Workforce Planning: The Complete Guide to Optimizing Your Team

Workforce planning ensures that you have the right team at the right time to navigate the competitive service industry landscape.

In this guide, we’ll discuss all of the essentials of the process to help you get the most out of your resources, from key steps and benefits to top tools.

Key Takeaways

Workforce planning is a process of aligning your organization’s workforce with business strategy and goals, usually by balancing labor supply with demand. According to research, this process is usually undertaken by professionals to achieve three main purposes:

Source: An Operational Process for Workforce Planning

Learn more about the key benefits of enterprise resource planning.

According to the 2023 State of the Global Workforce survey, 51% of workers said they are watching for or actively seeking a new job. The same survey results show that 59% of employees are not engaged at work, while 18% are actively disengaged at work.

Employee engagement is associated with many important success factors, such as increased accountability, higher quality of work, reduced turnover, and better customer satisfaction. This becomes even more crucial considering the existing shortage of skilled IT labor.

In light of these statistics, workforce planning becomes one of the most fundamental processes for achieving success. It not only helps you properly utilize your employees’ capabilities and strengths, but also manages their daily satisfaction by supporting core HR activities such as talent retention and hiring. Some of the main benefits of workforce planning include: 

In our guide to capacity planning and management, we briefly discuss the importance of implementing your strategies across different time periods — long-term, mid-term, and short-term.

This also applies to workforce planning initiatives, which we can separate into strategic and operational:

Aligning short and long-term strategies in workforce planning is necessary for maintaining organizational coherence and adaptability. By ensuring that daily operations support long-term goals, businesses can effectively navigate immediate challenges while steadily progressing toward their business goals. Making sure that employees across all levels of management are aware of both short and long-term goals can support this cohesion.

Learn more about resource planning with software:

The workforce planning process is a long-term strategy for human resources optimization. It can be divided into several main steps, which include defining core issues or areas of focus, analyzing current capabilities and capacity gaps, forecasting future requirements and availability, and developing and implementing staffing strategies.

To be able to proceed with the workforce planning process, you’ll first need to provide answers to the why questions: why are you looking to implement workforce planning, and what are you looking to achieve?

An understanding of the broader business context is essential for developing this strategic approach to managing human resources. Once you have a solid grasp of your main business strategies, investments, various external and internal factors, and what-if scenarios, you can proceed to an analysis of your current and future workforce needs. 

This forms the foundation for subsequent steps in the workforce planning process, guiding decisions on hiring, training, development, and workforce restructuring.

Analyzing the current workforce composition and skills involves a detailed evaluation of employees’ skills, qualifications, and experiences, along with assessing the workforce’s demographic characteristics, such as age, gender, and cultural background. By examining technical abilities, soft skills, leadership qualities, and other competencies, organizations can identify areas of strength and weakness.

This analysis is crucial for identifying skill gaps, informing talent management strategies, and making decisions about future hiring, training, and development. It ensures the workforce aligns with the organization’s current operations and strategic objectives, facilitating informed planning for future needs.

The ability to anticipate and prepare for future changes is key to maintaining an agile and effective workforce. Effective forecasting helps businesses stay resilient and proactive despite external and internal changes.

When forecasting, you’ll need to consider the following issues:

The ultimate goal of forecasting within workforce planning is to align the organization’s human resource capabilities with its evolving needs to support sustained growth and success. This is not a one-and-done event, but a continuous process of gathering, updating, and interpreting workforce-related data.

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After establishing your current and projected capabilities, the next step is gap analysis and solution development. Gap analysis can be a dynamic and complex process that targets different factors in a specific context — for example, in a marketing agency, gap analysis might focus on aspects such as:

Workforce planning gap analysis usually contains two main steps: supply and demand analysis and identifying skill gaps.

This involves a detailed comparison of the current workforce (supply) against the projected needs (demand). This analysis helps identify discrepancies between the available skills, numbers, and roles in the current workforce and what will be needed in the future.

It’s a meticulous process that considers various factors like retirement rates, potential turnover, and the impact of technological advancements on job roles.

The main gap analysis process is pinpointing specific areas where the workforce’s current skills do not align with future requirements. This includes identifying roles that are at risk of becoming obsolete and those that will be in high demand.

