Workforce planning is more than counting heads and costs


Zoe Hruby

Global Head of HR Solutions

Woman holding documents looking up and off into the distance

Your most valuable assets still walk out the door every day. And they have more choices than ever whether to return the next day. Finance, with help from HR, can help reveal the true costs.

Remember the good old days when it was a foregone conclusion that the return on capital was always greater than the return on labor? If questions ever arose about where to invest and where to cut costs, you could always refer back to that guideline and it was the last word on the matter.

Times are changing and there are a lot of questions about whether they were really all that good, particularly for your workforce. With labor increasingly scarce, distributed across more locations, weighing more job options, and demanding an equitable stake, you need to treat your workforce much more prudently to have any hope of seeing similar future returns on your capital investments.

For the last two decades, HR leaders strived to reframe “labor” as “people” and “talent,” and they are 100% correct. Your workforce is composed of people whose contributions simultaneously roll into a distinct set of cost-, risk-, and asset dynamics. Their skills and talents yield performance at the individual and team levels, driving performance at the organizational and financial levels. Yet finance and HR speak separate languages around adding value that need to be reconciled. HR has the practical expertise the finance organization needs to understand the full costs, benefits, and workforce configuration options available to the business, along with the savvy to help connect human performance with business performance and results. It’s time to strengthen your partnership with HR to elevate your siloed planning exercises to a new level with Connected Planning.

Headcount is not a monolithic cost object, but rather a multi-faceted investment in people

While your finance and accounting systems might still reckon people like machines, your workforce planning system absolutely cannot. Your workforce can no longer be a simple accounting of the heads and costs it takes to run the business. It is an assemblage of real people with diverse accumulations of specialized hard and soft skills and competencies, along with aptitude to gain new skills and perform new work. Your people are increasingly becoming proficient at working in a digital business environment and being productive in workplaces both virtual and physical. And, they are growing confident in the value they bring and expect to be treated and compensated accordingly.

Therefore, headcount is not a one-dimensional cost object. Rather, it is a heavily nuanced, multidimensional investment comprising a vast range of costs, like talent acquisition and development and budget overages for unplanned hires, and risks, such as variances in revenue or productivity due to resource inadequacies, project delays, and more. It also includes potential future value like innovative capacity and ability to achieve competitive advantages. Furthermore, there are numerous ways your organization can configure its workforce to achieve its strategic objectives, but only a few of them will be successful given your organization’s available resources. Smart planners treat headcount as a cost to be optimized rather than contained

Partner with HR to understand the financial dimensions of your workforce at a more granular level, and account for them accurately

Finance thinks in terms of cost and revenue, and profits and margins. HR thinks in terms of human behavior. Yet both regularly use the term “performance” to describe and evaluate what is managed. While performance doesn’t denote exactly the same thing to finance as HR, it provides a common ground to begin linking human performance to financial performance and discovering the full range of financial implications of workforce cost decisions.

For example, headcount costs may not necessarily be incurred in the same period, and can accrue over several periods in the future if the organization is experiencing persistently high attrition or excessively long lead times for hiring. Such situations are relatively common, yet make it much more difficult to conduct long-range workforce planning, especially as costs become more irregular or allocated over more cost centers. Nor are headcount costs necessarily direct costs; for example, reallocating headcount to improve performance temporarily, or remedy revenue losses resulting from inadequate, unavailable staffing of teams and projects.

HR can be an especially effective partner in preventing the organization from being penny wise and a pound foolish with its headcount expenditures. Close finance-HR collaboration can be exceptionally valuable in identifying and mitigating risks related to the workforce, including:

  • Loss of key staff, talent, or roles
  • Loss of critical competencies or skills
  • High workforce replacement costs
  • Onboarding, engagement and ramping of new hires
  • Restructuring, layoffs, and reductions in force
  • Poaching by competitors
  • Failure to shift headcount to handle emerging situations
  • Failure to deliver on operationally or strategically important initiatives
  • Degraded customer-facing performance or reputation resulting in lost revenue
  • Denied opportunities to enter markets due to inadequately resourced teams

Your organization’s best bets should be those made on your people

Data is making us a lot smarter about people, particularly in determining the right workforce allocations to address specific business priorities and operations. Armed with richer data, deeper insights, more robust forecasting capabilities, and the ability to compile disparate sources of data into one central platform, workforce planning can incorporate individual, organizational, and financial performance data to enable better people and business decisions.

Using a Connected Planning solution, workforce planners can tell better stories with their forecasts and budgets, helping the business understand their options and implications so as to make better educated bets. For example, if a company’s HR leaders see data indicating likely increases in attrition, they can make an educated bet together with finance on allocating budget to upskilling and cross-functionally developing existing workforce. Additional cost-relieving options might also be identified, such as better preparing for existing employees’ career paths, finding incentives to keep quality performers, and improving employee advocacy.

Of course, any such initiative needs to be balanced against the cost of using external talent in place of developing and promoting from within. But in our example of attrition, workforce planners now have options to build in location strategies to enable the business to re-hire as needed at a lower margin, or use remote work as leverage to find the right talent in a lower-cost area in consideration of tax implications and real estate costs. Instead of the appearance of plans built on guesses, these bets are informed by data and thus more apt for strongly number-driven departments like finance to support.

Maximize workforce returns, optimize workforce costs

Much like your organization’s capital, your workforce is a portfolio of talent representing a unique set of costs, risks, and opportunities. Treating your workforce like a one-dimensional cost is one of the best ways to ensure getting the least value from your workforce expenditures, and just as likely drag down your capital returns as well. Using a Connecting Planning platform like Anaplan, finance can forge a strong partnership with HR to determine what those costs, risks, and opportunities are, evaluate their financial and non-financial impacts, and craft the best investment plan with your resources.

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