Strategic Workforce Planning: A 3-Step Process Guide

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Strategic Workforce Planning: A 3-Step Process Guide

Workforce planning is often mentioned – but rarely explained. What is workforce planning, and how do you do it? When used well, strategic workforce planning enables HR to plan for the capabilities they need in the future. In this article, we will dive into what workforce planning is, the process, give a number of examples, and end with a toolkit on how to get started when you want to start planning your workforce.

What is Workforce Planning? A definition
Workforce planning and HR analytics
The workforce planning process
An Example of Workforce Planning
The Steps in Workforce Planning – A do-it-yourself Template

What is Workforce Planning? A definition

Workforce planning, also called strategic workforce planning, is about making sure that the right person is in the right job at the right moment. This means that there are not too many people available (overstaffing) nor too few (understaffing).

Workforce planning thus solves staffing problems for today and for the future. According to Evers (2014), strategic workforce planning is becoming increasingly important for a number of reasons.

  • Demographic changes: An aging workforce poses a number of different problems, including a lack of in-demand skills, reskilling challenges, and mass-retirement.
  • Cost reduction: Increasing global competition forces companies to work smarter. At the same time, the aging workforce is a more expensive one – but not necessarily a more productive one.
  • Talent management: Talented employees form a competitive advantage for the company. Having people with the right drive and lining up a talent pipeline to replace the aging group of senior management and executives in the company is essential.
  • Flexibility: Today’s competitive landscape requires faster and more disruptive innovation. The revenue produced by products that are less than a few years old has increased tremendously in the last few decades. At the same time, the tactics that got us here won’t get us where we need to go next.

When it comes to workforce planning, there are four criteria.

The Four Criteria of Strategic Workforce Planning

As explored in our HR Metrics & Dashboarding Certificate Program, the goal of workforce planning is to have a workforce with the right size, shape, cost, and agility.

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  • The goal of size revolves around the number of people and job roles. A workforce that is too large is overstaffed and works inefficiently while a workforce that is too small, means that the company isn’t producing what it potentially could produce. This can be indicated by an excess of vacancies.
  • The goal of shape revolves around having the required competencies needed today and tomorrow (in the form of succession planning).
  • The goal of cost revolves around reaching an optimum labor cost. Too much will bankrupt the company but too little will result in work not getting done.
  • The goal of agility is about having a workforce that is lean and flexible and can adapt to changing market demands.

Strategic workforce planning therefore revolves around ensuring that the company’s workforce has the right size, shape, cost, and agility for the future.

Workforce planning and HR analytics

On this platform, we write mostly about people analytics. You may be wondering: what’s the difference between workforce planning and people analytics? This difference is not always easy to define – and may be more methodological than anything else.

People analytics is defined as a data-driven approach to managing people at work (Gal, Jensen & Stein, 2017). Strategic workforce planning fits this definition, so it can be considered one of the tools in an HR data analyst’s arsenal.

However, where people analytics mostly focuses on analyzing relationships between people drivers and business outcomes, strategic workforce planning has a much more long-term and strategic focus and is predominantly occupied with employee formation. This is also the main difference between the two.

Workforce planning shouldn’t be confused with workforce analytics, which is mostly used as a synonym for people analytics.

The workforce planning process

So how does workforce planning work? There are multiple approaches to workforce planning but the process is usually similar. However, before we go into the process, let’s start off with a number of basic guiding principles.

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Basic principles of workforce planning

Workforce planning is the dynamic between what we have today and what we need tomorrow. Our current (employee) formation is therefore relevant when we make decisions about tomorrow’s ideal formation.

Here are three basic principles of strategic workforce planning

  1. Strategic workforce planning is in line with the organization’s strategy. The organizational strategy is a long-term plan that dictates what the company strives to achieve in the next five to ten years. This is an excellent guideline for planning your workforce
  2. Good workforce planning follows the 80/20 Pareto principle. 80% of the effect is achieved by only 20% of the work. When you engage in strategic workforce planning, focus on the organization’s primary functions (also called: critical roles). These are the ones that contribute most to the organizational results. Overhead and management are of secondary concern.
  3. What’s in the name: workforce planning is strategic. It focuses on tactical and strategic decisions and therefore has a long-term focus.

The workforce planning process

As we said before, strategic workforce planning is in line with the organization’s strategy. However, organizational strategy is not the starting point.

Organizational strategy is determined by the current resources and capabilities of the company, as well as the broader market.

In other words, if a company is very good at producing car paint, it will have acquired valuable resources and developed unique capabilities. It will have expensive machines that can make and mix different paint colors, it has knowledge about chemical compositions of the paints, knows what to mix paints with to make it stick better to different kind of materials, and it will have experienced managers and workers that know the industry and the production process.

It will be almost impossible for this company to become a digital marketing company: it simply doesn’t have the right configuration to do something else entirely.

This means that the current workforce influences the future direction of the company, along with its current products, and competition. These forces will steer the company towards a certain direction.

