Workforce planning can be a simple way of forecasting future skills demand. Consider the simplified diagram of a small software firm below.
The boxes and arrows represent ‘stocks’ and ‘flows’ of staff. Each of the boxes represents groups of staff with similar skills. They may be grades, or just clusters of roles which represent significant career steps in the business. The arrows represent different flows of staff, either within the firm or to/from the external labour market.
Using this model as a simple tool, it is possible to define and calculate a firm’s ‘demand for staff. There are several different types of ‘demand’ for employees:
Replacement Demand- this is when your demand for skills is prompted by either a leaver or a promotee. It assumes that the requirements of the job are the same & you are just seeking to fill an open vacancy. In this example, the ‘replacement’ demand among programmers is 6, because 4 have left and 2 have been promoted.
Growth Demand- this may also be simple if it’s just a case of recruiting to add to existing, well-established jobs (ie we need 2 more software engineers or sales people). However, if the growth means that the nature of the work is changing (eg recruiting your first PA, or a systems analyst) then the picture is different. In our example, our growth demand is for 2 more staff. The firm has decided it wants two extra programmers (growing from 10 to 12 during the year – these are the numbers in the bottom corners of the programmer box).
Quantity - demand might only be articulated in quantitative. terms (eg new establishment opening - need 20 operatives)
Or quality – a firm may need more software people with project management/client management skills
Current demand is the usual focus - short-term focus, meeting immediate need
Future demand, more difficult & less precise. Sometimes highly predictable (eg retirement bulges) - other times can engage in educated guesswork (assume 10% resignation rate among graduates; assume only 60% of women will return from maternity leave)
Workforce planning is a discipline which allows each of these aspects to be quantified & modelled. Scenario planning can be used to examine the demand & supply implications of business growth scenarios - eg grow, steady state, contract.
In our example, the number of programmer recruits which the firm needs to find during the year is 8. This figure is derived by adding the replacement and growth demand figures together. In effect, the firm in our example has to recruit 8 more programmers just to grow by 2.
Another way of looking at workforce planning as an aid to decision-making is to put together a simple planning grid (see below). In this example a manufacturing firm of 375 staff is trying to estimate how many people it will need to recruit next year. The grid forced them to look at different assumptions about staff turnover, about the balance of internal versus external recruits into any vacancy, and the likely growth scenarios which they might be in.
These scenarios told them that the number of recruits next year would range from 4 to 45 staff – quite a wide range! Then they applied a ‘reality check’ to these figures in order to narrow the range to something they could work with.
First, they new that the smallest number they needed, based on their history of staff turnover, was 12. So any cells in the grid which contained fewer than 12 recruits could be ruled out (or shaded grey, in our version). Next, they looked at their previous record of recruitment and found that they did not have the resources (trainers, equipment etc.) to assimilate more than 20 recruits during the year. This excluded any numbers above 20 (shaded blue). This view was reinforced by the view that they had never attracted more than 30 competent candidates in previous recruitment campaigns. This excluded any numbers in the grid above 30 (shaded yellow).
The range which remained after this process was from between 12 and 19 recruits. This number was felt to adequately allow for staff turnover, a clear ratio of internal to external recruits, and realistic growth scenarios.
At one level, workforce planning is a process which builds a range of factors into decision-making about a firm’s demand for skills and staff. In smaller organisations, it can remain a simple discipline. In larger ones it might need to reflect greater complexity and bigger numbers. Remember, it is not an exact science. It can, however, make sure that resourcing decisions are rational, have taken into account the main variables, and are based on a realistic view of the future. It can also help firms to be less reliant on knee-jerk responses to labour market changes.
Firms which need to invest in thousands of pounds worth of capital equipment or new premises would expect to go through rigorous planning processes and cost-benefit analysis. And quite right too. Yet investment in people (often a more costly asset) is only rarely subject to the same discipline. Workforce planning can help professionalise this process.
There is remarkably little practical help for employers in the techniques of workforce planning. The Local Government Employer’s Organisation has produced on of the most useful and up-to-date guides, though its focus is on local authority employers.
http://www.lg-employers.gov.uk/documents/publications/r&i/workforce_planning.pdf
There is a professional body which focuses on workforce planning. It is called the HR Society (formerly the Manpower Society). It runs events and training courses on workforce planning which are very practical.
http://www.hrsociety.co.uk/index.htm
An excellent source of data on the local labour market within the East of England is the East of England Observatory.
http://www.eastofenglandobservatory.org.uk
There are also county-by-county observatory sites. For example: -