How Accurate is Your Workforce Forecast?

In the wake of a pandemic that has turned the economy upside down and changed the way we all do business, attempting to predict your company’s future is challenging. However, not anticipating and planning to accommodate staffing needs can leave you short-handed when opportunity strikes or over-staffed and underfunded. No crystal ball can predict every bump in the road, but generating an accurate forecast based on available data can allow you to continue to operate seamlessly and plan ahead for seasonal changes, market expansion, and technological advances.

What Does Workforce Forecasting Entail?

Workforce forecasting attempts to predict the amount and type of work an organization will have at a future point in time as they strive to meet short and long-term goals. It ensures that the proper people and skills are already in place to keep day-to-day operations running smoothly and allows management to plan for anticipated change. A good forecast considers not only the number of employees needed, but the skills required, and the costs associated with acquiring or retaining those people and skills within the organization.

What are the Benefits of Forecasting?

Developing an accurate prediction of workforce needs in the future is a multi-step process that requires careful analysis of various aspects of the organization. The information gleaned through this deep dive can inform decisions regarding numerous different aspects of the company.

  • Better Organizational Structure – A detailed examination of the structure, allotment, and skill set of current employees leads to a greater understanding of business operations. It can lead to the development of reorganization strategies to improve the efficiency and effectiveness of employees and teams.
  • Improved Staffing Budgets – Knowing in advance that the company will need to hire more employees to support top initiatives informs budgeting decisions to cut back where necessary to accommodate increases in payroll costs.
  • Diminished Possibility of Employee Shortages – Accurate forecasting must also consider inevitable employee turnover events, whether due to retirement, company changes, or better employment opportunities. Understanding how these events impact recruiting efforts, as well as knowledge and skill retention, is essential to maintaining a skilled workforce.
  • Maintain Goal-Oriented Operations – Basing staffing decisions on the skills and individuals required to achieve established company goals ensures that recruitment and business strategy are correctly aligned.
  • Eliminate Skill Gaps – Business operations at present may be smooth. However, technological changes or customer needs down the road may dictate recruiting employees with a new set of skills. Advanced awareness of these changing trends helps businesses plug the gaps before they become apparent and lead to losses.

Developing an Accurate Forecast

Begin with a Vision

The goals and objectives of the company should lie at the heart of your forecasting efforts, and defining those goals should be the first step in the forecasting process. What do you hope to achieve in the next year, or five, or ten? Do you want to expand into new areas of the country or launch a new product? Are you struggling to keep up with a new competitor?

Next, identify the core competencies, skills, knowledge, and abilities vital to achieving your goals. If you are launching a new product, perhaps you need to expand your marketing department. If you are headquartered in Salt Lake City and want to expand into Utah County, you may wish to consult a staffing firm with first-hand knowledge of that market to assist with recruitment. The company’s direction will determine what your staffing needs will be in the coming months and years.

Perform a Skills Inventory

Until a problem arises, you may not have a reason to look closely at each team within the company, but the exercise can be enlightening. Examine the current staffing and organization. Does the staff distribution support the goals you want to achieve? Are all of the necessary skills and competencies in place? Once you understand the current staffing, you can make plans to close skill gaps and balance staff distribution to support business strategies.

Analyze Your Data

Filling known skills gaps is a vital first step, but it does not account for significant changes like a holiday surge or rapid company expansion. Forecasting workforce needs to account for these contingencies requires more analysis.

Companies rely on two main methods for determining what future staffing challenges may be ahead.

  1. Trend Analysis – Companies use historical data pertaining to employee turnover rates, demographics, sales, hiring trends, promotions, production, and employee transfers to identify past trends that are likely to repeat themselves. It may uncover a recurring pattern of high turnover rate after the busy holiday season, indicating the need to rely on temporary staffing for the holidays instead of hiring permanent employees. Trends can only be identified if a company is old enough to have five or ten years’ worth of data to analyze.
  2. Ratio Analysis – For younger start-ups, a ratio analysis is a more useful tool. This method predicts staffing needs by comparing company ratios to market standards. For example, to determine how many sales employees the company needs to successfully close “X” sales per month, one would examine the ratio of sales employees to sales in the market. Comparing this ratio to the current ratio at the company can inform sales hiring decisions before the busy season starts.

Create a Plan

The plan you develop should tailor directly to the skill gaps and staffing needs you identify. The actions required to achieve the desired mix of knowledge and skills may necessitate downsizing in one area or recruiting in another. Past company trends may suggest the best course of action is to partner with a temporary staffing firm because your staffing needs are transient or seasonal. Acting on the information gleaned through workforce forecasting will help make your company more productive and successful in achieving its goals and ultimately becoming successful.