A workforce plan always starts with the organizational strategy and cascades down
A workforce plan always starts with the organizational strategy and cascades down

So organizational strategy is formed by market, products, and competition.

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Strategic workforce planning is formed by the organizational strategy. If a company is looking to double its revenue in the next two years, this will have an impact on the workforce. Using current data you can calculate how many salespeople you would need in order to facilitate this growth. This helps in planning your recruitment pipeline.


An example is a major European airline group. The SWP team in this organization estimates the number of pilots they need to attract by tracking a number of key metrics.

  • Number of aircrafts purchased. These are long-term orders planned years in advance. These orders are placed after a meticulous analysis of future demand. The number of pilots needed in the organization depends on the number of airplanes
  • Age distribution of the pilot workforce to calculate the retirement rate. Retired pilots need to be replaced.

Using this data, the airline company is able to predict the number of pilots that need to be hired (because of aircraft fleet expansion and retirement) up to 10 years in advance. This helps them to plan their recruitment activities. Getting pilots ready only takes around 2 years. This way the company is able to anticipate the increasing shortage in airline pilots by recruiting with very specific hiring targets which help in planning recruiting activities.

An Example of Workforce Planning

Let’s take an example of a company with three product lines. The board of directors has set a number of revenue goals per product line. One of the product lines is growing very fast and is expected to keep growing, while product line C – which used to be the company’s flagship product – is slowly dwindling.

A simple calculation model can look like this. We know the figures of 2018 and based on the potential of the three product lines, we’ve created a revenue goal for the next year, 2019. By putting all these numbers in one overview, we have a relatively simple way of assessing how our staff will grow.

Revenue matrix to engage in workforce planning
A revenue matrix that enables you to create a workforce plan for the next year (2019)

As you can see, some product lines are more profitable than others. We don’t know the exact cost of personnel (we can easily calculate this and add it to the model), however, if staffing costs between departments are equal, product line B is much more profitable than product line C. The revenue per employee in B is $ 1.6 million divided by 8 people, which is a revenue of $ 200,000 per employee. For C this is $ 113,000 per employee.

Based on the growth percentage, you can estimate the growth of staff per department. Exact numbers are hard to pinpoint. However, assuming there are no sudden increases in sales and support efficiency, you will have to hire between 12 and 18 people for department B.

Based on this information, you will also know that product line C is unlikely to grow. In fact, the people who will become redundant in product line C could go to B – as long as they have the right skills and experience. If not, you can either retrain them, or let them go.

As you can see, through strategic workforce planning you discover future workforce challenges. Based on this information, you can already start to retrain a few workers in department C to work for product line B. This will ensure better succession and you will have people ready when you need them.

Of course, this doesn’t mean you start to hire 18 people immediately. These growth numbers are projections. However, it does mean that you should keep an eye out on the leading indicators for this growth throughout 2019. An example of such an indicator is new product leads.

If the number of leads in January 2019 grows steeply compared to December 2018, that’s a good sign that you need to start hiring immediately so you will have the people to follow up on these new leads in March.

Now this is a very simple model with only a few factors. We can include much more information, including employee turnover, employees switching product lines, revenue per employee, function levels, or types and much more. This will make our model much more complicated but also even more useful.

The Steps in Workforce Planning – A do-it-yourself Template

In this section, we will present a workforce planning template with the different steps involved.

Workforce planning centers around three key steps. The first is an analysis of the current workforce. The second is a conceptualization of the future. The third is an analysis of the workforce in the future. Let’s discuss these one by one

1. Analysis of the current formation of the workforce

Workforce planning starts with the current employee formation. It answers the question about what people and skills a company currently has.

There are two areas to explore when gauging the current formation of the workforce. These are quality of the workforce and quantity of the workforce.

1.1 Quality of the workforce

The quality of the workforce is about current performance and future potential. We all know the terms high-performer and high-potential. These are people who either perform very well today, or who are expected to perform very well in the (near) future.

Assessing the quality of the workforce lays the groundworks for effective talent management. Talent management revolves around capitalizing on the full potential of the employees. To achieve this, companies spend time and money enabling their people to perform well.

In the first step of the analysis of the current workforce formation, the quality of the workforce is assessed. Employees are rated on their current performance and future potential.

A good example of this is the 9-box grid framework. It helps in mapping the workforce. This map is useful as it enables HR to effectively manage talent.

Part of the strategic workforce planner’s role is to map out what the future will look like, which includes consideration to market trends and emerging capabilities. If, for example, a company wants to expand its machine learning capabilities, performance and potential today do not equal performance and potential in the future. Mapping employee potential against a diverging path is much more challenging.

9 box grid as a tool for workforce planning
The 9-box grid is a tool for workforce planning

Different groups of people need different talent management policies.

  • High potentials need coaching and training
  • High potential managers need management development
  • High performers with low potential shouldn’t get raises or promotions, as they cannot develop much more. Doing so would make the organization top-heavy. In addition, if people stop performing, there’s no incentive for them to leave as they are very well-paid. The banking sector tends to struggle with these kinds of problems.
  • Low performers with low potential shouldn’t get raises or promotions. These are the people you should part with as they are likely to be happier in a different job.

