By Nick Felton, Senior Vice President at MHR Analytics
In around 95% of organisations, people will always be the biggest business cost. Gaining control of this massive outgoing is essential for organisations to perform well financially.
It’s not just about headcount. Workforce costs are impacted by a wide range of factors, including salary, retention and recruitment rates, departmental structures and automation.
The greater control an organisation has over this huge organisational expense, the better.
What is workforce planning?
People are not only an organisation’s biggest cost – they are its biggest asset. Workforce planning is all about aligning your people strategy with your evolving organisational needs and business plan.
People are what make an organisation what it is. Simply put, no people means no business. That’s why any business strategy that fails to consider how the workforce will be organised and distributed is deeply flawed.
Workforce planning ensures your organisation has the right people, with the right skills at the right time. It looks at where you currently are versus where you want to be and shows you what you need to do to bridge the gap.
This could involve everything from questioning the work that should be done in-house and the work that needs to be outsourced, to striking the balance between full-time and part-time employees. It could be addressing the growing question of which tasks are more effectively performed using Robotic Process Automation (RPA), or making decisions about where the work should be done to experience the biggest opportunities and best financial results.
Why is workforce planning important for CFOs?
There are still blurred lines when it comes to the question of who should lead workforce planning, so while this might sound more like an HR task than a finance one, read on…
For some organisations, HR owns this process because of the obvious link to all things people in the business.
Others may hand this responsibility over to the Organisational Development team if they have one in place, whilst large organisations may have a specific team solely dedicated to workforce planning.
The role increasingly viewed as a key player in overseeing the workforce planning strategy is the CFO.
People costs make up such a large proportion of workforce planning, so it makes sense for the CFO to have eyes on this from the start. Good workforce planning is about bringing your business closer to reaching its strategic and financial goals.
The CFO will act as a credible voice when it comes to:
- Determining what investment will be required to implement the workforce plan
- Fully understanding the impact of changes in employee numbers on operating expenses
- Defining critical roles and the organisational structure
- Recognising the impact of various workforce scenarios on product and service margins
Real-time visibility of all workforce planning factors, each of which carries a cost, empowers CFOs to achieve greater speed, accuracy and confidence about the complex and changing workforce data they are working with.
Workforce planning should be something that every organisation constantly does, but even more emphasis should be placed on this in times of change such as an acquisition or merger, or in the lead up to Brexit.
Despite this, effective workforce planning often goes neglected, but research suggests that this is becoming more important than ever…
The cost of owning a workforce is rising quicker than the budgets available to support it. Organisations are being forced to learn how to increasingly generate more value with fewer resources. As a result, an organisations’ biggest cost – the workforce, needs to be optimised with fit for purpose workforce planning systems.
A recent study by McKinsey revealed that more than one-third of global executives said their organisations are unprepared to address the skill gaps they anticipate. Whilst 60% expect that up to half of their organisation’s workforce will need retraining or replacing within five years.
Workforce planning reveals obstacles that will crop up in the future and shows organisations what they can do to mitigate risk and spot opportunities for growth.
The benefits of automating the workforce planning process place it even more in the CFO’s domain: Faster insights; more time to spend on higher-value tasks; more accurate decision-making; real-time analysis; ability to model “what-if” scenarios before committing to a decision; better ability to match spend to resource; and better cost savings over time.
Examples of workforce planning
- Predict future workforce needs – Identify possible future scenarios and use workforce planning to understand what this will mean for your workforce.
- Understand gaps in the workforce – Use workforce planning to show you where skills are missing, as well as determining when you’ll need these capabilities and how long it will take you to obtain them.
- Reduce costs – Identify where you’re making unnecessary spendings and take action to reduce costs.
- Improve productivity and quality of work – Determine where time is being wasted and boost productivity by taking measures like adopting new technology or outsourcing repetitive work.
- Create employee reward initiatives – Effective workforce planning will help you to understand how to reward employees in a way that keeps both them and your budget happy.
- Get the balance between different types of employees – Determine the perfect ratio of full-time employees, remote workers, contractors and freelancers for success.
- Recruit with confidence – Recruiting can be a tedious process often left to intuition. Workforce planning will show you how hiring new people will impact your organisation’s overall vision.
- Easily adapt to change – Having a clear understanding of what is going on in your workforce allows you to seamlessly adapt to any changes in the short or long-term.
Advanced analytics techniques for workforce planning are widely available, but not yet widely adopted. Our Financial Workforce Planning ebook provides guidance on the steps to take to adopt workforce planning into the wider business planning process to sharpen your competitive edge.
NEWS22 hours ago
Heavy winter sweaters, coats pile up at stores as warm weather threatens holiday shopping season
INVESTING3 days ago
3 Ways to Revolutionize Retail Trading
NEWS2 days ago
Oil jumps 3% as steep US crude stocks draw adds to supply concerns
INVESTING4 days ago
Digital Assets: The New Frontier in Retail Investing