Headcount planning is an extremely important corporate exercise with an intrinsically strategic value for a company. While it requires a considerable investment of resources, headcount planning holds the key to the success of an organization through smart hiring.
The primary motivation behind headcount planning is to empower the organization, as one smoothly operating engine, to succeed. As the chances of success are directly linked to the talent working behind the scenes of a company, it becomes imperative to design every hiring decision meticulously. This process involves in-depth data analysis to formulate the best decisions related to the roles essential for business success.
What Is Headcount Planning?
Headcount planning is a tactical strategy undertaken in an organization to ascertain if the present organizational structure and resources are adequate to achieve long-term and short-term business goals within the specified budget. Also known as organizational charting, this process ensures the business possesses enough skilled employees to execute the company’s mission.
Senior management, finance experts, departmental leaders, and HR teams work together during headcount planning. Their tasks include controlling attrition rates, analyzing workplace occupancy for space utilization analysis, and discussing hiring plans to draw company-centric insights. As this team features representatives from multiple departments, the hiring targets and strategies devised can be quickly altered if required.
Why is headcount planning important?
Headcount planning assumes considerable importance for a company as management must clearly understand the labor costs being incurred. Labor costs or employee salaries usually take up the lion's share of a company's budget. Additionally, headcount planning combines with FP&A processes to help the management align business targets with hiring plans.
Headcount planning is also necessary to ensure the company's stability in the future. It assists management in preparing succession plans. Additionally, if the business plans on raising funds in the future, headcount planning offers a better understanding of productivity, labor costs, organizational structure, and human resources management.
What is a headcount model?
A headcount model is an analytical tool used during headcount planning to develop forecasts based on the present resource structure of the company. Headcount modeling powered by a headcount model forms the basis for developing solutions for the company's strategic and operational considerations.
A well-defined headcount model can help with key tasks like:
- Headcount supply forecasting: identification of external and internal sources to meet the headcount demand based on qualifications and functions.
- Headcount demand forecasting: targeting headcount planning based on crucial strategic indicators.
- Headcount optimization: using personnel structure changes to identify areas that require headcount optimization.
- Headcount database: consolidating all the headcount data into an integrated database.
Headcount Planning Vs. Workforce Planning
The key difference between workforce planning and headcount planning is that the focus of headcount planning is to determine if the company has the right employees with the right skills at the right positions in respective departments. The objective of workforce planning is to retain good employees and build a great team to meet the company's present and future workforce requirements.
Workforce planning can be described as a basic activity undertaken by management, under human resource management. It involves planning the organization's human resource requirements after understanding the current and future requirements based on organizational goals. The objective of workforce planning is to plan for new hires beforehand, predict changes in the workforce, help employees with skill development, and sustain existing workers to stay ahead of the competition.
How do you create a headcount plan?
Listed here are some of the important steps that can help you create a comprehensive headcount plan:
- Ascertain areas for improvement: First and foremost, identify the areas of focus in the company that need improvement or have a critical need for resources.
- Arrange and analyze the data: Gather the data related to your workforce from all available sources and analyze the data to draw meaningful insights — including lack of efficiency, long ramp time, or critical staffing shortages.
- Team analysis: Analyze team structures, starting with team leaders and the support they have to build up and nurture a successful team.
- Formulate the headcount plan: Organize brainstorming sessions with department heads to analyze the current headcount structure against the goals of each department and the business as a whole. Structure a headcount model, making sure to integrate data from key data sources such as your CRM, HRIS, and ATS.
- Manage changes: As the annual headcount plan is crafted, include provisions to manage changes that might happen during the year, due to unforeseen industry, economic, or staffing circumstances.
- Review the plan: It is important to review the plan periodically to determine its performance and undertake any changes that may be required.
How do you streamline the headcount planning process?
Streamlining the headcount planning process involves adopting the latest technology for system updates and using modern solutions to fill the gaps. Here are the steps you can follow to streamline your headcount planning process:
- Frame the problem by identifying the short-term and long-term challenges you are facing.
- Build a seamless data lifecycle, as inaccurate data causes the most problems.
- Identify tools for the tech stack that you require to streamline your headcount planning process.
- Scale your RevOps team with professionals having extensive knowledge of headcount planning.
- Win stakeholder buy-in from different departments to foster inter-departmental collaboration.
What are some ways to bring clarity to headcount planning?
To ensure better clarity during your headcount planning, you can follow some simple steps:
- Evaluate the existing workforce to determine the need to add or reduce positions.
- Promote participation from the entire management.
- Align the headcount planning process with business strategy.
- Identify skills gaps in your existing workforce.
- Identify the urgencies in hiring.
- Ascertain the impact of every headcount decision.
- Save time for tasks that add value.
- Establish and track key metrics and KPIs
- Track progress regularly
What are the best data integrations for headcount planning?
Data integration benefits for headcount planning include freedom from manual data importing and entry. You can connect your ATS with a relevant headcount planning software like Pigment which offers many benefits such as easier sourcing, clarity in hiring, time-saving, and automating tasks. You can also connect your ATS with CRM, HRIS, and spreadsheets. These collaboration features enable you to include expert understanding as an additional layer of data to the models and transform complicated data into actionable insights.