In today’s rapidly changing business landscape, organisations must continuously adapt to remain competitive. A crucial aspect of building this capability is workforce capacity planning. But what exactly is workforce capacity planning, and why is it so essential for your company’s success?
We answer those questions in this blog, as well as outlining the best practices and strategies you can use to make your workforce capacity planning process as effective as possible.
What is workforce capacity planning?
Workforce capacity planning is the process of assessing an organisation’s workforce to ensure that it has the optimal number of employees to deliver on current and future needs and demands. It assists in aligning the workforce with organisational strategy, enabling the business to hire the right person with the right capabilities for the right job.
The impact of workforce capacity planning
Workforce capacity planning is similar to workforce planning in that it’s a process for long-term strategic planning and ensuring that your organisation meets its business priorities. It does that by identifying the capabilities (the skills, tools, processes, knowledge, and behaviours that combine to deliver on business outcomes) that enable employees to perform their jobs and aligning them with your strategic goals.
Perhaps most importantly, effective capacity planning improves productivity and efficiency. It enables your business to deploy the right skill sets and knowledge where and when they are needed, minimising any inefficiencies caused by capability gaps and ensuring that employees are able to perform their roles with greater competence and confidence.
On top of that, workforce capacity planning enables you to identify and eliminate bottlenecks and redundancies in processes. By fine-tuning workflows and ensuring the right tools are in place, workforce capacity planning allows a seamless flow of tasks, accelerating work and productivity. In other words, workforce capacity planning helps in creating a more agile workforce capable of responding swiftly to challenges and opportunities.
This also means you’ll reduce costs, because you won’t be wasting money from overstaffing or resources from understaffing. In other words, workforce capability planning fine-tunes your resource planning and management to ensure your business is operating optimally.
Plus, there’s also the fact that 94% of employees say they would stay with their company longer if it invested in their professional development. When you use workforce capacity plans to identify the gaps in capabilities, you can develop training to close those gaps, increasing employee satisfaction and engagement and reducing employee turnover. And, given the cost to businesses when they need to hire, reducing turnover makes for a healthier bottom line.
Strategies for effective workforce capacity planning
You might think workforce planning is a big task due to its broad scope. You wouldn’t be wrong, which is why there are some strategies you can employ to make the process easier and more effective.
When you start workforce capacity planning, you should include:
- Decision-making driven by data
- Scenario planning
- Forecasts of future needs and demands
- Communication and collaboration.
Data-driven decision-making
It might seem obvious, but it’s essential to mention here. Data collection and analysis involves gathering and analysing data on current workforce capabilities and the business landscape. A good tool to help you here is an environmental scan, which helps workforce planning managers in understanding the operating environment of their company. This drives managers and leaders to make better data-informed decisions for the future.
How does an environmental scan do this? Well, it’s a process of analysing the trends (in historical data), competition, customers (and customer demand), and the external labour supply, in order to gain an objective view of your organisational context. These factors fall under four categories:
- Internal environment scanning (supply). This is your organisation’s current situation, including hiring costs, revenue per employee, new hire attrition, and turnover.
- Internal environment scanning (demand). This is the value your organisation creates, and how it delivers it.
- External environment scanning (supply). This includes things like the talent currently available and competitor growth.
- External environment scanning (demand). This covers the political, economic, social, technological, legal, and environmental factors that affect your organisation and how it operates.
Scenario planning
A scenario analysis, or scenario planning is a method used to prepare for different future scenarios. Scenarios are considered in many forms that affect the workforce, including both internal and external drivers. It encourages workforce planners to conceptualise future scenarios and events that will have an impact on the organisation, sidestepping the “what ifs?” of your initiatives with some helpful insight. In other words: scenario planning helps you avoid worst-case scenarios.
The idea is to imagine scenarios outside of what historical data might predict–while the events of the past can indicate patterns that will continue to occur, they aren’t the be-all and end-all. Most organisations didn’t factor a pandemic into their workforce plans based on the data from previous years, for example.
