Analytics-Driven Workforce Planning – Part 1

Gap Analysis - Aligning Workforce Strategy with Organizational Objectives

by Jason George

This is the first of two articles on Analytics-Driven Workforce Planning. The second article, to be released next week, will cover the optimization of the gap analysis provided here.

The Importance of Workforce Planning

Effective workforce planning is critical for aligning people resources with an organization's strategic objectives. It ensures that the right number of people, with the right skills, are in the right places at the right times. By anticipating workforce needs, organizations can be proactive in their talent acquisition and talent management approaches, manage labor costs, and enhance overall productivity. Understanding and predicting workforce supply and demand helps maintain a competitive edge and supports sustainable growth.

In this paper, we will explore two basic, yet critical, aspects of workforce planning: demand planning and supply planning. These discussions will culminate in a comprehensive data-driven gap analysis to help organizations strategically plan for current and future workforce needs.

Demand Planning

Demand Planning is the process of forecasting the future workforce requirements of an organization. At the most fundamental level, this forecasting process must include the following elements:

1. Alignment with Strategic Business Goals: Demand forecasting must be directly linked to the organization's strategic goals and/or objectives. For example, if a company aims to expand into new markets, the demand forecast should reflect the need for additional sales and marketing personnel in the new market. Demand forecasting is essentially useless unless it is driven by the organization’s strategic goals and/or objectives.
2. Correlation of Demand Drivers: The drivers used to create the Demand forecast must be highly correlated with demand. Drivers could include factors like projected sales growth or production growth. Multivariable correlation analyses are a great way to decipher which factors truly drive people demand.
3. Forecastable Drivers: The selected demand drivers must also be forecastable to provide reliable data for planning. If you can’t forecast the drivers, you can’t forecast the demand for people.

Demand Planning can be done at a very high, corporate level (what will our overall workforce size look like in the next several years?) or can be done at a very granular, specific level (how many accountants, engineers, nurses, etc. will we need in the next few years?). The level of specificity is dependent on what specific need or question the analysis is meant to address. For example, if an organization is trying to figure out their real estate needs (office space, buildings, etc.), an overall, high-level approach is appropriate. However, if an organization is trying to figure out how many data scientists it will need to hire over the next five years, a much more specific analysis would be needed. Regardless, the same approach to Demand Planning can be used in either of these two situations.

Supply Planning

Supply planning involves assessing the current workforce and predicting future supply based on various factors. When creating a Supply forecast, attrition assumptions and retirement assumptions are some obvious factors in what the forecast will look like. However, other factors can be considered that will also impact the shape of the Supply forecast, such as the following:

1. Demographic Changes: Understanding the age distribution, gender, and diversity within the workforce helps in predicting future staffing needs. Anticipating demographic shifts allows for proactive talent initiatives and strategies.
2. Skills Gaps: Regular skills assessments are essential for identifying current competencies and future training needs. Addressing skill gaps through targeted development programs ensures that the workforce remains capable and competitive.
3. Internal Mobility: Tracking internal promotions, transfers, and career progression helps in understanding talent movement within the organization. This insight is vital for planning internal talent pipelines and reducing reliance on external hires.
4. Technological Advancements: The impact of automation and AI on workforce requirements cannot be ignored. Planning for technological changes ensures that the workforce is prepared and adaptable to new tools and processes.

Intended Output

The goal of Demand Planning and Supply Planning is to come up with a Gap Analysis that looks similar to the very simple chart shown below.

Being able to forecast a multi-year talent gap that is directly tied to the organization’s strategic objectives gives incredible insight into current and future talent needs and allows the organization to be proactive in its recruitment plans, development plans, training plans, and all other talent plans.

Stay tuned for the next paper, where we will delve into optimizing the demand and supply gap identified here. We will explore advanced techniques and strategies to ensure a balanced and efficient workforce that drives organizational success.

Feel free to reach out if you would like to discuss how to use these tools to help discover what actually drives workforce supply and demand in your organization!