The Essential Steps of Workforce Planning: A Strategic Guide

Workforce planning: it’s not just about filling seats or matching headcounts — it’s also about foreseeing the future of work. Understanding the workforce planning steps you need to take is the first phase of strategically aligning your employees with your business goals.   

Why focus on workforce planning and optimization? Workforce planning helps you get the right people in the right places at the right times. Workforce optimization enables businesses to improve productivity and retain top talent.    

In this post, we aim to help business owners and HR leaders understand the crucial steps of workforce planning and align them with their broader goals. We’ll cover how to analyze your current team, predict future needs, and then create strategies to meet those needs. 

Introduction to workforce planning

Workforce planning is a systematic, fully integrated organizational process that’s all about planning ahead to avoid talent surpluses or shortages. It’s based on the idea that a company can be staffed more efficiently if it forecasts its talent needs and the actual supply of talent that is or will be available. 

Here at Hubstaff, we’re workforce management aficionados. So, we’re well aware of how vital workforce planning is (and you likely are, too, if you ended up here). However, no matter how much emphasis you place on it, the process of workforce planning can feel complex.  

That journey towards workforce optimization starts with understanding the key steps you need to take. Luckily, there is a universally agreed-upon method of approaching this process, brought to us by the National Institutes of Health.  

What are the 6 workforce planning steps?

The six workforce planning steps businesses need to take to optimize their workforce are:

1. Strategic direction
2. Supply analysis 
3. Demand analysis
4. Gap analysis
5. Solution implementation
6. Monitoring progress

Now that we’ve outlined the six steps, let’s look at a detailed guide to executing your workforce planning strategy. 

Detailed workforce planning steps for business leaders:

By embracing a strategic approach to workforce planning, organizations can anticipate and respond to changes effectively and secure a competitive advantage in attracting and retaining top talent.

Source

Here’s your detailed guide to the steps you need to take to optimize your workforce planning. 

1. Strategic direction 

In this stage, the organization sets the foundation for aligning its workforce strategy with its business goals and objectives related to workforce planning. 

This foundational step is critical for ensuring workforce planning efforts support the company’s overall direction. 

Setting clear goals and Key Performance Indicators (KPIs) during the strategic direction step of workforce planning is essential for measuring progress and ensuring alignment with organizational objectives. 

Here are some specific examples showing you what goals and KPIs would look like at this stage. 

Examples of goals and KPIs for workforce planning

Goal: Improve leadership capabilities across the organization.

KPIs:

• Increase number of current employees completing leadership development programs
• Increase succession planning completion rate for critical roles

Goal: Optimize workforce productivity.

KPIs:

• Increase revenue per employee
• Bolster employee satisfaction scores related to resources and tools for productivity

Goal: Enhance employee retention rates.

KPIs:

• Reduce overall employee turnover rate and voluntary turnover rate
• Increase the average tenure of employees

Setting these goals and KPIs ensures that the workforce planning process is measurable, targeted, and aligned with the broader strategic aims of the organization. It also provides a framework for ongoing evaluation and adjustment (we’ll talk more about this later), enabling organizations to stay responsive to internal and external changes.

2. Supply analysis 

Next, you need to do a classic supply and demand analysis, starting with analyzing your workforce supply.  

A workforce supply analysis involves assessing an organization’s workforce composition to understand employee skills, competencies, and capabilities. The goal is to get a clear picture of the workforce’s ability to meet current and future business demands.  

To quickly re-emphasize why this is all so important, we’ve got a fun fact for you. Did you know 87% of talent-optimized companies surpassed or met their goals in the past year?

Again, we’ve got some clear workforce metrics to look at so you know what to measure at this stage. 

Key components of a supply analysis

• Employee demographics: This includes age, gender, tenure, and diversity metrics, providing insight into the workforce’s composition and potential future changes (e.g., retirements). DEI efforts can also improve recruitment and retention. 
  
