Introduction to Workforce Planning

Developing & Implementing Workforce Plans

What is workforce planning? Workforce planning is about deciding how many and what types of workers are required

Corporate objectives set HR needs Corporate objectives set the HR objectives which set the agenda for the workforce plan Indicates likely demand for labour (e.g. sales targets, units, locations, costs) E.g. a strategy of retrenchment will indicate significant reduction in demand for labour

Analyse existing workforce How many? Numbers, location, age full/part-time, permanent/temps etc. How do they perform? Productivity, retention etc. How well does the existing workforce meet future needs? A skills audit should help match existing skills with those needed

Assess future needs (demand for labour) Shaped by plans for markets, products & targets for efficiency and costs Impact of changes in technology (e.g. better production processes, new ways of delivering services) should be taken into account Consider changing economic, social and political environment e.g. recession should make it easier to recruit (higher unemployment) but will downturn in consumer spending reduce requirement for labour? Remember that, as with any forecast, the workforce plan needs to make a series of assumptions – these need to be as realistic as possible and based on reliable data

Identify gaps in the workforce (gap analysis) Arise if the business does not have the staff with the right skills for future needs, or enough staff in total to meet demand (or worse – both) Plan should identify the strategy for closing the gap – a combination of recruitment, promotion and training, including an estimate of the likely cost

Internal influences on workforce plan Corporate objectives Simply the most important internal influence – any significant change in, or new corporate objective will impact the workforce plan Production and marketing objectives The required production capacity, product quality and delivery timetables are significant to the business demand for labour Financial position and objectives The workforce plan must take account of the financial budgets in place and the cash flow forecasting. Staff remuneration is usually a major operating cost and cash flow Strength of the current labour supply The number, skills and experience of existing staff clearly influence workforce planning since the process examines whether the existing supply is sufficient to meet demand Existing organisational structure How production is organised (e.g. cells, teams, production lines) and management structure (e.g. flat, matrix) all affect existing internal supply of labour

External influences on workforce plan Market demand The most important external influence. Demand for the firm’s products determines production output which in turn sets out the requirement for labour Labour market trends Also very important. The strength of the overall labour market determines how easy or difficult it is to recruit staff and the market rate for paying them Economic conditions Closely linked to market demand. A weak economy may lower wage rages and make it easier to recruit (and vice versa). But poor economic growth is likely to result in lower market demand too Social and political change E.g. demographic factors may affect the supply of labour (ageing population; more single-person households). Legislation such as the minimum wage directly affects staff costs in many industries. Local factors Local labour market may be affected by specific factors such as changes in transport links, quality of local schools, major changes in substantial local business employers

Handling a labour shortage When a business does not have enough labour to be able to meet production demand

When a labour shortage might occur A short-term increase in demand which cannot be handled by the existing production capacity A loss of experienced staff through higher staff turnover Competitor expands its operations and offers better pay terms, which encourages staff to change jobs Changes to products or production processes mean that existing staff do not have the required skills and experience

Some ways to handle a labour shortage Increase production capacity by introducing additional shifts , extending working hours ( overtime), or by employing temporary or seasonal staff Review whether the existing pay and reward systems are competitive Invest in training to address the workforce skills gaps Recruit more aggressively, perhaps by promoting job opportunities in new ways or by offering incentives to staff to introduce potential recruits Offer flexible working options to broaden the pool of potential recruits to the business

Excess labour When a business has too many employees for its needs

Why excess labour occurs The basic reason – excess production capacity E.g. economics downturn = reduced demand, leaving firms with too many staff Also arises when existing employees do not have the skills that the business demands

Dealing with excess labour Redundancies - common short-term response, but must be genuine Ban or restrict overtime , introduce short-time working or cut shifts (lower pay for employees, but fewer job losses) Flexible working - e.g. full-time move to part-time; job sharing; career breaks Temporary workplace shutdowns (e.g. extended holiday breaks) Relocate or retrain employees to cover skills gaps (takes time)

Benefits of effective workforce planning Most importantly, helps a business achieve its corporate objectives by ensuring the business has a workforce of the right size, with the right skills, in the right place Encourages managers to prepare and plan for changes rather than simply react to them – HRM is part of strategic decision making Businesses going through significant change are better able to handle the workforce implications Improved communication – staff feel that they are closer to the decision-making process, are working for a business that takes HRM seriously

Issues with workforce planning (1) Cost Perhaps the most important issue. A workforce plan needs to be supported by sufficient financial resources for it to be effective. Every decision made as a result of the plan has a cost implication – e.g. new training, extra recruitment, redundancies. The cost needs to be justified and should be consistent with the corporate objectives. Employer / employee relations The workforce plan inevitably affects both sides of the relationship e.g. a plan to offer more flexible working options would be welcomed by employees, but might place additional pressure on the workloads of line managers Solution is usually better communication and consultation

Issues with workforce planning (2) Training The issue for most businesses (particularly small ones) is that training is: (1) Expensive (particularly off-the-job training) (2) Disruptive, and (3) Difficult to measure the benefits Business image A business that has an effective workforce plan that has the support of employees is likely to enjoy a good brand or corporate image Customers recognise businesses that place HRM as a strategic priority – they see it in the higher quality of customer service and quality that they experience at each interaction with the business.

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Introduction to Workforce Planning

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