How many staff would you need? Tips for strategic staff planning
Whatever the short and long term HR plan you are preparing (cost, training, event) the most frequently asked question is "how many?" will be. If we think further about headcount, questions that do not arise when planning HR costs - such as how much parking, how many phones, how much licensing - can take on relevant dimensions in the company's costs, so headcount is not just an HR budget issue. Written by István Gál.
What makes workforce planning strategic?
The essence of strategic workforce planning is that it takes a medium to long term view, not a one year view, with a focus on the future. It's not about being pin-pointed, it's about defining the field you want to work in. It requires mapping the current state and defining the expected future state. Strategic workforce planning ensures that the right quantity, price and skills of workers are available at the right time in the future. At first glance, it may seem too idyllic in the current labour market and economic environment, but if you ask a company manager how he envisages the company he is running in 3-5 years' time, there will most certainly be an answer that can be further elaborated and on which a strategy can be built. When the future picture and the current situation are compared, we can see the risks and shortcomings that need to be addressed, either immediately or in the longer term. The benefit is twofold: in addition to getting a vision of the future based on one (or more) hypothetical scenarios, by analysing the current situation, we can also prepare for the hypothetical scenarios, i.e. we can take pre-programmed action for different environmental changes.
How many people are needed?
As a starting point, I think we can accept that all disciplines try to carry out the tasks assigned to them to the best of their ability, with the greatest possible safety and with the least possible confrontation. Because who would want to be confronted because a task is not completed due to a lack of staff, or because overtime has to be worked, or because overstaffing has resulted in low utilisation rates. A typical attitude is that departments try to ramp up staffing levels. What if you get sick? What if you go on leave? Typical questions and indeed these are risks that need to be managed, but not necessarily with extra staff.
How many of us are there?
The number approach depends on function. Typically, the head of a department means the number of people who can perform the task, which does not, by definition, mean all the employees who are employed by the company. The two approaches are also reflected in the statistics. The first is the number of persons employed under labour law, which includes all employees from the beginning of the employment relationship to the end of the employment relationship. The other is the statistical headcount, which is narrower than the above, as it excludes, for example, workers on maternity leave, workers on unpaid leave for childcare, workers on inactive leave for more than 30 days, suspended and dismissed workers. None of these groups include workers who are employed for less than 60 hours per month.
The number of employees is also important because it is the basis for a number of indicators. The headcount-based indicators provide a good indication of whether, for example, our staffing levels, processes are in order or whether intervention is needed. Without being exhaustive, here are a few indicators that can give you an idea of how your organisation is working.
The turnover rate is the most notorious indicator, showing the dynamics of churn. It is the ratio of the number of leavers to the average number of staff. It is a misconception that if there is turnover, it would be a huge problem, because as workers are replaced, the organisation is refreshed, meaning that a healthy level of turnover is not a problem.
The revenue per employee ( annual revenue/average headcount) suggests several things. If the figure is low, it means the staffing is too high or the organisation is inefficient, but it could also indicate a pricing problem.
The intake rate (number of probationers/hires) can indicate the organisation's capacity to absorb and/or our advertising accuracy ( how much the employee got what we offered him/her).
Does the recruitment cost index (recruitment cost/number of hires) give us a clue as to how good our advertising channels are? Are we advertising on the right platforms and channels or are we throwing money down a bottomless pit.
Not strictly speaking, a headcount-based indicator is the examination of time-frame utilisation and its projection onto a normative system for manual jobs in manufacturing. The staffing requirements in manufacturing areas are typically based on the standard system, so if we see that the standard system should produce a given quantity of product in normal working hours, but this is only possible with overtime over and above the time frame, then we need to look at the efficiency of production or the staffing levels. An under-utilisation of the time frame, an increase in downtime, is a clear indication of overstaffing.
On a headcount basis, you can come up with metrics for almost anything, it depends on creativity and management interest. Certainly, the number of employees is almost directly proportional to the cost, but it has an impact on organisational culture, morale, productivity and the bottom line, so it is not worth taking planning or execution lightly.