In this article, you’ll find four strategies that drive success and make the headcount planning process simpler and more effective.

Managing your organization’s headcount, while staying within budget, and having the employee resources to meet your organization’s strategic goals for growth is a crucial component to any talent management strategy. Although 70% of HR executives understand the need for workforce transformation, only 37% of these same leaders are confident that their HR departments have the ability to make future progress.

What Is Headcount Planning and Why Is It So Important?

Regardless of industry, executives and leaders need to know that talent costs and goals are aligned across the organization. That’s where headcount planning comes in, and why it’s vital to your future success.

A critical talent management exercise, headcount planning (also known as org charting) is a systematic process designed to ensure an organization has the right number of people with the right skills in the right roles so the company can execute on its business strategy. For enterprise organizations, the process typically culminates in a talent review meeting where leaders talk about hiring targets, succession, organizational structure, and more.

Before making hiring decisions or implementing a succession plan, managers need to understand their current and future organizational design. The best way to tackle this level of planning is with the use of an appropriate solution that allows decision-makers to see the design, performance, costs, and span of control for the organization as it exists today. Taking that a step further, a capable org charting tool will also include open positions and contingent workers, as well as additional resources that are necessary for the organization to function properly.

Furthermore, the right org charting tool can help managers create and share visual representations of how all these factors will come together when a change is made, such as a restructuring, an office closure or a company merger. A successful headcount planning process accounts for both internal and external changes, empowering the organization by:

• Aligning talent strategies with organizational strategies and goals
• Identifying skills the current workforce lacks, but that you need to be successful
• Focusing recruiting teams on the right candidates—the ones with the skills you need in the near term
• Allowing managers to identify and mentor employees who can—with additional training—fill critical skills gaps
• Projecting costs associated with hiring new staff and developing current employees, as well as salaries for your future workforce.

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To reap the benefits of workforce planning, organizations should take these four steps to create their headcount plan.

1. Identify Your Business Challenges

When identifying business challenges, there are a few questions to ask yourself:

• Has your competition broadened or deepened their offerings?
• How are your customers’ needs evolving?
• Are there regulatory changes ahead that will affect your businesses?
• Are there technologies, process automations, or other innovations you can adopt to your competitive advantage?
• Is your goal to grow within current markets, expand into new markets, add products or services, or enhance existing lines?

With a firm understanding of your business goals, strategies, and market landscape to inform the headcount planning process, you can keep pace with what’s ahead while anticipating your organization’s future needs.

2. Establish Metrics to Evaluate Existing Talent, Define Workforce Needs, and Inform Budget Projections

Smart leaders—and successful organizations—ground their critical decisions in data. As with effective succession planning and other talent decisions, headcount planning should be as free of individual bias, guesswork, and subjectivity as possible.

Define the objective measures by which you will determine whether individuals or departments are staffed with the right people, and let those metrics drive your workforce evaluation and headcount strategy. Common workforce metrics include:

• Performance ratings
• Position requirements
• Employee skill sets, certifications, and licenses
• Attrition rates (overall and by department)
• Department hierarchy
• Retirement eligibility information
• Salary data

During your headcount planning exercise, HR and business leaders who lead and participate in headcount planning exercises will benefit from data visualizations that capture these workforce metrics in real time.

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3. Evaluate Your Workforce

Now it’s time to put the metrics to work. Some important considerations to think about during this stage:

• Which roles are critical now and which ones will be in the future?
• Which positions (if any) can we do without to maximize the overall ROI of our workforce?
• Where are we having problems with attrition and what can we do about it?
• Are we growing or hiring succession-eligible employees?
• Do you know who your high potential employees are? And which employees are a high flight risk?

As you evaluate the workforce, pay particular attention to critical roles. This includes leadership positions—the ones typically accounted for during succession planning and talent reviews—but don’t neglect other roles.

Depending on your industry and market dynamics, other critical positions might include sales, customer service representatives, R&D, retail associates, or project managers. Essentially, whichever roles are necessary for implementing your business strategy in the near and mid-term.

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4. Make Headcount Planning Agile and Inclusive

Organizations that engage in formal headcount planning typically do the exercise annually. But given the current landscape due to COVID-19, which has shown us how quickly markets can pivot, the truly strategic approach should be agile, inclusive, and iterative. That is, your headcount plan should be a living document.

Ideally, leaders should revisit and adjust their strategic workforce plan regularly, using real-time data. This enables the organization to respond nimbly to internal and external factors that could otherwise be disruptive.

The headcount planning team should reach out routinely for insights from departmental and business line leaders, and their HR counterparts, to surface near and long-term skills needs.

The Competitive Advantage of Headcount Planning

As a significant element of workforce planning as a whole, headcount planning is one of the most powerful and critical exercises led by HR teams. Your headcount plan makes a direct connection between strategic organizational priorities, budgets, and talent management strategies—including hiring, learning and development, and succession planning.

Being able to plan a proposed organizational structure will have the greatest benefit for senior leaders, like the VP of Human Resources, who are looking at larger organizational structures. Having a clear roadmap and process for success in place, along with real-time data to inform course corrections or shifts, gives your business an edge on the competition.

Take the guesswork out of organizational planning with your free trial of OrgPublisher, where you can see all your critical workforce data in easy-to-read org charts.