Workforce forecasting: what it is and how to predict future needs

Do you find yourself constantly juggling staffing levels, grappling with labor costs, and struggling to optimize your workforce’s productivity? This article is here to guide you through the world of workforce forecasting and help you solve this critical puzzle.

We’ll demystify the process of workforce forecasting and provide you with a step-by-step guide to predicting your future labor needs.

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What is workforce forecasting?

Workforce forecasting is a strategic approach that helps businesses, including restaurants, retailers and salons, predict their future labor needs. It involves analyzing various factors to determine the right number of employees needed at any given time.

Workforce forecasting empowers you to strike a balance between staffing levels and customer demand. It ensures that you have the right number of employees available to deliver exceptional service while controlling your labor costs effectively.

Workforce forecasting example:

Let’s say you own a restaurant and the holiday season is approaching. Based on historical data, you know that this time of year tends to be bustling with customers.

Using workforce forecasting, you can analyze factors like past sales, reservations, and upcoming events to estimate the increased demand. This allows you to schedule additional waitstaff and kitchen staff to handle the influx of customers efficiently, providing a pleasant dining experience.

Conversely, during slower periods like weekdays with lighter foot traffic, workforce forecasting helps you optimize your staffing levels to avoid overstaffing. By analyzing data and considering factors like historical trends, you can schedule fewer employees without compromising service quality.

This way, you can manage costs while still meeting the needs of your customers.

How workforce forecasting can help your business

By embracing workforce forecasting, you can gain several benefits for your business.

Better resource planning

Want to make sure you always have the right number of employees on board? Workforce forecasting is your secret weapon.

By digging into past data, market trends, and future projections, you can align your workforce with the workload you anticipate. No more scrambling to find extra hands or wasting resources on unnecessary hires.

Enhanced operations

Ever wished you could predict busy and slow periods in advance? By having insights into peak and lull times, you can distribute your resources wisely.

Say goodbye to overstaffing during slow periods and running short-handed during busy times. By optimizing your workforce deployment, you’ll save on labor costs and boost productivity.

Strategic employee management

Identifying skill gaps within your team can be a challenge, but workforce forecasting makes it easier. By analyzing future business needs, you can be proactive in recruiting, training, and developing employees with the right skill sets.

Stay ahead of the game by ensuring your workforce remains adaptable, capable, and ready to tackle any challenges that come your way.

Minimized overtime and turnover

Nobody likes working excessive hours or feeling burnt out. Accurate workforce forecasting allows you to plan and schedule efficiently, so you can minimize the need for overtime. By distributing workloads evenly and having extra staff during peak periods, you’ll foster a healthier work-life balance.

Happy employees mean reduced turnover and a stronger, more dedicated team.

Increased financial stability

Worried about your small business’s financial stability? Workforce forecasting is here to help. By aligning labor costs with revenue projections, you can optimize your budgeting and ensure you always have the resources to meet your business goals. Say goodbye to financial surprises and hello to long-term success and sustainability.

Remember, investing in workforce forecasting is investing in the growth and success of your small business.

Steps to forecast your workforce needs

Step 1. Define your business goals

The first step in workforce forecasting is to define your company’s business goals, which include its vision, mission, goals, and motives. Once you have a clear understanding of where you want to go, the HR and compliance department needs to develop a strategy that aligns with those objectives.

It’s also important to define the core competencies and requirements that will drive your company forward.

To make sure everyone’s  on the same page, communicate your company’s direction to all employees, regardless of their position. Connecting financial planning and human resources to your workforce forecast and setting a budget can be challenging without reliable data.

Consider the cost to hire an employee when planning your workforce. This includes expenses related to recruitment, training, onboarding, and any required equipment or software. Factoring in these costs will help you make informed decisions about your workforce needs.

Use HR analytics

That’s where HR analytics comes in. By using HR analytics, you can gain valuable insights that help you calculate costs and establish:

• How your company will assess, attract, hire, develop, and retain talent to achieve short-term and long-term business goals.
• How you will address workforce gaps and risks, such as skill shortages and turnover rates.
• If your company is compliant with local labor laws

By harnessing the power of HR analytics, you can unlock valuable insights that will not only help you calculate costs but also establish strategies for assessing, attracting, hiring, developing, and retaining talent.

Let’s dive into how HR analytics can support your organization in achieving short-term and long-term business goals while addressing critical workforce gaps and risks.

Assessing, attracting, developing and retaining talent

HR analytics enables you to make data-driven decisions at every stage of the talent management process. It helps you assess the current capabilities of your workforce, identify areas for improvement, and design effective strategies for talent development.

With the insights provided by HR analytics, you can align your recruitment efforts with the skills and competencies needed to drive success in your organization. This allows you to attract top talent that fits your company culture and goals, ultimately enhancing your team’s performance and productivity.

Addressing workforce gaps

Skill shortages and high turnover rates can pose significant challenges to any organization. HR analytics comes to the rescue by providing you with a deeper understanding of these workforce gaps and risks.

Through data analysis, you can identify patterns and factors contributing to skill shortages and turnover. Armed with this knowledge, you can take proactive measures to address these issues.