• Skills inventory: Assess your existing workforce skills, qualifications, and certifications. This helps identify the skills gaps and any critical skills well-represented within the organization.  
     
• Performance data: Evaluating current employee performance levels to identify high performers and those with potential for growth or promotion.
  
• Workforce distribution: Analyzing how employees are spread across departments, roles, and locations. This helps in understanding whether there are areas of surplus or shortage within the organization.
  
• Employee engagement and satisfaction: Insights into employee morale, engagement levels, and satisfaction can indicate the likelihood of retaining critical talent. Also, it is a vital metric to track based on its impact on productivity and profits. 

• Succession planning and career pathways: Identifying existing succession plans and career pathways to understand how internal talent can be developed to fill future roles.

3. Demand analysis 

It’s all about supply and demand, my friends. But for this step, we’re focusing on workforce demand. 

Demand analysis requires forecasting the skills, jobs, and number of employees the organization will need to meet its business goals. This could involve analyzing trends in the industry, technological advancements, and changes in market demand.

The goal is to anticipate future staffing needs and ensure the organization can achieve its objectives and remain competitive.

Key components of a demand analysis

• Role and skill forecasting: Determining the specific roles and skills you’ll need. Assess how job roles may evolve due to technological changes, process improvements, or shifts in business focus. Then make changes and identify new roles that may emerge.
  
• Quantitative forecasting: Estimating the number of employees needed in various roles based on projected business growth, turnover rates, and operational changes. Then use statistical modeling and scenario analysis to predict staffing needs under different conditions.
  
• Qualitative forecasting: Assessing the quality of skills and competencies required, not just the quantity. Examine the depth and expertise needed in critical areas, leadership capabilities, and other qualitative factors influencing workforce effectiveness.
  
• Scenario planning: Develop various scenarios to understand how different scenarios (e.g., economic downturns, rapid growth, technological disruptions) could impact workforce needs. Consider both internal and external factors 

With a deep understanding of future workforce requirements, organizations can develop targeted recruitment, development, and retention strategies to build the workforce they need to succeed. 

4. Gap analysis   

Now, let’s put these two analyses together to see what’s missing. 

By comparing the current workforce to future needs, organizations can identify workforce gaps in skills, positions, or numbers of employees. This analysis helps understand what needs to be done to prepare for future workforce requirements. 

The gap analysis is where your workforce plan will start to take shape. 

What kind of gaps are you looking for?  

• Skill gaps: Identifying differences between the current workforce’s skills and the skills you’ll need in the future.  
  
• Role gaps: Determining if there are roles that are critical for future success that the organization is not currently addressing or has understaffed.
  
• Quantity gaps: Assessing whether there are enough employees to meet future demand in various roles or departments.  
  
• Development gaps: Recognizing opportunities for developing existing employees to fill future roles and become future leaders. 

Gap analysis is a powerful tool in workforce planning. It provides a clear roadmap for strategic HR interventions, ensuring the organization can meet its future challenges and opportunities head-on.

5. Solution implementation

Once you’ve identified where you’re lacking, you need to develop a game plan to fix it. 

Solution implementation is where strategic estimation meets operational execution. 

The strategies are implemented through recruitment, training, development, and other HR practices. This stage requires careful management to meet the organization’s talent needs efficiently.

Here’s an example of what a solid action plan would look like for one fundamental objective: employee retention. 

Business objective 

Reduce voluntary employee turnover rates and increase the average tenure of employees within the next 12 months.

Action plan for enhancing employee retention rates

1. Launch a mentorship program 

Objective: To foster a supportive culture and facilitate knowledge transfer

Action items:

• Pair experienced employees with newer or less experienced team members.
• Provide training for mentors on how to support their mentees effectively.
• Set clear objectives for the mentorship relationship, including skill development and career guidance.

2. Review compensation and benefits

Objective: To ensure the organization’s compensation packages are competitive and meet the needs of employees.

