

Budget Planning 

The cost of an employee impacts your bottom line.  An employee’s total cost isn’t solely their salary, but also the payroll taxes, benefits costs, and any other auxiliary costs the company is responsible for.  Additionally, there is a cost associated with the time your HR team puts into the recruitment and interview process to find new hires.  Too often, companies will attempt to throw money at a problem.  CEOs think the solution to employee turnover is just hiring more people at a higher salary because that’s the only feedback they hear from exit interviews.  The problem is there are often other reasons an employee has left an organization, but salary is the easiest response to give. The inherent problem with this typical reaction is the company may have the money at the moment to solve the problem, but they may not be able to sustainably fund that salary pool in the future.  Workforce planning ensures your company has the budget to pay for the position to meet the immediate business need and the long-term budget to fund the role in the future. You’ll have a greater understanding of the overall cost of the hire and how it impacts company profit and revenue over time. 

Aligned With Business Goals

Effective workforce planning aligns business goals with headcount growth. For example, if your company wants to increase sales because it will allow you to hire additional administration and operational headcount, then it makes sense to hire a salesperson. As it relates to budget planning, if you are able to close more business because of the additional salesperson, then your financial goals and budget projections align with your hiring plan. You create opportunities for increased revenue, which allows you to fund the roles needed to support the increased client load. Before you go to market for a role, identify the business case for hiring, and identify how filling the role advances the business’s goals and its impact on the overall financial state of the business.  

Impact on Employer Brand 

Your company’s intentional workforce planning and hiring impacts your employer brand, or how employees and candidates perceive your company. When working with clients to identify their employer brand, we ask them to define the one thing they want candidates to know about their company. Big tech firms’ employer brands are being tarnished due to how their former employees were treated during the layoff process.  It’s difficult to convince job seekers to work for you if your company’s reputation isn’t as positive as it once was.  If Meta, Google, Salesforce, and their other tech peers had been more methodical and intentional in their workforce planning and had aligned their headcount growth with business needs and financial projections, they wouldn’t be in the position they are in today.  Instead, they admittedly overhired, without a strategic, long-term plan in place. A company who makes data-driven workforce planning decisions, with sustainability in mind, has a greater advantage in today’s job market.    

The Workforce Planning Process 

Intentionality in workforce planning means you follow the process the HR experts in your organization have established. They are the professionals with the insight and expertise who provide guidance on a methodical approach to building your workforce. Red Clover, through our Recruitment Process Outsourcing (RPO) and Interim HR Management services, work directly with leaders to find the best talent aligned with business goals and the financial realities of the business.

Analyze Gaps  

Before hiring, analyze your current workforce and the gaps in your business causing the obstacles in achieving your goals.  It’s not always people related, but if it is, that’s when you begin the workforce planning process.  Generally, you need to hire because not having someone in a role is disrupting your ability to meet customer needs or interrupting internal business continuity.  Your single point of failure is your inability to scale the business because you don’t have someone in critical roles.  

Identify Your Budget  

An essential component of effective workforce planning is understanding the impact hiring will have on the company’s finances.  The key question when understanding the impact of hiring on your budget is “Can you afford this person now and can you afford them in six months?”  Sometimes, companies move quickly to hire someone to meet a short-term need without thinking of the long-term impact.  For example, a consulting firm may hire an administrative staff member to support a consulting team, because the client has demanded a quicker resolution to a project.  However, if after the project is complete, the client ends the engagement, or no longer needs a high level of administrative support, what does the company do with the person they just hired?  

When planning to grow your team, you may take an aspirational look at your budget projections, but you need to be honest with yourself.  If your ability to hire and retain three new employees is dependent on you closing three more client deals, then you better make sure you have the infrastructure in place to make that happen.  Identify milestones your business needs to meet and key metrics you need to maintain in order to feel comfortable with bringing on and keeping new hires. 

Remember, the cost of an employee isn’t ONLY their salary.  It’s the additional cost related to benefits and payroll taxes.  The investment you make in their training.  Any equipment and software costs associated with their onboarding and integration.  When you decide it is time to hire, make sure you map out the entire cost of the employee and how it influences your cash flow and your profit and loss statement.

Define the Role 

Once you know you need to fill the role and know you can sustain it financially even if business conditions change, HR defines the role.  Develop a job description that clearly defines the day-to-day responsibilities and how the successful candidate will drive the business forward.  Use this opportunity to document the core competencies and knowledge skills and experience you are looking for in the successful candidate.  And because you’ve identified the budget as part of your workforce planning process, you can feel confident listing the salary range in the job posting – especially as job seekers are demanding greater transparency – and more and more state laws are beginning to require it.  HR outlines the interview process and posts the role so you can start attracting the right candidates to fill the gaps in your workforce.

How Does Workforce Planning Help You Reach Your Organizational Goals?

Workforce planning strategically fills the people-related gaps in your business.  When done correctly, you’re intentional and methodical in your hiring process, avoiding the greater possibility of having to conduct layoffs due to shifting market conditions or economic uncertainty, because you planned for these variables.  You also ensure business continuity because you’ve addressed the gaps in service appropriately by hiring qualified professionals to address those gaps.  You construct a team that drives the business forward and doesn’t have an adverse impact on your operational budget.  Because of your intentionality, you should actually begin to see a return on your investment in no time, and may even be able to continue to grow the team, rather than reduce or eliminate it like other companies who took a less strategic approach to hiring.

Start Your Workforce Planning Process With the Help of Red Clover

We work with small and medium-sized businesses who are looking to scale.  Although we can move quickly to help your business grow its team, we do so by integrating our proven workforce planning and recruiting processes into your workflows.  We work hand in hand with leaders to understand your P & L and develop your approach to compensation and your pay philosophy so you afford top talent – and keep them – even with an unpredictable economy.  If you’re sick of trying to build your workforce without a plan, reach out and chat with a member of the team.

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