Headcount management. Workforce forecasting. Staff planning.
It’s all kind of the same thing. At the end of the day, you’re trying to manage your headcount within budget while still having the employee resources to meet your organization’s strategic goals for growth and overall success—and it is a crucial component to any talent management strategy.
Although headcount planning is one of the highest priorities for HR leaders, 60% say that it is one of their weakest capabilities.
But that’s the goal of this post—we want to help make this process simpler and more effective.
What is Headcount Planning and Why Is It Important?
Regardless of industry, CEOs, HR teams, department managers, and other leaders need to know that talent, costs, and goals are aligned across the organization.
That’s where headcount planning comes in, and why it’s vital to your future success.
A critical talent management exercise, headcount planning is a systematic process designed to ensure an organization has the right number of people with the right skills in the right roles so the company can execute on its business strategy. For enterprise organizations, the process typically culminates in a talent review meeting where leaders talk hiring targets, succession, organizational structure, and more.
Find out how to get more value out of your talent review meetings.
A successful headcount planning process accounts for both internal and external changes, empowering the organization by
- Aligning talent strategies with organizational strategies and goals.
- Identifying skills the current workforce lacks, but that you need to be successful.
- Focusing recruiting teams on the right candidates—the ones with the skills you need in the near term.
- Allowing managers to identify and mentor employees who can—with additional training—fill critical skills gaps.
- Projecting costs associated with hiring new staff and developing current employees, as well as salaries for your future workforce.
4 Keys to a Successful Headcount Plan
To reap the benefits of workforce planning, organizations should take these four steps to create their headcount plan.
1. Identify Your Business Challenges
Questions to ask yourself: What challenges is our business facing? Our industry? What opportunities do they create for our organization? What are we trying to achieve in the coming year?
- Has your competition broadened or deepening their offerings?
- How are your client or customer needs evolving?
- Are there regulatory changes ahead that will affect your businesses?
- Are there technologies, process automations, or other innovations you can adopt to your competitive advantage?
- Is your goal to grow within current markets, expand into new markets, add products or services or enhance existing lines?
With a firm understanding of your business goals, strategies, and market landscape to inform the headcount planning process, you can keep pace with—and anticipate—what’s ahead.
2. Establish Metrics to Evaluate Existing Talent, Define Workforce Needs, and Inform Budget Projections
Smart leaders—and successful organizations—ground their critical decisions in data. As with effective succession planning and other talent decisions, headcount planning should be as free of individual bias, guesswork, and subjectivity as possible.
Define the objective measures by which you will determine whether individuals or departments are staffed with the right people, and let those metrics drive your workforce evaluation and headcount strategy.
Common workforce metrics include
- Performance ratings
- Position requirements
- Employee skill sets, certifications, and licenses
- Attrition rates, overall and by department
- Department hierarchy
- Retirement eligibility information
- Salary data.
During your headcount planning exercise, HR and business leaders who lead and participate in headcount planning exercises will benefit from data visualizations that capture these workforce metrics in real time.
Learn more about workforce data visualizations to inform succession planning and headcount strategy.
3. Evaluate Your Workforce
Now it’s time to put the metrics to work. Some important considerations to think about during this stage:
- Which roles are critical now and which ones will be in the future?
- Which positions (if any) can we do without to maximize the overall ROI of our workforce?
- Where are we having problems with attrition and what can we do about it?
- Are we growing or hiring succession-eligible employees?
As you evaluate the workforce, pay particular attention to critical roles. This obviously includes leadership positions—the ones typically accounted for during succession planning and talent reviews—but don’t neglect other roles.
Depending on your industry and market dynamics, other critical positions might include sales, customer service representatives, R&D, retail associates, project managers—whatever you need to implement your business strategy in the near and mid-term.
4. Make Headcount Planning Agile and Inclusive
Organizations that engage in formal headcount planning typically do the exercise annually. But given how quickly markets can pivot, the truly strategic approach is agile, inclusive, and iterative.
That is, your headcount plan should be a living document
Ideally, leaders should revisit and adjust their strategic workforce plan in real time, using real-time data—enabling the organization to respond nimbly to internal and external factors that could otherwise be disruptive.
The headcount planning team should reach out routinely for insights from departmental and business line leaders, and their HR counterparts, to surface near- and longer term skills needs.
The Competitive Advantage of Headcount Planning
As a significant element of workforce planning as a whole, headcount planning is one of the most powerful and critical exercises led by HR teams.
Your headcount plan makes a direct connection between strategic organizational priorities, budgets, and talent management strategies—including hiring, learning and development, and succession planning.
It gives leadership a clear roadmap for success and, with the right process in place and real-time data to inform course corrections and shifts, it gives your business an edge on the competition.