For instance, you can invest in targeted training programs to upskill your existing workforce or develop partnerships with educational institutions to ensure a pipeline of skilled candidates.

By analyzing turnover data, you can uncover the underlying causes and implement strategies to improve employee engagement, satisfaction, and retention.

Calculating costs and ROI

HR analytics plays a vital role in helping you calculate costs and establish the return on investment (ROI) of your talent management initiatives. By tracking key metrics such as recruitment expenses, training costs, and productivity gains, you can evaluate the effectiveness and efficiency of your talent strategies.

This data-driven approach enables you to make informed decisions when allocating resources, optimizing your talent management budget, and maximizing the ROI of your human capital investments.

Step 2. Analyze your talent pool

The second step in workforce forecasting involves analyzing your talent pool. This means understanding the characteristics, capabilities, and distribution of your current workforce.

By doing so, you can develop effective strategies to bridge any gaps that exist. HR analytics is a valuable tool for gathering this data and has been recognized as important by 84% of respondents in the 2018 Deloitte Global Human Capital Trends Survey.

To gather the necessary information, consider creating a database that includes:

• Employee demographics
• Turnover and recruitment rates
• Any internal changes that could impact your business processes, such as budget cuts or shifts in direction
• The competencies of your workforce, including permanent, supplemental, and contract employees
• Your employee rewards system
• Insights into your competitors’ workforce management strategies

By gathering and analyzing this data, you’ll gain a deeper understanding of your workforce and be better equipped to make informed decisions about future staffing needs. You can use an employee scheduler tool to streamline your scheduling process and ensure efficient allocation of resources.

Step 3.  Consider what your business will need in the future

Step three focuses on determining clear and specific requirements for your future workforce.

One effective way to identify these needs is by analyzing both internal and external factors that impact your business operations. To do this, HR professionals can ask themselves a series of questions to recognize current workforce gaps and predict future needs, such as:

• How can we address existing skill shortages?
• What can we do to reduce turnover rates?
• What competencies will be crucial for our company to achieve its goals?
• Will our future hires be full-time, part-time, permanent, or temporary employees?
• Where should we focus our efforts to find the right talent?
• What kind of rewards system should we have in place?
• How does our company compare to our competitors in terms of workforce management?

By answering these questions, HR professionals can gain valuable insights into the specific requirements for their future workforce. This helps in developing targeted recruitment and talent development strategies to meet the company’s objectives.

Additionally, if your business experiences seasonal fluctuations in demand, consider the need for hiring seasonal employees to meet increased customer demand during peak periods. Factor in the associated costs of hiring and training these temporary staff members.

Step 4. Find gaps between your current and future workforce

This step in workforce forecasting is all about uncovering any gaps that exist between your current workforce and your future forecast.

It’s important to identify areas where your organization may fall short in meeting its objectives. Here are some common weaknesses to watch out for:

1. Business Objectives: Assess whether your current workforce aligns with your company’s goals and objectives. Identify any areas where you may need additional skills or expertise to drive success.
2. Skill Shortages: Look for any gaps in skills or competencies within your current workforce. Determine if there are specific areas where you lack the necessary talent to meet future demands.
3. Staffing Processes: Evaluate your current staffing processes to ensure they are efficient and effective. Identify any areas where improvements can be made, such as streamlining recruitment or enhancing onboarding procedures.
4. Turnover Rates: Analyze your turnover rates to identify any patterns or issues. High turnover can be indicative of underlying problems that need to be addressed, such as a lack of engagement or inadequate career development opportunities.
5. Employee Profiles: Examine the profiles of your employees to ensure they match the needs of your future workforce. Consider factors such as demographics, skill sets, and career aspirations to determine if adjustments or new strategies are required.

Step 5. Fill the gaps between your current and future workforce

The final step is all about creating a strategy to bridge the gaps identified in the previous step and reduce or eliminate any workforce discrepancies. The main goals of this strategy are to enhance employee capabilities and boost productivity.

To develop and implement an effective gap-closing strategy, you should refer back to the data you collected earlier.

Your gap-closing strategy will depend on your specific workforce management goals, and it can address various business processes, such as:

1. Talent Retention and Recruitment: Focus on hiring and onboarding top talent within your organization and attracting new talent that aligns with your future needs.
2. Employee Development: Invest in HR & compliance tools like Homebase and to develop the skills and competencies of your workforce. This helps them adapt to changing requirements and enhances their overall productivity.
3. Staffing Optimization: Evaluate your staffing levels and consider strategies such as staff reduction or reallocation to align with your future workforce needs.
4. Salary Projections: Analyze salary trends and projections to ensure your
5. compensation packages remain competitive and attract the right talent.

Consider incorporating new hire paperwork into your onboarding process to ensure legal compliance and a smooth transition for new employees. This includes necessary documentation, contracts, and forms that need to be completed during the hiring and onboarding process.

To ensure the success of your workforce planning efforts, it’s crucial for you and your HR team to take ownership of all five steps, from defining business objectives to identifying workforce deficiencies.

Hassle-free hiring and onboarding.

All the tools you need to grow your team fast  — like free job post templates, interview scheduling, new hire welcome packets and more.