Workforce Planning Guide: Definition, Process, Strategies

Workforce planning is a process of aligning your organization’s workforce with business strategy and goals, usually by balancing labor supply with demand.

It’s goals are to:

Source: An Operational Process for Workforce Planning

We talk more about it in out benefits of enterprise resource planning article.

Workforce planning initiatives are separated into two types – 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.

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.

Learn more about resource planning with software:

Workforce planning is critically important because it directly supports employee engagement, which is tied to key success factors like higher work quality, lower turnover, and improved customer satisfaction.

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.

The key reasons why workforce planning is important are:

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.

Below well share the stages of workforce planning, packed in a simple step-by-step action plan.

To be able to start 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. 

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.

After establishing your current and projected capabilities, the next step is gap analysis and solution development. Here you should compare your current state to your future needs.

In other words; you should assess the skills, roles, and capabilities do you have right now vs. your targets. Then you should prioritize those gaps. Focus on the ones that could hurt your business goals the most — like critical skill shortages or future leadership needs.

In case you’re running a marketing agency, check out our marketing agency software list to get the numbers behind:

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 re-skilling programs for existing employees, and succession planning for critical positions.

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.

To make the sharpest decisions, get the data that answers the following questions:

Secondly, in order to measure the real impact of your workforce planning strategies against target goals, you can monitor capacity planning KPIs.  

The key workforce planning metrics are attrition rate, retention rate, tenure, quality of hire and diversity metrics. Here is what each workforce metrics is all about:

You can find out more about how Steamroller studios uses Productive increase their employee retention rate.

Strategic workforce planning models are HCMI and OPM. Both are here to assess the current workforce, forecast future hiring needs, and develop strategies to ensure the company has the right people, skills, and resources to meet its objectives.

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 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.

To implement your workforce plans you should first define clear objectives that align with your business strategy (map out what this workforce needs to achieve, and how does the plan support these goals). Then you should analyze your current workforce (what are they good at, what can they do better, and skill gaps).

When you’re done with analyzing, you should forecast future needs. Use market trends and internal data to anticipate challenges like talent shortages or shifting customer demands.

A mix of hard data and good judgment goes a long way. Finally, continuously review your strategies and monitor workforce KPIs such as attrition and retention rate to ensure sustained success.

If you want to make this process easier and more data-driven, tools like Productive can help you combine real-time resource planning with performance insights, all in one place.

You can optimize workforce planning by managing skills and knowledge with human capital planning, using workforce software, and monitoring workforce utilization. Remember that workforce planning optimization isn’t a one time thing, it’s a continuous process.

Below, we’ll expand on these approaches:

The basic first step of optimizing workforce utilization and productivity is effectively managing the skills and knowledge within your company. This activity, known as human capital planning, is a fundamental aspect of strategic HRP.

If you want to manage internal employee skills and knowledge you should:

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

You’d also might want to use a tool like Productive to help you map your team’s skill and gaps and connect workforce capabilities directly to your business needs.

The right workforce planning software does more than organize data; it provides real-time visibility, automates planning tasks, and helps align your people strategy with business goals.

You also get real-time data like utilization metrics that reflects on your workforce needs and performance. Choosing a platform like Productive can simplify this process, giving you the clarity and flexibility you need to plan smarter and adapt faster.

According to a HR trends 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.

In case you’re also uncertain about which technology to adopt and how to proceed, the next section is your problem solver.

Here, we’ll talk about the best tools for effective workforce planning and introduce key features that support day-to-day workforce and agency operations.

The best software for workforce planning is one that gives you a full, real-time view of your people, projects, and resources — all in one place.

Ideally, it should help you forecast future needs, manage capacity, track skills, and align workforce capabilities with business goals. An example of this magical software is Productive.

Additionally, here’s a brief comparison of potential types of software solutions you might use for planning and managing your workforce:

To make this selection easier for you, we’ve made a best workforce planning software list. In the following section, we’ll show you how Productive supports your workforce planning and management approach.

Productive is a comprehensive project management tool for professional service providers of all shapes and sizes. It’ gathers’s packed with key features that support workforce planning, including billable hours management, resource management, task allocation, utilization forecasting, and more.

These key features for managing your workforce and resources 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.

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 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. Keep in mind that workforce planning is a huge part of the broader HR planning process, they should always work together.

Find out more about managing your utilization in crisis times:

In order to attract and retain top talent you should focus on building a workplace people want to be part of. Always support growth, a healthy work-life balance, and offer real opportunities. This might sound romantic or unrealistic, however there are several approaches companies can take to attract and keep amazing employees.

Let’s start with attracting.

The most important thing to learn here is that you need to develop talent acquisition strategies that have the capacity to reach a wide audience, as well as the right profile of employees.

Here are some tips for improving your talent acquisition:

Show your employees they’re valued and safe. Build strong training and development programs that help them grow their skills and stay engaged over the long term. Succession planning is another key strategy. When employees see a clear career path within the company, they’re more motivated to stay and invest in their future with you.

Finally, focus on creating a healthy workplace culture. Avoid micromanagement and excessive workloads, and encourage work-life balance. When people feel supported both professionally and personally, they’re far more likely to stick around.

Workforce planning a dynamic process that aligns HR processes with strategic goals. To be really good a closing talent gaps, stick with the advice from this article and use software to make informed decisions about your future goals and recruitment strategies.

The sahre approach to workforce planning will help you foster a productive, engaged, and diverse workforce that drives business success.

If you’re looking for a tool to help shape your workforce planning strategies and keep everything in one place, you should book a demo with Productive.

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.