Workforce Forecasting: Why it Matters, Key Components, Benefits, and Techniques
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Workforce forecasting is similar to weather forecasting, except that this is significantly more accurate. An important tool in HR and strategic planning, workforce forecasting helps predict future demand by applying predictive analytics on historical data.
This guide delves into workforce forecasting and talks in greater detail about the workforce forecasting techniques that businesses can use.
What Is Workforce Forecasting?
Simply put, workforce forecasting is a prediction of the number of employees that will be required to fulfill future business needs. It lists out not just the number of people required, but also the specific skill sets currently available and the capabilities that need to be acquired to meet future market demands.
Workforce forecasting, when done correctly, is a systematic process that can help:
- Align staff with demand: When you can predict the number of employees required in different roles and at different times, you are better equipped to optimize your workforce and reduce under or over-staffing.
- Budget effectively: Knowing future talent needs helps in accurate funds disbursal, channeling resources towards recruitment, training, and other HR activities.
- Stay competitive: Keeping up with the fast-changing needs of the market requires having the right talent at the right time. Workforce forecasting can help a business get a competitive edge.
- Reduce employee turnover: Businesses can make better decisions regarding training, career development, and promotions when they have an accurate idea about workforce requirements. This increases employee satisfaction and can reduce turnover.
Why Is Workforce Forecasting Necessary?
Workforce forecasting isn’t a new trend made popular through new-age business gurus. There is a definite need for more businesses to adopt and implement this HR tactic in their operations. Unfortunately, a recent World Economic Forum survey shows that almost 40%of companies have a rudimentary understanding or capability for workforce forecasting, and they usually make decisions based on their gut feelings.
This approach can prove detrimental and lead to:
- Reduced efficiency: Companies that do not match their workforce to changing market demands will notice a drop in operational efficiency.
- Greater turnover: When workforce is not forecasted correctly in an organization staff could be under or over-utilized, and these businesses often notice higher turnover rates as compared to businesses that rely on forecasting techniques.
- Lost opportunities: Lack of workforce forecasting, and the missing talent, therefore, often leaves companies unprepared for market opportunities when they arise.
The Core Components of Workforce Forecasting
There are quite a few workforce forecasting models and techniques that can work for a business:
- Historical Data Analysis: Past data can be used to determine future requirements. Studying previous patterns and trends from the company’s older turnover rate and workforce data can be a good starting point.
- Future Demand Estimation: Assessing future business growth, imminent projects, and predicted market trends can indicate future business needs, including the number of people and specific skill sets.
- Internal Supply Analysis: Before looking outward, examining the current workforce can help a business understand the strengths, capabilities, and potential growth of the current workforce and make decisions regarding training, promotions, or role shifts.
- Skills Gap Analysis: Identify skills gaps in your workforce by comparing existing capabilities with future requirements. This helps calculate whether skills shortages exist in a particular team or department.
The Benefits of Workforce Forecasting
Workforce planning can help businesses take a lead in the market with benefits such as:
- Strategic planning: Workforce forecasting does not work in isolation. An important aspect of strategic planning, effective workforce forecasting directly impacts an organization’s long-term business goals. With the knowledge and insights gained, organizations are better positioned to determine whether they have the right talent to support their growth plans, whether it involves expanding into new markets or launching new products.
- Talent development: Workforce forecasting is not just about filling positions in the organization. A business must also focus on the development of existing talent and retaining it. When employees see themselves as part of the organization’s future it boosts morale and there is greater job satisfaction. The immediate benefit of this is lower turnover rates and more in-house talent being nurtured.
- Adaptability and agility: A business scenario is volatile and market conditions, technologies, and consumer preferences can change overnight. Is your business ready to adapt? Agile companies can shift strategy quickly to gain a competitive edge. Workforce forecasting is especially crucial in this situation as it supports this adaptability. When a business anticipates future talent needs, it can quickly adapt to the change and stay ahead in the game.
- Workforce efficiency: Having clarity on future workforce demands allows a business to allocate resources more efficiently. This eliminates the hassle of last-minute hiring or having an overstaffed but under-used department.
Popular Workforce Forecasting Techniques
There are a few workforce forecasting techniquesthat a business can apply. Some of the more popular ones include:
- The Delphi Technique: In this method,a panel of experts is involved in arriving at a decision. Adjustments are made after taking feedback and making revisions to the plan. The Delphi Technique is useful in the absence of complete historical data.
- Managerial Analysis: Having senior leaders and managers is always great. This method relies on their years of experience and judgment in forecasting workforce requirements. A combination of qualitative insights and data is used to take the decision.
- Advanced Quantitative Techniques: As more businesses are starting to rely on accurate workforce forecasting, the methods are becoming more sophisticated. Regression analysis or time series forecasting that use past data to derive patterns are gaining prominence in this HR initiative.
- Workload Analysis: As the name suggests, this method looks inwards at the existing workforce and its roles within the organization. Workload analysis identifies the number of people required to complete specific tasks and functions and helps managers arrive at staffing requirements. This is usually applicable in departments that have quantifiable tasks, such as manufacturing or customer service.
- Historical Analysis: The solution for the future often lies in the past. Reviewing and analyzing historical workforce patterns is a useful workforce forecasting toolthat can help predict future needs.
Also Read: Workforce Analytics in Labor Forecasting
Conclusion
Workforce forecasting is not a buzzword or new corporate jargon. If a business is looking for long-term success and growth, it needs to prioritize workforce forecasting. Ignoring it can mean missed opportunities, inflated expenses and inefficient human resource management.
Frequently Asked Questions
Q1. Why Is Workforce Forecasting Necessary?
The business landscape is volatile and can change with evolving customer demands, new technologies, and future opportunities. A business needs the agility to quickly pivot and adapt to these fluctuations. Knowing how many people are required to complete a project, not being over- or under-staffed, and maintaining high levels of efficiency require correct workforce forecasting.
Q2. Are There Benefits Of Workforce Forecasting?
Some of the major benefits of workforce forecasting in business operations include:
- Strategic planning: Workforce forecasting impacts the long-term business goals of an organization.
- Talent development: The development of existing talent leads to lower turnover rates and more in-house talent.
- Adaptability and agility: Workforce forecasting helps a business quickly adapt to change.
- Workforce efficiency: Efficient resource utilization.
Q3. What Workforce Forecasting Tools Do I Need?
There are a few workforce forecasting tools that a business can choose from:
- The Delphi Technique: Uses a panel of experts.
- Managerial Analysis: Relies on senior leaders and managers.
- Advanced Quantitative Techniques: Combination of past data and sophisticated techniques.
- Workload Analysis: Study of the existing workforce.
- Historical Analysis: Analysis of historical workforce patterns.