Action items: 

• Conduct a labor market analysis to compare the organization’s compensation and benefits with industry standards.
• Identify areas for improvement or enhancement, such as health benefits, retirement plans, or performance bonuses.
• Identify current labor costs for the organization. 
• Implement changes to compensation and benefits packages, clearly communicating these to employees.

3. Establish career development opportunities

Objective: To provide clear career pathways and development opportunities for employees.

Action items:

• Map out career paths within the organization for various roles.
• Offer training, workshops, and education support for skill development.
• Implement regular career planning discussions between employees and their managers.

This example takes concrete steps toward creating a more engaging and supportive work environment by focusing on targeted initiatives. This example is just an overview, but it should give you an idea of a good starting point for your workforce planning. 

6. Monitoring progress 

Now that you have a solid plan, it’s time to start monitoring your progress. 

Workforce planning is an ongoing process. Organizations need to continuously monitor their workforce planning initiatives, evaluate their success, and revise their plans to respond to new information or changes in the overall business strategy.

Here’s how you can do that effectively.  

How to monitor your workforce planning progress

• Ask for feedback: To make your workforce planning benefit employees, ensure you’re getting regular feedback. Implement methods to gather feedback from employees, managers, and other stakeholders about the workforce planning strategies and their impact. 

• Adjustments and refinements: Based on the outcomes of the KPI assessments and feedback received, make necessary adjustments to the workforce planning strategies. 
  
• Documentation and reporting: Keep detailed records of the monitoring process, findings, and adjustments made. Regularly report these findings to senior management and key stakeholders to ensure transparency and support for ongoing workforce planning efforts.

• Encourage open communication: Foster an organizational culture that values open communication and feedback. That means welcoming employee feedback at every stage of the process, not just in the initial creation of your workforce plan. 
  
• Use technology: Finally, you must leverage technology solutions to automate data collection and analysis for more efficient workforce management. We saved the best for last here. We would argue this is one of the most critical steps in your strategic workforce planning process — but don’t worry. We’ll cover this in more detail in our final bonus step.  

Monitoring success is a critical step in ensuring that workforce planning remains a dynamic and responsive process.  

By regularly evaluating the effectiveness of workforce strategies, organizations can continuously refine their approach, ensuring their workforce is aligned with strategic business objectives.

Bonus step: Finding tools to automate the process

We agree with our friends at the National Institutes of Health on their six workforce planning steps for effective workforce planning, but one area they missed is the implementation of workforce planning tools. 

As workforce management has been increasingly popularized at major organizations, more and more workforce planning tools have emerged. And new technology has made these tools even more valuable for businesses looking to optimize their workforce. 

Let’s take a look at some of our favorites. 

Workforce management tools

• Hubstaff: We’re a bit biased, but our comprehensive workforce management tool offers time tracking, productivity insights, workforce analytics, and reporting, enabling organizations to optimize productivity and streamline workforce planning processes.

• Survey Monkey: A user-friendly online survey tool that allows users to create custom surveys to gather feedback, conduct market research, and measure employee satisfaction efficiently.
  
• Workday HCM: Offers tools that help organizations manage the entire workforce lifecycle, from recruitment to retirement. Workday HCM provides analytics and insights for strategic workforce planning.
  
• Deputy: Provides scheduling, time tracking, and communication features. These features can then make it easier for businesses to manage their shift workers and ensure they have the right staff at the correct times. 
  
• Google Forms: A free tool that provides a simple way to create forms, surveys, and quizzes. It’s integrated with Google Drive for easy storage and collaboration, making it accessible for gathering feedback and organizing events.

Planning for the future

By leveraging the right tools — organizations can streamline their strategic workforce planning framework. These tools facilitate workforce planning and enhance team collaboration, communication, and organizational efficiency.  

By now, we can all agree that workforce planning is critical for organizations to align their human resources with strategic objectives. You have your path laid out clearly in front of you, so it’s time to dig in and start planning.