It also involves assessing the depth of the learning curve for new technologies or processes and understanding where additional training or recruitment is necessary.

Once gaps are identified, the next step is to develop and implement solutions. This could involve a range of strategies, such as targeted recruitment for hard-to-fill roles, upskilling or reskilling programs for existing employees, and succession planning for critical positions.

Additionally, organizations might consider organizational restructuring or changes in work processes to better align with future needs.

Your workforce planning efforts should be monitored and measured in order to ensure that you’re addressing your identified capacity gaps and forecasted future needs. Ask the following questions:

Secondly, in order to measure the real impact of your workforce planning strategies against target goals, you can monitor certain key performance indicators. Some of these key capacity planning KPIs are attrition rate, retention rate, tenure, quality of hire, and diversity metrics.

To gauge your agency’s performance, it’s useful to compare your outcomes with industry standards and competitors. For example, according to the Bureau of Labor Statistics, the overall turnover rate in the US in 2023 was 4%, with quitting accounting for 2.5%. Furthermore, the average duration of employment was reported to be 4.1 years. You can consider these numbers in the context of your industry and agency environment.

There are two commonly known workforce planning models: HCMI and OPM.

The HCMI model consists of eight steps. It addresses workforce-related questions, followed by scenario analysis and macro (management input) and micro (line manager input) demand forecasting. It also includes internal and external supply modeling, gap analysis between demand and supply, and the development of a workforce action plan.

In contrast, the OPM model follows a five-step process. It starts by setting a strategic direction linked to the agency’s broader plans. The second step involves analyzing the workforce and identifying skill gaps. Developing and implementing an action plan comes next, focusing on strategies like recruitment and training and ensuring that resources are well coordinated.
Finally, it concludes with monitoring, evaluating, and revising the plan.

Both models prioritize strategic alignment and continuous evaluation, but HCMI leans more towards in-depth analysis at each stage, while OPM focuses on a clear, structured process integrating workforce planning with overall strategic objectives.

To summarize our discussion of the workforce planning processes, here are our main tips to ensure efficiency and effectiveness:

After exploring the main steps to developing your workforce planning strategies, this section outlines the three fundamental ways to optimize your results: managing skills and knowledge effectively with human capital planning, leveraging technology, and monitoring workforce utilization.

These steps ensure a skilled, well-equipped, and efficiently deployed workforce, aligning human resources with business objectives.

The basic first step of optimizing workforce utilization and productivity is effectively managing the skills and knowledge possessed by your agency’s resources. This activity, known as human capital planning, is a fundamental aspect of strategic HRP.

Human capital planning can help you:

In the later sections of the guide, we’ll cover essential HR strategies that help cultivate your agency’s resources, such as talent retention and management.

According to research by Gartner, technology was placed as one of the top three priorities for HR leaders in 2024. However, 56% of HR leaders noted that their HR technology solutions and strategy do not match their current and future business needs. HR leaders are also uncertain about which technology to adopt and how to proceed.

Garner suggests focusing on the following main concerns: 

In the following section, we’ll discuss the best tools for effective workforce planning and introduce key features that support day-to-day agency operations.

Since workforce planning is a complex process, there’s a variety of solutions available that can support your planning, both on an operational and strategic level. Here’s a brief comparison of potential types of software solutions you might encounter during your research:

Consider the above factors when looking for the best workforce planning software for your agency. In the following section, we’ll explore some key features of Productive,  a popular all-in-one solution, as an example of a good option to look out for.

Productive is a comprehensive agency management tool for agencies of all shapes and sizes. It gathers key features that support workforce planning, including billable hours management, resource management, task allocation, utilization forecasting, and more.

Key Features Include:

Additional features of Productive include Sales, Docs, and Automations. Productive also includes a variety of integrations that help maintain continuity with your established workflows, such as Xero, QuickBooks, Google Calendar, Slack, HubSpot, Zapier, and more.

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Billable utilization is the fundamental metric for tracking the success of your capacity management efforts. In short, it’s the ratio between billable hours and overall hours worked, tracked per employee, team, or department (learn more: what are billable hours and how to calculate them).

A low utilization rate signifies that much time is spent on non-billable work, which can signify ineffective processes. However, an overly high utilization rate — industry standards usually recommend a maximum utilization rate of 90% — often means that your employees are being overworked.

