How Workforce Planning and Workforce Forecasting are Different?

Organizations have to be flexible and visionary in the present-day business environment. Therefore, companies find workforce planning and forecasting as integral elements of business success. Despite often being confused with one another, these terms refer to two important subsystems of any good workforce strategy. This article seeks to highlight the major differences between workforce planning and workforce forecasting, as well as explain how each of the strategies enhances the efficiency and adaptability of the given organization.

Leaders and HR teams will be in a better position to strategize and, in turn, improve talent retention as all workforce issues will be well understood and expectations aligned with business strategy.

Workforce Planning

Workforce planning can be defined as identifying and meeting the present and anticipated human resource requirements of the organization with a view to enhancing its efficiency and effectiveness. Think of it as addressing the short-term strategy of enabling the achievement of organizational objectives. Workforce planning consists of the management of human resources, such as -talent management or workforce management, role definition and design, succession readiness, and resource management.

According to a report released by Oxford Economics, 61% of high-performing firms state that workforce issues are a part of board-level discussion, but this ratio declines to 46% in low-performing firms. This figure stresses the strategic importance of workforce planning in high-performing organizations.

Important Elements of the Workforce Planning

• Skills Audits: These involve skill assessment approaches for current employees while identifying gaps and ensuring the company goals are fully met.
• Succession Planning: Future leaders need to be groomed by identifying existing resources within the organization for leadership transitions.
• Role Design and Talent Management: It involves creating job descriptions with specific duties and responsibilities to enhance productivity and attain business goals.
• Resource Allocation: Placing qualified personnel in positions where they are likely to maximize effectiveness.

Involving multiple departments in workforce planning is essential. In a survey, 94% of businesses involve HR teams, and in 75% of businesses, CEOs play a significant role in the workforce planning process. The presence of leadership in such decisions points to the relevance of workforce planning in business strategy.

Workforce Forecasting

Workforce forecasting is more predictive than workforce planning. Workforce forecasting estimates the future workforce demographic changes to allow organizations to plan accordingly. This is usually done using historical data, trends in the job market, or organizational goals and strategies. Effective workforce predictive analysis allows for protective measures to be taken ahead of a turnover in labor or productivity. Hence, labor gaps or deficiencies in skill capacity requirements are reduced.

Workforce forecasting can be useful in volatile economies where sudden changes, including business disruptions (which have grown by 260% over the last five years), affect workforce requirements. Using analytics and predictive modeling, workforce forecasting can determine when demand for workers will peak. This allows firms to optimize their workforce and, therefore, prevent the expenses associated with excess or short staffing.

Given that 58% of recruiting leaders find it challenging to obtain suitable talent for immediate business requirements, workforce forecasting helps to avoid this problem through anticipation of hiring needs.

Key Components of Workforce Forecasting

• Predictive Modeling: Use of historical data to inform the future needs in the workforce.
• Scenario Planning: Running different scenarios that require diverse worker demands in order to successfully identify multiple possibilities.
• Skill Gap Analysis: Finding and providing resolutions to unaddressed skill gaps to maintain optimal levels of productivity.
• Seasonal and Market Trends: Understanding cyclical patterns in order to enable workforce changes.

Workforce Planning vs. Forecasting

While workforce planning and forecasting are closely linked, their main difference lies in analysis method and focus. It can be said that workforce planning is always strategic and focuses on long-term company goals, whereas workforce forecasting involves estimation regarding future labor requirements based on current trends and market conditions.

Strategic Focus vs. Predictive Analysis

• Workforce planning aligns with the company’s strategic objectives and requires input from top-level executives.
• Predictive analysis is utilized in workforce forecasting in order to build models illustrating the demand for an organization’s workforce in the future.

Long-Term Perspective vs. Short-Term Focus

• What makes workforce planning different from other processes is its more holistic approach to targeting talent management that is aligned with the company’s long-term growth.
• What makes workforce forecasting a process critical for organizations is the fact that it responds to immediate and near-future requirements. Hence, it deals with real-time adjustments.

Role in Organizational Agility

• Workforce forecasting helps organizations react to unexpected shifts, such as economic disruptions, by providing data on necessary workforce adjustments.
• It is through workforce planning that organizations become agile by strategically positioning their people around business objectives and eliminating roadblocks to ensure those objectives are achieved.

Both workforce planning and forecasting processes are becoming more and more data-based, 61% of Chief Human Resources Officers (CHROs) intend to purchase Artificial Intelligence to help with the management of the workforce structure, and 39% of HR leaders acknowledge data management as one of the most pressing issues. The integration of AI and data analytics would improve not only workforce planning but also workforce forecasting, which makes the workforce strategy more flexible and responsive in nature.

The Role of Global Workforce Planning and Forecasting in Hybrid and Diverse Work Environments

Following the expansion of remote working, 57% of organizations are looking for techniques to track the productivity of remote employees. This trend is altering the dynamic of how workforce planning and forecasting is done, highlighting the importance of being able to pivot quickly.

Firms now equally appreciate the need to have diverse employees. In fact, companies with diverse leadership tend to do better in terms of growth; their average growth is 19%. A staggering 76% of employees claim that diversity is of great significance, which further demonstrates the need for workforce planning with an aim to enhance the inclusivity of workplaces.

In the current globalized world, demographic and cultural factors have to be considered in workforce planning strategies. This helps to ensure that local teams in various regions are adequately staffed to meet the local challenges.

The Impact of Workforce Planning and Forecasting on Business Success

Integrating both workforce planning and forecasting practices can prove to be quite beneficial in achieving business success. Without a plan for managing the workforce, significant costs of turnover can be incurred. Turnover could cause employers to spend, on average, 33% of a worker’s annual salary on recruiting and training a new worker. Forecasting aids in avoiding loss of that nature by predicting the hiring requirements and lowering turnover chances.

In organizations that are characterized as high-performing, workforce planning and forecasting are important for strategic decision-making. In fact, 61% of these top-performing companies see workforce issues as essential to their overall strategy, compared to only 46% of underperforming companies. Also, the involvement of leadership in these processes is important in achieving short- and long-term organizational objectives.

Also Read: How to use workforce forecasting to optimize staffing levels?

Conclusion

Workforce planning and forecasting are interdependent activities. While planning defines the high-level goals, forecasting deals with the more immediate hiring requirements. Together, they form the basis of building a responsive workforce that is in sync with the changing business environment.

Tools like ProHance can help both business leaders and HR teams leverage planning along with forecasting to fill skill gaps, retain key employees, and ensure productivity.