Workforce Planning: House of Cards or Castle On the Hill?

One could argue, that 2023 was one of the most challenging planning years to predict for businesses and finance teams with all of the macro-economic headwinds, budget cuts, revenue down trends, and workforce layoffs. With 2024 right around the corner and the annual planning cycle in full swing, let's take a deeper look at 'what' Workforce Planning actually means and in particular, how it impacts the Recruiting function.

📌 What is Workforce Planning?

Workforce Planning is the process of analyzing, forecasting, and planning workforce supply and demand, assessing gaps, and determining target talent management interventions ⬅️ (Focus of the article) to ensure that an organization has the right people.

📌 Why is it important?

✅ 5 R's: Having the right talent in the right roles, at the right time, right place, and at the right cost.

✅ Better employee experience: Companies are focusing on employee engagement and making them feel valued.

✅ Adaptation to automation: Automation and artificial intelligence are changing work and employment expectations. HR leadership is constantly re-evaluating manpower planning.

✅ Adapting to new skills: As technologies change, workplace needs also change. Existing employees need to be trained to adapt to these new requirements.

✅ Changing workforce demographics: The rise of Generation Z and the increasing diversity of the workforce is creating new challenges for organizations.

✅ Reduce labor costs: Businesses can be more efficient in controlling their labor costs by adjusting staffing levels throughout the day.

✅ Align HR with business strategy: Businesses and their partners (HR, Operations, Recruiting, L&D can better align with business needs over a given period of time (typically annual plan, sometimes Long range plan LRP over 3-5 years)

✅ Reduce labor costs: Businesses can be more efficient in controlling their labor costs by adjusting staffing levels. 'Where' employers hire employees can also have an outsized impact on labor costs. If companies open their hiring to whole regions or remote options, they often can reduce cost per head while keeping revenue per head steady. <-- This is the #1 business-focused argument for having a remote workforce. Hire talent, where they are and focus on equal skills at a lower overall cost.

✅ Improve productivity: When a plan is set and milestones are in place, businesses and their partners can easily track progress toward goals and adjust in real time. These checks/balances tend to happen in more formal Monthly, Quarterly, and Annual planning review sessions.

✅ Respond to changing customer needs: As businesses adjust the the macro-economic climate, financial plans often change. This impacts budgets, headcount demand, employee retention strategy, product and customer launch timelines, and more.

✅ Make data-driven decisions: Nearly 70% of business executives believe that people analytics is a priority. Analytics can help businesses understand their workforce, improve employee experience, and optimize internal processes.

✅ Refine recruitment processes: Recruiting, like Sales organizations, is highly cyclical in its operations and heavily ratio-dependent. As businesses work through their annual and LRP's, recruiting organizations are also working with business leaders, corporate and business-aligned finance teams, HR, and operational partners to assess business roadmaps, headcount projections, and budgets. This is where I will focus below 👇🏻.

📶 How Workforce and Annual Planning Cycles Impact Recruiting: Sarah L. (formerly of Asana - Sarah is #opentowork by the way!) Wrote a great article on Capacity Planning strategies, the importance, and different forms of capacity planning, check it out!

📍Proactive or Reactive: Retrospective and forward-looking project roadmaps, budget shortfalls/overruns, and future headcount impact are all born from the planning processes.

📍Team Size: Recruiting org/team capacity (i.e. team size) is heavily dependent on business and finance planning. If a business needs to ramp up hiring to meet deadlines, tackle new projects, and rightsize for attrition losses, recruiting will be impacted.

📍Company Size/Stage: Depending on the company size/stage (Early stage start-up (Seed - Series C), Growth (Pre- IPO Series D-F), public growth (2-4k employees), or large/enterprise (5k+ employees), the type of investments and budget availability will differ and thus have an impact on resource investments (i.e. FT employees, RPO's, contract & FT mix; LCL global focus or HCOL US based hiring, etc)

📍Technology: Recruiting tends to have a smaller budget than most business verticals. Thus, investments in technology to supplement or aid in Recruiting functional resources are heavily dependent on business needs. Heavy hiring may mean more tools (ATS, HRIS, CRM, AI automation tools, Platform subscriptions, Talent Branding, etc.) Less hiring may mean reductions in tooling spend and potentially (as 2022-2023 have shown) reducing staffing.

📍Location: A business's investment strategy often dictates the location of headcount needs. 2023 is a great example of this. As we see companies become more cost-conscious, they are not only reducing staff in high-cost regions, but they are ramping up staffing in lower-cost regions in Europe and Asian Pacific regions (i.e. Increasing: India, Philippines, Poland, Eastern Europe; Reducing: US, UK, central Europe countries: Germany, France). This type of pivot requires either A. An already-in-place global hub and spoke Recruiting structure or B. A quick pivot to build fully functional Recruiting teams in said regions. There are many examples in the tech industry this last year opening or expanding office/headcount footprint in lower cost, dense tech talent regions.

📍Hiring timelines: 'Just in time' hiring, bell curve hiring, seasonal hiring, growth hiring, or flat hiring. All are common and all are dependent on two questions:

🔍 Does the business have a clear annual plan with quarterly milestones that tie back to project roadmaps?

🔍 Is the plan reasonably possible to achieve based on the time it is formalized in comparison to the current support function size/alignment?

🔓 Conclusion: Organizations that I have worked for who are best at meeting plans and making real-time adjustments without disrupting progress all have a few things in common. They are great partners and bring in support functions during each phase of the planning process to identify blind spots and use data to build a realistic, working backward plan. The other key success measure is timing. Each of these organizations understands that hiring is cyclical and requires specific planning timelines to be met in order for Recruiting to land hiring when they need them.

In most organizations, hiring tends to take 60-90 days on average, and hiring targets are broken down by quarter. If your company quarter maps to the calendar year, this would mean that on October 1st you will want to have a draft annual plan with a specific Q1 headcount number in place. It typically takes 1 month once plans are finalized to be locked and operationalized through finance and systems and then another couple of weeks to a month for requisitions to be created, details to align, and jobs to go live. This means you need to have your Q1 roles finalized in 2 weeks.

📈 Are you prepared?

Check out another great resource for Workforce Planning's importance written by Christine Organ for Forbes .