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Workforce Planning – Balancing Demand and Supply

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What is Workforce Planning?

Simply put, workforce planning is about forecasting your current and future staffing needs.

First, you work out your strategic business objectives, then address the supply of labour. For example, are there candidates with the skills you require available? The final step is to get the right balance between labour demand and supply so that you have the right number of employees with the right skills at the right time.

Labour Demand Forecasting

Labour demand forecasting is crucial, as businesses don’t want a surplus of employees who are not fully and effectively deployed, nor do they want gaps in their employee pool, resulting in reduced productivity, performance, and profitability.

When business owners are considering labour demand forecasting, their first questions are likely to be:

  • Where are we going as a business – what is our intended growth in the next 3-5 years (or longer)?
  • Will we be developing or expanding our services or product range?
  • What technological advancements may affect what we do, and will this affect our need for differing staffing levels?
  • What are our absenteeism and turnover rates like?
  • Do we have sufficient management support to progress our objectives, and will they be behind the plans?

Any changes to the human resources needs within the business should be led by the strategic business plan and the goals for the business – not the other way around.

Labour Demand Forecasting

When undertaking labour demand forecasting, there tend to be two approaches – quantitative and qualitative.

Quantitative

The quantitative approach uses various statistical and mathematical methods to determine the needs, including indexation (forecasts determined to one or more fixed organisational indices) or trend analysis (predictions based on the study of past human resource growth). These are often complex and expensive – but a real need, especially for larger organisations.

Qualitative

Small and medium-sized businesses often prefer to rely on qualitative approaches to determine labour demand forecasting. These approaches tend to use experts to select future needs, i.e., employees, managers, and business owners themselves.

Popular qualitative approaches include:

  • Delphi Technique (uses problem-solving and expert consultation methods in a structured manner); managerial judgement (business owners and managers assess their own labour requirements taking into account factors such as retirements, promotions, new technologies etc.)
  • Nominal Group Technique (using group processes to compare predictions on the staffing needs for the future)

One of the significant advantages of using qualitative methods, especially with SMEs, is that the techniques used involve the people likely to be affected by any business changes about human resources practices. Therefore, there is expected to be more significant commitment and acceptance of those involved’ policies and procedures. However, one of the downsides is the time and cost of applying employees, managers, and business owners.

Having an HR Consultant on hand, leading the process, and adopting the most appropriate methods to guide businesses through these processes can help forecast future employee needs effectively.

Labour Supply Analysis

Once a business has forecast what its future requirements are likely to be, it is then necessary to determine what number of employees will be needed, what skills and when. Labour supply may come from within the organisation or outside. The first step, therefore, is to do an analysis of the skills currently within the business.

If skills are not available internally, then they may need to be sought externally. Once looking at external factors such as the availability of skills within the job market will be considered significant.

Balancing the Supply and Demand

If a business is short of employees to achieve the business objectives, effective recruitment strategies will need to be devised. Considerations will then relate to job design, career development, flexible work options, remuneration and reward programmes.

If a business has too many employees, effective strategies will need to be created to manage retirements, redundancies, and, if appropriate, dismissals.

In conclusion

Workforce planning is imperative to businesses wanting to plan their growth and limit situations where they are faced with too many or too few employees or the wrong skillsets. In addition, workforce planning can help business owners see how their employees (by forecasting staff with specific skills) can help them achieve their strategic business objectives.

Here’s an interesting take on the workforce of a warehouse – in this superhero workforce infographic.

The COVID-19 pandemic has thrown a spanner in the works for many firms sourcing staff in workspaces deemed optimal or slightly overcrowded. Social distancing requires six feet or ideally two meters between workstations so alternative work environments like remote working are popular.

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