Enterprise Workforce Planning

The purpose of workforce planning is to determine the characteristics needed in the organization’s workforce to facilitate the achievement of those objectives. In this scenario, workforce planning is strategic planning at the HR level and involves similar processes, including a SWOT analysis, which occurs at the organizational level. In simplistic terms, the HR function must determine the numbers and types of employees needed and evaluate the availability of both internal and external individuals having the correct characteristics. Based on these analyses, a determination can be made as to the proper HR programmatic activities required to achieve the correct workforce composition. Workforce planning then involves three stages: forecasting workforce needs, determining the internal and external supply of employees, and developing appropriate strategies to achieve forecasted needs in relationship to projected supply. HCM supports the following processes for you to conduct enterprise workforce planning.

Forecasting Workforce Needs

The allied project plans (for the organization’s strategies) in provide information as to the number and type of employees that the organization needs during the planning period. Expansion, retrenchment, new products or services, the introduction of new technology, the entrance of new competitors in the market, economic conditions, employee retirements, workforce turnover, and so forth must be considered when forecasting workforce needs. Forecasting is the process of using both historical data and predicted scenarios to determine workforce needs during a stated planning period. Following is a discussion of several forecasting methods that are often used.

Trend Analysis

Trend analysis involves studying historical organizational employment levels to predict future employment levels. For example: If, on average, employment levels in the organization have increased 5% per year, it might be logical to forecast a 5% increase for the next planning period. A more accurate forecast using this method might be to evaluate trends in separate departments or other organizational subentities and then aggregate the increases (or, potentially, decreases) at the organizational level. Doing so provides more specificity as to not only the numbers of employees but also the types of employees needed.

Trend analysis assumes that history will repeat itself. In today’s more volatile times that might not be the case. However, trend analysis provides some data on which a final forecast can be made.

Ratio Analysis

Ratio analysis is a forecasting technique that assumes a set relationship between one variable and another, and that the relationship allows for the prediction of workforce needs. Assuming no increases in productivity, an organization might be able to predict total workforce requirements based on predicted total sales or total productivity. For example: If, historically, it takes five employees for each 100,000 units of product produced, a projected increase of 1,000,000 units per year will require an additional 50 employees.

Organizations often have standard staffing tables that can be used in ratio analysis. As an example, a restaurant chain would know how many servers, cooks, managers, and so forth are needed to staff a restaurant. Based on a projected expansion in terms of the number of restaurants, an increase in workforce needs can be forecast.

Turnover

Analysis of historical turnover—in reality, a type of trend analysis—provides additional data for forecasts. Average turnover rates indicate the number of new employees required just to maintain current employment levels. Obviously, turnover is affected by many environmental factors, most notably unemployment rates, so other variables must be considered when using these data for forecasting.

Managerial Judgment

Managers and executives are asked, based on their experience and knowledge, to develop forecasts. Forecasts, like budgets, can be a top-level overall estimate or a bottom-up aggregation of multiple departmental estimates. Top-level forecasts provide a gross indicator of needed employment levels, but do not indicate where those employees should be allocated in the organization. Bottom-up forecasts, provided by managers in the various departments, provide a better idea of the allocation of the workforce and the types of employees that are needed. However, bottom-up forecasts tend to overestimate workforce needs as each manager tries to increase staff size.

Determining Internal and External Supply of Employees

Not only must the demand for employees be determined, but workforce planning must include an analysis of the potential supply. Forecasts must be made of the supply of candidates for jobs within the organization and the supply external to the organization in the relevant labor market. Methods of forecasting supply, internally and externally, are discussed in the following section.

Internal Supply

The internal supply of candidates can be determined using a number of methods, such as replacement charts, succession plans, human resource management information systems, and departmental estimates. A brief discussion of each of these methods follows.

Succession Planning

The concept of succession planning is similar to replacement charting except the time perspective is different. Succession planning is the process of identifying candidates for future openings. It is a longer-term plan for developing candidates to fill positions. Traditionally, succession planning has been reserved for only high-level positions. However, because of the increased importance of human capital in many organizations, succession plans are being developed for the orderly replacement of lower-level employees.

External Supply

There is a huge amount of information available to assist in forecasting external supplies of labor. Economic and workforce development agencies typically can provide data on labor supply availability. The availability of external candidates is affected by:

• Economic conditions
• Unemployment rates
• College and high school graduation rates in the relevant labor market
• Net migration in or out of the area
• Relative skill levels of potential candidates in the labor market
• Competition for labor in the labor market
• Changes in the skill requirements of the organization’s potential job openings

Determination of Strategies

The analysis of demand and supply for labor leads the SPHR to develop appropriate strategies to achieve the planned level of employment. The result of the analysis can result in one of three conditions:

• Equality: In which case the strategy becomes one of retaining current employees
• Insufficient number of employees: In which case the strategy becomes recruitment
• Too many employees: In which case the strategy becomes decruitment

Retention of employees involves strategies designed to maintain or improve job satisfaction and organizational commitment. For example, retention strategies involve creating pay equity and providing desired benefits when compensation and benefits strategies are being developed.