Robust scenario planning should look deeper into the data to find the indicators of the unexpected. Yes, we know, we just said that most organisations didn’t see the pandemic coming. That doesn’t mean it was unpredictable—for years, leading scientists had been saying that another pandemic was close at hand. But that’s exactly the point. Scenario planning should dig deeper to find the patterns in historical data that would otherwise go unnoticed. This way, you’ll never truly be surprised by challenges that arise, and you’ll be flexible and adaptable enough to address those challenges.
Forecast future needs
This is also known as demand forecasting, and it’s one of your most important workforce capacity planning tools. It’s about forecasting the future needs of your workforce, from future workload to future hiring needs, and even customer demand, estimating both the quantity of the workforce required and its quality.
One of your best practices here is to think of the capabilities required to successfully deliver your organisation’s objectives and goals. These won’t just be limited to business capabilities (the organisation’s capabilities to perform business functions), but human capabilities (employees’ role-specific capabilities) as well.
When you’re forecasting future needs, you should make sure you assess:
- What capabilities you will need
- The importance of the capabilities
- The current level of proficiency in each capability
- The future desired level of proficiency.
It’s also important to remember that for better forecasting, data should be based on the collective capability of teams and business units, rather than specific individuals.
Stakeholder management and engagement
Capacity planning isn’t just a task for human resources—just like any change management program, it needs the input and collaboration of other business units, stakeholders and business leaders. Without that buy-in and collaboration, you’ll lack the support to actually design and implement your capacity plans—in fact, up to 70% of change management programs fail when they don’t have leadership support.
Even once you identify the relevant stakeholders, you can’t guarantee that they’ll be all-in on your workforce capacity plan. As with building co-ownership between HR and business units in your organisational change initiatives, you’ll need to convince them that capacity planning is important to them. Make sure to answer:
- What motivates this particular stakeholder? Why are they important to your company and its capacity plans?
- What are these stakeholders’ priorities and how can you align those priorities with your workforce capacity planning?
- Is this stakeholder likely to support your project, and if not, how will you address that? What pain points can your workforce capacity plans address for them?
Without involving stakeholders, your workforce capacity plan will be dead on arrival and unable to make any meaningful changes to the workforce or business performance.
The impacts of not doing workforce capacity planning
Failing to implement a workforce capacity planning process can have significant and detrimental impacts on your organisation. The biggest impact is that you won’t be able to proactively plan for your company’s future state, and that’s a problem that snowballs out into individual inefficiencies.
- Poor resource planning and allocation, resulting in wasted resources or an inability to achieve goals due to a lack of resources. For example, understaffing can drive employee burnout, which in turn feeds turnover.
- 48% of executives name succession planning as their biggest workforce concern, but a lack of workforce capacity planning prevents organisations from hiring high-performing talent, as they can’t identify the necessary capabilities that mark a high-performing employee.
- Low engagement and morale among employees. This could be from a lack of professional development (due to not knowing what capabilities to develop) or under-utilising the skills and expertise your employees possess (due to poor resource allocation). This all feeds back into employee turnover, as employees are ten times more likely to find a new job if they feel their capabilities are being wasted.
- Capability gaps, both from employees leaving the business and a lack of clear capacity planning to provide targets for training to address. This can lead to an inability to effectively adapt to change.
- Reduced productivity and performance due to a misalignment between employee capabilities and the business’s strategic priorities, barring your organisation from taking opportunities and creating an organisation that is sustainable in the long term.
Key takeaways
Workforce capacity planning, or workforce planning, is an essential activity allowing organisations to prepare themselves for the future. It involves planning for future customer demand, the number of employees needed (including hiring plans and costs), project demand, and training and development needs to build organisational capability.
It’s a large process, and it can be daunting. You can make it easier for yourself with four workforce capacity planning strategies:
- Decision-making driven by data
- Scenario planning
- Forecasts of future needs and demands
- Communication and collaboration.
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