We can write a book about different talent management strategies based on this simple 9-box grid quality map. The purpose of this example is to show how useful a simple workforce planning exercise can be to structure a complex process like talent management.

1.2 Quantity of the workforce

The next step is to assess the quantity of the workforce using a personnel flow matrix. This matrix includes new hires, employee turnover, and internal promotions.

As you can see below, this matrix divides employees into four categories, top management, middle management, production staff, and support staff. The matrix shows how many employees from each category were there on 1-1-2018. For example, there are 45 people in top management (category A). 28 of these remained until 1-1-2019, 15 quit, and 2 were demoted to middle management.

Workforce planning model that shows changes in the workforce
A complicated model – but a workforce matrix can show changes in the workforce once you know how to read the model

This model shows risk factors in the organization. In this case, turnover among top management is dangerously high. It also shows internal mobility, external mobility, and provides an overview of the biggest changes in the organization.

This model is fairly simple. Additional information can be added (like the total of internal replacements), categories can be changed into different departments, the data can be filtered based on employees with different attributes or skillsets. It would, for example, provide a great overview in terms of diversity in internal mobility if you compare this overview for both sexes.

The data can also be filtered based on the type of function. Not everyone in the organization is mission-critical. Focusing on critical functions, for example, would make sense. These are the 20% of the organization that account for 80% of its results.

An example of this is Johnson & Johnson. Out of the 30,000 employees, 150 critical roles generated 80% of the company’s value. Imagine the value of such an overview for these 150 roles!

2. Anticipate the future: Leverage scenario analysis to plot potential futures

It’s good to know where you are now. However, to be ready for the future, you need to have a sense of what could be coming.

The future is impossible to predict, but you can create scenarios of possible future outcomes. These can help you create action plans in advance.

One of the pioneers of scenario planning is Peter Schwartz. In this brief clip, he explains the scenario planning process and gives a real-life example related to digital assistances.

Schwartz pioneered his scenario planning philosophy at Shell. This anticipation of possible futures has long been in the company’s DNA. According to a 2013 HBR article titled “Living in the future”:

Scenarios have the power to engage and open the minds of decision makers so that they pay attention to novel, less comfortable, and weaker signals of change and prepare for discontinuity and surprise. When the oil crisis of October 1973 hit, Shell’s committee of managing directors had already considered a comparable scenario. As one scenario team member put it, “And then, of course, high oil prices came, and everybody said, ‘You’re very clever, you’ve got that right.’ And we all said, ‘No, wrong. We’re not forecasters. We’re your ‘personal trainers.’”

Shell was one of the very few oil companies to proactively react to this crisis and was able to leverage it to build a competitive advantage.

3. Analysis of the future formation of the workforce

The last step is to analyze the future formation of the workforce. There is a difference between the expected formation and the desired formation.

3.1 Future expected formation

The expected formation is the formation in 3-5 years when the company keeps doing what it is currently doing. The personnel flow matrix we showed earlier is helpful in this as it enables us to extrapolate these numbers over a longer period of time.

However, the question is whether the future expected formation is in line with the desired formation.

3.2 Future desired formation

An example is the transport sector. A recent report by the International Transport Forum estimates that the demand for drivers will be reduced by 50-70% in the US and Europe by 2030.

In a recent conversation with a friend who worked in a railway technology consultancy, he pointed out that trains are capable of autonomous driving and that the role of the train operator has been reduced to someone who needs to be there in case of emergencies. Within two to three years, there will be no need for the operator at all.

These kinds of developments are challenging for the workforce. The expected formation will tell you that your train operator workforce will still be significant in 2-3 years. However, their job will be automated by then so your desired formation will be very different.

Knowing this gap will help you in solving it. Especially in unionized countries, it will take a long time before these jobs can be removed. Knowing what is coming through smart workforce planning will help you anticipate these difficulties and take appropriate action at the appropriate time.


The goal of workforce planning is to have the right people in the right jobs at the right time. This happens by knowing the current workforce capabilities, planning future scenarios, determining the desired workforce, and taking steps to align the future workforce with this desired workforce.

Workforce planning is not something that you can easily do on a rainy afternoon in your office. It is a complex exercise that requires careful data aggregation and planning. However, when done well, workforce planning is a fantastic and incredibly valuable tool that can help to build a competitive advantage for your organization.


What is workforce planning?

Workforce planning is ensuring the right person is in the right job at the right time. If NASA discovers they need five more astronauts by next month, they needed to have started hiring and training them already two years ago. Workforce planning prevents these kinds of surprises.

What is the goal when workforce planning?

The goal of workforce planning is having the right person in the right job at the right time. This means that an organization is never overstaffed – but also never understaffed. Planning the workforce is therefore crucial for large companies.

What are the steps in workforce planning?

Workforce planning is about identifying the gap between the workforce the organization needs in the future – based on its strategy – and its current workforce. Once this gap is identified, actions are taken to reduce this gap.

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