Workforce Forecasting: Your Staffing Superpower

An efficient pitstop crew of about 20 people can change all four wheels of a Formula 1 racecar in about 2-3 seconds. That’s because the technical minds behind high-level motorsports have long known the optimal number of people needed in a pit crew for an almost instantaneous wheel change.

Similarly, seasonal fluctuations and other factors cause businesses to have different workforce requirements throughout the year. Anticipating those fluctuations and when they might occur can help your business prepare for any situation. But how can you do this?

Two words: Workforce. Forecasting.

Figuring out that balance of what fits your needs and when that might change is the crux of workforce forecasting. To better understand this practice, let’s look at what workforce forecasting means and how you can use it to make sure your business can cope with any level of demand.

What is Workforce Forecasting?

Workforce forecasting is the process of analyzing and predicting an organization's future staffing needs. It helps HR pros identify the number of employees required (and what skillsets they need) to achieve business goals.

You’re probably already using some form of business forecasting, such as tracking how the economy affects your sales and revenue figures. Workforce forecasting in HR is very similar — it just centers on your workforce instead of your sales.

Workforce forecasting can include basic workforce needs, such as how many temporary staff you may need to cover the Christmas season. Or what training any employees may need to adapt to new technology and systems you plan to introduce.

Ultimately, the goal of workforce forecasting is to ensure your business always has a “ready” workforce that can meet any demands placed on it. It’s a key strategic pillar of workforce management and a welcome addition to any HR pro’s toolbox.

The Benefits of Workforce Forecasting: Why it Pays to Prepare

While you’ll never have a crystal ball, workforce forecasting might be the next best thing to help your organization anticipate and plan for future needs.

How does forecasting benefit your organization?

1. A Balanced Labor Supply

Supply and demand: two of the golden benchmarks of doing business.

In the world of HR forecasting, you need a supply of workers to meet the demands placed on your workforce. And that demand doesn’t just refer to the size of the workforce, but also the skills and knowledge it has.

Workforce forecasting helps your organization strike a balance between this supply and demand of labor. In real terms, this avoids overstaffing, understaffing, and an under-skilled workforce.

For example, if your business plans to implement a new communications system over the next year, you can forecast to identify any training your staff will need on that new system.

Or, maybe your organization is opening a new location within the next 18 months. Workforce forecasting helps determine how many new employees you need to hire for the location to be successful.

2. Easier Budgeting

An efficient business plans its budget at least a year ahead, including all potential staff-related costs. Remember, your workforce is an asset, and you should always have an efficient human capital strategy for it.

Workforce forecasting should look at two areas for employee costs:

• New hires. These can include both permanent and temporary workers. What costs are included in hiring? Consider the recruitment process itself, any required preboarding or onboarding, and any job training a new hire will need.
• Existing workforce. There are a lot of factors at play here, including salary increases to boost staff retention, productivity bonuses, and any training costs to enhance skill sets.

When you forecast your labor needs, you’ll have a better understanding of the expected costs. Use this information to build a more informed budget.

3. Anticipated Future Workforce Needs

Finally, every business has some level of natural staff turnover due to retirement family relocation, etc. Workforce forecasting can help identify how many new employees you might need in the next year due to natural turnover.

Staff forecasting needs also arise from plans to change a business’s strategy. Keeping tabs on your people analytics can help you determine if your organization is prepared to align with the new direction, in both workforce and skillsets.

Top Workforce Forecasting Methods

You can see how a staffing forecast can be a real game-changer for your business­ — no more guesswork, just solid staffing solutions.

But what sort of forecast methods should your HR team use?

One thing to keep in mind while reviewing the following methods is that they all rely on a healthy supply of data. You’ll need a strong HR reporting platform to capture the necessary inputs (unless you want to drown in spreadsheets!).

1. Quantitative Method

If your business has been operating for several years, you should have a significant amount of data to play with.

Look at historical trends related to staffing and business outcomes. Investigate how many salespeople on the floor correlated with the highest revenue. Uncover how many waitstaff you need for every guest at your restaurant.

The idea is to use the data you have to identify staffing trends and ratios that support your organization’s goals.

You’ll also want to keep in mind key labor HR metrics, like turnover rate, time to hire, and cost per hire, that may also affect your strategy.

Of course, the inherent limitation with this method is its use of historical data to identify patterns and cycles. The reality of business is that future trends may be different, which adds an element of unpredictability to this method. Therefore, most HR forecasters will want to combine it with other models.

2. Qualitative Method

In some cases, quantitative data may be underdeveloped or unknown.

For example, your business may be in the R&D stage of a new product and have no quantitative data regarding how many staff you’ll need if that product goes into full production. Instead, you’ll need to rely on qualitative data from expert opinions, market research, or focus groups.

What’s important is that your HR forecast team looks at this data systematically while remembering it’s based on opinions, albeit informed ones.

3. Causal Method

Causal forecasting is a dynamic method that thrives from a wide range of datapoints. It involves analyzing historical data while also looking at possible future effects from external variables. For example, impending elections often cause economic uncertainty that can affect a business’ strategy.

It can be a very useful method for long-term HR planning and forecasting by helping your team identify probable periods when staffing demand will be low or high.

Unless you’re a mathematician, you’ll need a robust Human Resource Information System (HRIS) to capture the necessary data and analyze it.

How Specialist Software Can Help You Make a Winning Workforce Forecasting Model

Is your head spinning a bit? Don’t worry!

The intricacies and needs of accurate HR forecasting are indeed demanding. Thankfully, as with many other areas of modern business, the solution, or at least part of it, lies with technology.

By using an all-in-one HR and payroll solution, you can make HR’s job easier and take much of the work out of workforce planning. Paylocity comes equipped with sophisticated tools like the Modern Workforce Index (MWI), which provides your team AI-driven forecasting and predictive analytics.

For more information about how Paylocity can help you with workforce forecasting, request a demo today.