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Workforce Planning – Balancing Demand and Supply

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If a company fails to implement workforce planning, it may face several challenges, such as skill shortages, inadequate or excessive staff, and difficulty retaining talented employees. This can lead to reduced productivity, poor customer service, and higher costs. Ultimately, these problems can significantly impact the company’s ability to compete and profit.

What is Workforce Planning?

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

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

Labour Demand Forecasting

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

When business owners are considering labor 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 guided by the strategic business plan and the business goals—not the other way around.

A couple of methodologies are used to forecast labor requirements – the quantitative approach and the qualitative approach.

Quantitative Approach

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

Qualitative Approach

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

Popular qualitative approaches include:

  • Delphi Technique (uses problem-solving and expert consultation methods in a structured manner); managerial judgment (business owners and managers assess their labor requirements considering 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 in 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 forecasted its future requirements, it must determine the number of employees needed, what skills will be needed, and when. Labor supply may come from within the organization or outside. The first step, therefore, is to analyze the skills currently within the business.

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

Balancing the Supply and Demand

Effective recruitment strategies must be devised if a business lacks employees to achieve the business objectives. Considerations related to job design, career development, flexible work options, remuneration, and reward programs.

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

Workforce Planning Apps

Technology to the rescue! There are workforce planning apps that assist businesses with strategic planning, forecasting, resource optimization, compliance, and more. Some of the popular apps include:

  • ADP Workforce Now
  • Deel
  • Workday
  • Rippling

There are numerous apps available for workforce planning, some of which also offer additional features such as HR management, operations tasks, and even bookkeeping.

In conclusion

Effective workforce planning is crucial for businesses to strategically manage their growth and avoid the challenges of having an excess or shortage of employees with the required skillsets. Moreover, it enables business owners to envision how their workforce, equipped with specific skills, can contribute towards achieving their long-term business goals.

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