Workforce Forecasting: How to Predict Future Labor Needs
By TERRA Staffing Group
Posted on June 30, 2020
While considered a good indicator of a healthy economy, the low national unemployment rate over the last several years has brought challenges to many businesses as they compete for a smaller number of candidates with the skills needed for their company. Technological advances in the workforce and employers’ changing needs for specialized skills amplifies the challenge of finding the right person for the job.
The Skills Gap Problem
According to a 2019 SHRM.org study, 75% of HR professionals “who reported difficulty recruiting in the previous 12 months say there are skills gaps in job candidates, while 52% claim the skills shortage had worsened over the previous two years.”
As an HR professional, it’s time to evaluate whether your current workforce is prepared going forward. When considering the skillset at your business, ask yourself the following questions:
- Do you have a surplus of employees, or are there gaps that need addressing?
- Are the qualifications of your current employees sufficient to meet your company’s needs for future success?
- Is your team up to the task?
Workforce forecasting and scheduling can help you answer these questions and other staff and strategy related concerns. Here is a look at how you can predict your company’s future labor needs.
What is Workforce Forecasting?
Workforce forecasting helps you predict your company’s workload so you can ensure you have the correct amount of staff, at the necessary time(s) to handle the amount of work, whether that be for day-to-day operations or unusual situations. Although the process can be complicated, it will help deliver both long and short term business goals.
The forecasting process can aid your organization in many ways, including:
- Help you understand the workforce across your organization.
- Reduce the possible risk of staffing shortages.
- Examine current staffing skill sets to compare them with future needs.
- Determine new organizational structures for better workforce deployment in the future.
- Streamline recruitment strategy.
- Improve business decisions and achieve company goals
Take the Quiz: Buy, Borrow, or Build? Which Strategy is Right for Your Business?
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Five Steps for Workforce Forecasting
To implement this proactive approach successfully, you will need to complete the five steps listed below. Accuracy is essential to avoid adverse impacts such as future layoffs or hasty hires. It is important to note that you should expand or modify these steps to meet the specific needs of your business.
Define your objectives
The first step to workforce forecasting is to define your company’s business objectives, including its vision, mission, goals, and motives. Once established, HR will need to develop a strategy that aligns with those objectives. In addition, the department will need to define core competencies and requirements that will move your company forward.
Your company’s direction must be communicated to all employees, regardless of position or rank. It’s often challenging to connect financial planning and human resources to a workforce forecast and set a budget without reliable, consistent data, utilizing HR analytics will help your department overcome these challenges. Gained insights will help you calculate costs and establish:
- How your company will assess, attract, hire, develop, and retain talent to help you meet short or long-term business goals.
- How your organization will deal with workforce gaps and risks, including skill shortage and turnover rates.
Analyze your talent
The second step in workforce forecasting is to identify the characteristics, capabilities, and distribution of your current labor force, which will permit the formation of successful gap-closing strategies. An ideal method to gather this data is through HR analytics, which was considered important or very important to 84% of respondents to the 2018 Deloitte Global Human Capital Trends Survey. To do so, it is best to create a database with a variety of information such as:
- Employee demographics
- Turnover and recruitment rates
- Changes within your company that could influence business processes like budgets cuts or change in business direction
- Competencies of your current workforce including permanent, supplemental, and contract employees
- Employee rewards system
- Competitor’s workforce management strategy
Consider future needs
Step three focuses on determining well-defined labor force requirements for future employees. Analyzing internal and external factors that influence business processes is one of the most useful methods of identifying future talent needs for your company. Several questions that can help HR professionals recognize current workforce shortages and predict future necessities include:
- How can we fill existing skill shortages?
- How can we reduce current turnover rates?
- What competencies will our company need to meet our business objectives?
- Will future hires be full or part-time, permanent, or temporary?
- Where will the labor force be located?
- What rewards system will be used?
- How will our company rank with competitors?
Find the gaps
This step in workforce forecasting focuses on revealing workforce gaps between your current labor force and your future forecast. Common weaknesses to be on the lookout for include business objectives, skill shortages, staffing processes, turnover rates and employee profiles.
Fill the gaps
The final step is the creation of a gap-closing strategy that will reduce or eliminate the workforce discrepancies discovered in step four. The goals of an effective gap-closing strategy are to increase employees’ capability and productivity. To help you develop and implement your gap-closing strategy, you should refer to your collected data.
Depending on your workforce management goals, your gap-closing strategy can address a variety of business processes such as:
- Talent retention and recruitment
- Employee development
- Staff reduction
- Salary projections
To ensure your company benefits from proper workforce planning, HR professionals must be responsible for all five steps, from determining business objectives to determining the deficiencies in your labor force.
Get Help Bolstering Your Workforce
Aligning your workforce correctly doesn’t have to happen alone. TERRA Staffing Group can help you with filling the gaps in your workforce to meet future labor needs. Contact us today.