Workforce Analysis: HR’s Introduction and Guide

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Workforce Analysis: HR’s Introduction and Guide

Understanding your organization’s strengths, weaknesses, and future needs in terms of its workforce is essential to making effective staffing decisions. Conducting a workforce analysis helps you do just that.

What is workforce analysis?
Why should you conduct a workforce analysis?
How to conduct a workforce analysis

What is workforce analysis?

Workforce analysis is a process used to collect, analyze, and interpret data to assess the current state of the workforce and turn it into actionable information which organizations can use to plan to meet their future needs. The current supply of labor is compared to the anticipated future needs of the organization. Organizations can then address any identified gaps with a suitable solution.

Workforce analysis takes a broader approach than people analytics by using both employee and ROI data to make informed recruitment, retention, and employee management decisions.

These insights are crucial for an effective workforce planning process.

You can carry out several different types of analysis, including: 

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Supply analysis

Supply analysis assesses the current state of an organization, including the number of employees, their skill sets, and demographics. Projections are made based on turnover rates—the number of resignations, retirements, promotions, and terminations that have occurred so far—to help inform how this will affect the future workforce.

The workforce analyst can then create a profile of how the organization’s workforce would look in the future if there are no changes made or action taken within recruiting or training.

Demand analysis

Demand analysis predicts what the organization’s future workforce will look like based on a wide range of factors such as the launch of new products, business issues, competition, changing labor markets, and more. This analysis model considers both internal and external influences, along with the future direction of the business and the workforce needed to achieve its goals and objectives.

Gap analysis

Gap analysis is where the supply analysis is compared with the demand analysis. It identifies any gaps between the current structure of the organization’s workforce and its future anticipated needs, whether this points to a shortage or an excess. All future scenarios may be discussed and categorized based on which is most critical and likely to happen.

Conducting a Workforce Analysis
We discuss the steps in conducting a workforce analysis in more detail below.

Why should you conduct a workforce analysis?

The business world is an increasingly competitive landscape. Therefore, if organizations want to continue meeting demands and growing, they will need to regularly update their business strategy by utilizing a range of workforce data to make strategic, data-driven decisions. Workforce analysis enables businesses to better understand their current workforce, including the following:

  • whether staff costs are profitable or excessive,
  • where there’s a shortage of employees,
  • where there are skills gaps in critical roles,
  • the characteristics that are present in top-performing employees,
  • types of training that have the highest return on investment,
  • where there’s a lack of training,
  • and much more.

These valuable insights can lead to a positive impact on your bottom line.

Recruitment & staffing costs

Workforce analysis can help determine whether a company’s staffing costs are optimal or need increasing or decreasing. Certain recruitment strategies may be flagged as ineffective. Then, Human Resources can take steps to pivot their approach and double down on the most effective ones.

Workforce analysis also helps businesses identify the key skills and behaviors needed for success in a particular role. That way, they can hire based on these characteristics in the future. The findings can also help organizations avoid biased hiring decisions, reduce ineffective training initiatives, and more.

Predict future staffing problems

Workforce analysis will also help businesses identify the levels and types of staff needed as the business evolves. It helps them maintain an optimum number of employees. This enables managers to make more informed transfer and severance decisions. At the same time, they can avoid the loss of critical skills and top talent.

You can identify skills and leadership gaps early on and plan for them accordingly. Organizations can offer existing employees further training, nurture potential, set performance benchmarks, and map succession paths for the most promising talent.

In other words, you’re able to make effective adjustments to your talent management strategy.

Improve company culture

Aside from the savings in time and money, workforce analysis can also foster more cohesive teams and improve the company culture. Metrics such as productivity levels and undesired behaviors of ill-suited employees can be tracked. Using these results, businesses can improve the retention rate of their highest-performing employees by identifying turnover triggers, which leads to greater efficiency.

It also helps managers understand what factors help attract efficient employees and design strategies to further motivate their workforce, inevitably leading to greater employee satisfaction and team morale.

How to conduct a workforce analysis

1. Define a challenge you want to address

The first step in conducting a workforce analysis will depend on the plans and goals of a business. You will also need to consider external factors such as competition, expansion or constriction of markets, workforce availability in the area, and more. For example, if you plan to launch a new product line over the next 12 months, you will need to know how many new employees you require (if any), along with the core employee competencies, to make this a success. 

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  • Does your current workforce have the skills needed to launch a new product line with minimal training?
  • Will they respond well to these changes and remain loyal to the organization?
  • If you need to hire more employees, how many do you need?
  • And will you find those with the skills required to perform in the labor market?
  • What will your organization need to do to attract and retain those employees?
  • Will any other changes in demand affect the number of employees you need?

2. Collect relevant data

Once you know the challenge you want to address, the next step is to collect the relevant data needed to measure this. This could include workforce demographic data, skills data, performance data, training completion data, employee survey results.

3. Decide on the right analysis method

The next step is to decide which analysis method is most suitable for analyzing your data sets. Here are some of the most common methods:

Trend analysis

Trend analysis refers to comparing data over a set period in the past to identify any trends. You can use strong trends to make future decisions. For example, if a business notices that employees’ productivity gradually decreases over time, they can use these findings to determine the cause and work to improve productivity. 

Correlation analysis

Correlation analysis is used to study the strength of a relationship between two variables. For example, if an organization wants to determine whether a lack of training causes low employee engagement.

Predictive analysis

Predictive analysis uses a combination of historical data, algorithms, and machine learning techniques to predict the likelihood of future outcomes (not just numbers but also behaviors) based on past data so that businesses can make accurate forecasts.

Prescriptive analysis

Prescriptive analysis relies on historical data. It is typically used after predictive analysis to plan the most suitable course of action for the organization to meet its goals. 

Diagnostic analysis

Diagnostic analysis identifies the causes of success or failure within a workforce, which can be used to correct failures and boost business performance. For example, if there’s a trend for employee retention rates to drop as promotion level increases, a diagnostic analysis would help you discover why this is happening.

Don’t hesitate to ask your people analytics team or your data department for help with choosing the right type of analysis and for running the analysis. However, upskilling in people analytics will help you gain the necessary understanding of core statistical concepts and analyses. That’s extremely helpful for analyzing and interpreting data-driven insights.

4. Analyze and present the results

Once you’ve selected the most appropriate analysis method, the next step is to conduct the analysis and then present the findings to relevant business leaders and stakeholders. You can display the results as a dashboard or in a report—what’s important here is that it’s clear and easy to understand. Visual elements are immensely beneficial here, particularly when conveying complex ideas.

5. Determine what action you’re going to take

The final step in conducting a workforce analysis is to determine the most suitable course of action for the business. For example, if your results identify a future skills gap over the next 12 months, now is the time to plan how you will avoid this. This might mean training existing employees or hiring as many new ones as needed with the right skills and integrating them into the existing team.

In conclusion

The workforce is a vital business resource for any organization. In a word, identifying how you can maximize its capabilities through workforce analysis will help you make your workforce planning future-proof.

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