How does supply and demand affect workforce planning?

All\nbusinesses regardless of their size and sector, depend on human capital to\nsucceed. Despite its importance, human capital is often not carefully planned,\nmeasured or optimized. It is a common rule that workforce planning and\noptimisation is one of the key roles of every leader.

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Workforce planning is a term used to\ndescribe the planning process\nundertaken to ensure that an organisation has the right people with the right\nskills at the right time performing the right tasks. It is simply a methodical\nprocess that documents the directions in which an organisation is heading and\nprovides managers with a tool for making human resource decisions now and into\nthe future.

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A\ntalented and aligned workforce is crucial for bringing strategy to life and\nensuring an organisation delivers on its objectives. Great workforce planning should balance both workforce demand and supply. There is a number of techniques used\nto forecast both workforce demand and\nsupply but the overall goal is to\nmake sure you don’t have workforce\nsurpluses or shortages.

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Workforce demand forecasting is the process of estimating the future quantity and quality of manpower requirement. In demand forecasting, one should consider\nproduct demand, economics, technology, financial resources, absenteeism,\nturnover, organisational growth and philosophy.

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Knowledge\nof the present situation on manpower requirement is essential if a satisfactory\nforecast is to be made. After knowledge of present situation, future forecasts can be made from long\nterm corporate plan which are translated into activity levels for each function\nand department. 

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For\nexample, in a manufacturing company, the sales budget would be translated into\na manufacturing plan, giving the numbers and types of products to be produced\nin each period. From this information the number of man-hours, by skill and\npersonality categories, required to set the target for production would start\nfrom the production plan setting out a programme for installing new machinery.\nIn an insurance company, forecasts of new business would be translated into the\nnumber of proposals that would have to be processed by the underwriting\ndepartment. In a mail order company, forecasts would be made from the number of\norders that are to be processed, assembled and dispatched.

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The\nfactors that influence workforce demand\ninclude; External Environmental Challenges (challenges that arise from economic\ndevelopments, political, legal, social, technical changes, and the\ncompetition.), Organisational decisions (the organization’s strategic plans,\nsales and production forecasts and new ventures.), and Workforce Factors (for\nexample retirements, terminations, resignations, death and leave of absence,\namong other reasons).

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Once\nan organization has forecast its future requirements for employees, it then\ngoes on to determine how it can fulfil its requirements. Workforce supply forecasting involves determining if there are\nsufficient numbers and types of employees eligible for the positions in\nquestion. It scans the internal and external environment for the best-fit\ncandidate for the positions in question.

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Internal supply includes staffing\ntables, markov analysis, skills inventories, management inventories,\nreplacement charts and succession planning. External supply includes\ndemographic changes, education of workforce, new graduates, labour mobility,\ngovernment policies and unemployment rate.

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Gap\nanalysis is the process of comparing your current workforce supply to your workforce\ndemand and identifying gaps (deficits or surpluses). The process of\nidentifying the differences between supply\nand demand establishes the roadmap for your organisation’s Workforce Action\nPlan. One should prioritise those gaps that are critical to the delivery of\nyour organisation’s future goals. The focus should be on these gaps at least\ninitially.

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Microsoft\nand Shell Oil (which used to operate in Zimbabwe) are some of the organisations\nthat have a good reputation on workforce\nplanning. For example, Shell in the 90s used scenario planning to generate a number of possible options for their\nfuture workforce. This benefited them\nin the next crisis that stroke the oil industry and most of their competitors\nsuffered because they were not prepared. \n

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In a nutshell, a balance between workforce demand and supply will allow\nfor a more effective and efficient workforce.\nWell forecasted and planned supply helps an organisation to ensure that replacements\nare available to fill important vacancies in the right time and with the right\nskills.

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After proper workforce\nplanning, realistic budgets for recruitment, training or retraining,\ndevelopment, career counselling and succession planning can easily be done.\nOther activities such as restructuring, reducing or expanding your workforce\ncan be done objectively.

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A\nnumber of organisations are now starting to realise the value of workforce planning. The billionaire Bill\nGates once said, “Bringing together the right information with the right people will\ndramatically improve a company’s ability to develop and act on strategic\nbusiness opportunities”. It is time for organisations to utilise the\nbenefits of workforce planning.

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Benjamin\nSombi is a Data Scientist, Entrepreneur, & Business Analytics Manager at\nIndustrial Psychology Consultants (Pvt) Ltd a management and human resources\nconsulting firm.