Workforce planning is a widely used yet often misunderstood term. It’s usually taken to mean the day-to-day, tactical workforce management needed to maintain capacity, or shorter-term planning that looks at the months ahead. While both of these are necessary, neither will ensure organizational health over the long term.
If you get workforce planning right, the productivity gains can be substantial. In a research study with CEBR, we found that workforce planning is a key measure for improving productivity. In the UK, better people planning could contribute to £10.4 billion in additional GDP, while in the US it could help generate an extra $92.2 billion in GDP .
The difficulty with short-term workforce planning is that it leaves you unprepared for the uncertainty of the changing nature of work. It leaves you vulnerable to disruption. Planning longer term allows you to anticipate change and be ready for what the future brings.
Defining workforce planning
Workforce planning is broadly defined as the data-driven process of identifying what an organization is going to need in terms of the size, type, experience, knowledge, and skills of its workforce to achieve its business objectives.
In simpler terms, it’s about “getting the right number of people with the right skills in the right place at the right time [and] at the right cost.”
The CIPD defines workforce planning as the process of analyzing the current workforce, determining future workforce needs, identifying the gap between the present and the future, and implementing solutions so that organization can achieve their mission, vision, and strategic plan.
The Corporate Research Forum has a more focused view, defining workforce planning as “identifying critical skills required to execute a change in strategic direction and analytics is crucial in achieving that.”
Strategic versus operational workforce planning
Workforce planning is a fluid, continuous process that tracks and adapts as the business changes. It combines with organizational design, which details the destination while workforce planning provides the map of how to get there.
Ultimately, workforce planning is about the demand and supply of ‘workers’. It is about knowing what the gap is between actuals (supply) and target (demand), what’s causing it, and how to do something about it. If org design provides the demand, workforce planning sets out how the business will supply the labor to meet it.
It’s worth making clear exactly what we mean by workforce planning and where the real value lies. Confusion arises because the term covers a range of disciplines, each with different objectives and scope. The biggest distinction to make is between operational and strategic workforce planning.
Short-term workforce planning is often referred to as operational. It usually covers the next 12 months and aligns with the annual business planning cycle. Whereas longer term planning covers an 18-month to three year forecast period and beyond, and looks at future workforce implications attached to business outcomes. This is generally referred to as strategic workforce planning.
While workforce planning doesn’t have to be timebound, it’s the level of granularity and alignment with strategy that differentiate the different options. However, the more strategically focused it is, the more workforce planning can deliver value to the business.
What stands in the way of workforce planning
Organizations are complex structures with many interconnected, moving parts that are constantly changing and evolving. This complexity means workforce planning just can’t be done manually, but many still try. This is one of the big reasons why companies find it so hard.
Getting stuck in the mire of immediate needs means organizations overlook the opportunity to extract more value from workforce planning over the long term. Invariably, they turn to their Human Capital Management (HCM) system and spreadsheets to do their planning, which inevitably limits them to short-term outcomes that don’t take into account future requirements.
That said, there are common barriers that stand in the way of effective workforce planning in general, which relate to process (collaboration) and technology (adoption and data availability).
Our research shows that less than half (40%) of HR and finance decision makers in the UK and US believe they have a collaborative relationship and only 28% say they had joined up reporting systems and tools to facilitate data sharing.
When it comes to technology adoption, only 10% say they use specialist workforce planning software extensively while continue to rely on spreadsheets (48%) or presentation tools (41%).
Related to technology use is data availability. We found 85% of organizations come up against obstacles to workforce planning that are to do with collecting, organizing, and interpreting data.
You can read more about these research findings in our report Making people count: 2019 study on workforce analytics
Effective workforce planning drives productivity
Our research establishes that organizations see workforce planning as one of the main ways to drive productivity. We found that organizations with better people planning capability report a productivity growth rate that’s two times higher compared to organizations with below average capability.
Conner Forrest, analyst for 451 Research, reinforces the link between effective workforce planning and productivity: “Executives and managers must think more strategically about their workforce as a framework for driving innovation and improving the bottom line,” he says.
In our experience, effective workforce planning that’s capable of boosting productivity will include the following activities:
- Planning the deployment of your workforce specifically to deliver strategic business goals
- Identifying gaps between your current workforce and future needs
- Assigning the right people with the right skills to the appropriate tasks
- Managing workforce costs into the future
By extrapolating our productivity findings nationally, we calculated that if all companies with over 250 employees improved their workforce planning to match the top 50% performing organizations in the survey, it would improve the overall growth rate by 0.5%.
To find out more, see our infographic Connect people to profit – the economic benefits of workforce planning
Workforce planning in practice
Once you have a clear workforce plan in place, it’s through scenario modeling that you’ll be able to evolve the plan to keep pace with business changes. By modeling people, roles, processes, and skills, you can accurately forecast the gap between supply and demand for each eventuality and measure the impact for each.
Putting the plan into practice requires planning groups that break down requirements into subfunctions, job families, and locations to make it achievable. This gives rise to questions such as “how many sales people do we need each year for product group one in Germany?” for example, or “how big should the compliance function be when new legislation comes into force?”
This video simplifies the workforce planning process and clarifies its most fundamental aspects. You’ll see that it focuses on skills and capabilities, not headcount. Importantly, it also places emphasis on making the plan actionable and adjustable.
MyHRFuture (David Green): The workforce planning process
In the end, workforce planning is part of a continuous process of monitoring your organization’s health over the long term – something we call organizational planning and analysis. Developing capability for this important business process is just another step on the road to a sustainable future for your organization.
 Infographic (2019) Connect people to profit https://www.concentra.co.uk/resources/infographic/infographic-connect-people-to-profit-the-economic-benefits-of-workforce-planning/
 Based on Julie Sloan (2010) The Workforce Planning Imperative https://trove.nla.gov.au/work/36879746?q&versionId=47882236
 Rupert Morrison (2014) Data-driven organisation design https://www.concentra.co.uk/resources/book/data-driven-organization-design-the-book/
 CIPD (2019) Workforce planning https://www.cipd.co.uk/knowledge/strategy/organisational-development/workforce-planning-factsheet
 Corporate Research Forum (2017) Strategic workforce analytics, p. 39 https://www.crforum.co.uk/research-and-resources/research-report-strategic-workforce-analytics/
 See note 1
Read more about workforce planning
How do you know if your business is getting the right people doing the right things with the right skills? Workforce planning can deliver value to the business by modeling scenarios before committing to organizational change.