This can lead to increased turnover, significantly impacting the success of your workforce planning efforts.

Utilization rates can also help guide your long-term planning. For example, you can forecast utilization and decide whether you have enough resources for potential projects. Or, you can see which underutilized resources in certain parts of the year, and either restructure your teams or guide sales efforts towards acquiring specific clients.

Find out more about managing your utilization in crisis times:

By integrating workforce planning into your HR planning process, you can optimize human capital and employment models, ensuring you have the right skills in the right places. Your organization’s success in integrating workforce planning with other HR strategies relies on a comprehensive understanding of both the strategic and operational aspects of workforce planning.

Key areas of integration include:

This holistic approach ensures that workforce planning is a continuous process aligned with the broader HR strategy to enhance organizational agility and resilience.

In this section, we’ll explore strategies for human resources management. We’ll delve into effective methods for attracting and retaining employees and managing workforce diversity, equity, and inclusion (DEI), essential elements in building a strong, dynamic, and inclusive workforce.

To ensure your company’s success, it’s important to develop talent acquisition strategies that have the capacity to reach a wide audience, as well as the right profile of employees for your agency. Here are some tips for improving your talent acquisition:

The 2020 Work Institute Report presents the following factors as the main reasons for voluntary turnover:

Consider these statistics when developing strategies for employee retention. Every agency and industry is different, but some basic tactics include working on comprehensive training plans to ensure that employees feel valued and engaged. Another important tactic is proper succession planning, which provides employees with a career path within the organization to work and grow toward.

Finally, promoting a healthy workplace culture is very important. This means ensuring a balanced daily workload by avoiding overtime and micromanagement. Additionally, businesses should work to actively encourage a balance between personal and professional life to increase employee satisfaction.

Here’s a simplified explanation of the three tenants of workplace diversity, equity, and diversion initiatives, or DEI:

A Pew Research Center survey shows that about six-in-ten (61%) US workers say their company or organization has policies that ensure fairness in hiring, pay, or promotions, and 52% say they have training or meetings on DEI at work. Majorities of those who have access to these measures say each has positively impacted where they work. 

To apply these strategies to your own workplace, consider the four Ps of DEI:

Process: Achieving inclusivity usually requires developing and implementing new approaches, rather than just working on changing employee mindsets.

Protocol: It’s essential to have clearly documented systems. Furthermore, these should be well communicated to ensure everyone knows them.

Procedure: These new protocols need to be regularly monitored to ensure that all steps are being followed in order to achieve the pre-set goals.

People: The commitment of your team to your vision is crucial. They should not only be aligned with DEI goals but also understand and share a passion for their importance and value.

There are three key principles to follow for successful workforce planning. First is adaptability, or the capability to account for adjustments and align with evolving business needs and market trends. The second is improving efficiency, or eliminating outdated processes by identifying skill gaps, tracking key metrics, and modernizing technology. Finally, focusing on workforce quality is vital for overall business success.

Some best practices include:

In conclusion, successful workforce planning is an intricate and dynamic process that requires a sophisticated approach. From aligning HR processes with organizational goals to implementing modern technology, each aspect plays a pivotal role in shaping a robust workforce.

By implementing these strategies, organizations can effectively attract, retain, and nurture top talent while staying adaptable and efficient. Ultimately, this comprehensive approach to workforce planning is key to fostering a productive, engaged, and diverse workforce that drives business success.

If you’re looking for a tool to help shape your workforce planning strategies, consider booking a demo with Productive, the all-in-one agency management software.

The five key elements or steps of implementing workforce planning are aligning your strategy with your business needs, identifying skill gaps, forecasting future availability to prepare for potential challenges, monitoring and evaluating processes, and reiterating by using data. 

The 5 Rs of workforce planning refer to having the right size of the workforce, the right skills, the right shape or organizational structure, the right site, and the right spend or budget. These principles guide organizations in creating a balanced, skilled, and cost-effective workforce aligned with business objectives.

Workforce planning involves analyzing the current workforce, forecasting future requirements, conducting gap analysis, developing action plans to address these gaps, and implementing and monitoring these plans to ensure alignment with evolving business needs.

The four stages of workforce planning are analyzing the current workforce, forecasting future needs, developing strategies to address identified gaps, and implementing and monitoring these strategies for effectiveness and alignment.