Workforce planning is especially critical during times of turbulence, as your people are both your biggest cost centre and your biggest value driver. Total human capital costs average nearly 70% of operating expenses, for instance.

With the impending recession looming large – UK inflation is predicted to hit a new post-war record of 22% – workforce planning has skyrocketed to the top of the agenda.

Let’s talk about how workforce planning can help your business prepare for the recession – and whatever other crises the future has in store.

What is workforce planning?

Workforce planning is the process of ensuring the organisation has the right workforce to meet its strategic goals. It involves analysing your current workforce and forecasting future needs, then delivering a talent plan to fill the gaps.

In essence, planning the workforce means optimising the organisation’s people resource – ensuring you’ve got the right people with the right skills in the right places to add the value the business needs. Organisations typically undertake both operational and strategic workforce planning.

Strategic workforce planning versus operational workforce planning

Both operational and strategic workforce planning are about optimising your people resource to meet business goals, but they happen on different timeframes.  

  • Operational workforce planning is shorter-term, focussing on ensuring the organisation has the skills to meet requirements over the next handful of years. For example, do you have the right hires to deliver on a large project?
  • Strategic workforce planning takes a longer-term perspective, considering the people and skills you’ll need to execute the business’ vision over the next five, ten or more years. For example, do you have the right skills to adapt to emerging technologies as the world of work changes?

It’s critical to balance operational and strategic planning priorities. If not, you risk making near-term reactive decisions that hurt the business long-term or focussing too far ahead that you sacrifice current operational execution. Conducting both types of planning protects the organisation’s current health and its longevity.

The consequences of getting workforce planning wrong can be major – the UK healthcare sector is a good example.

Analysis suggests NHS England is becoming particularly reliant on doctors from abroad, driven by a lack of effective workforce planning. Without a long-term workforce strategy, the NHS is unable to effectively counter risks and challenges like evolving working practices, talent shortages, and increased use of technology. As a result, the NHS is battling a workforce crisis with dire skills shortages impacting quality, access, and level of care.

The challenge is much the same across every industry because organisations operate in a Volatile, Uncertain, Changing and Ambiguous context. This VUCA model defines the business environment we all operate within, and have been for years.

The consequence is that business and HR leaders are standing on constantly shifting sands. New challenges and tensions arise continually, and there are no simple answers. Right now, the immediate challenge is rising inflation and the impending recession.

Battling the recession with strategic workforce planning

There have been growing concerns for the UK economy for months, with KPMG UK conceding a ‘downbeat outlook […] which could see another shallow recession from the end of this year’. The recent death of Queen Elizbeth II has exacerbated recession fears.

Organisations across the UK are tackling record inflation levels, which saw consumer price inflation up by 8.8% in the 12-months to July 2022. This has huge ramifications for business and HR leaders.

94% of UK employees are suffering from money worries, and 77% say those concerns impact their work. This burden of financial stress has a knock-on impact for productivity. Strategic workforce planning means understanding and modelling the impact of this trajectory on the workforce and creating a plan to counter.

For example:

  • How will you protect against productivity decline?
  • What does productivity decline mean for delivery in the short- and long-term?
  • Where else could you invest to protect productivity?

Turnover is another major issue here. 33% of UK workers have applied for a new job and another 22% plan to start job hunting, as the cost of living crisis tightens its grip. And little wonder. 60% of employees who switched jobs from April 2021 to March 2022 saw their real earnings jump by 10% – compared to a 2% drop in inflation-adjusted earnings for those who stayed put.

A robust workforce strategy helps business and HR leaders formulate a response to these challenges.

For example:

  • Should you increase salaries?
  • What are the cost implications if you do?
  • But what are the recruitment costs of replacement hiring?
  • Or should you freeze hiring altogether?
  • But what impact would a hiring freeze have on delivery?
  • Could you increase gig economy hiring?
  • Where else could you invest to protect retention?

A strategic workforce plan should evaluate the challenges and opportunities the business faces and develop proactive people strategies to overcome or capitalise, within the overall context of the organisation’s strategic goals.

For example, to counter turnover you might increase strategic employee engagement investment.

Getting started with simple workforce planning

A mature people planning practice can be an advanced, complex and robust multi-disciplinary process harnessing cutting-edge people analytics to conduct scenario modelling and analysis.

But there’s value in simple planning too. At its most basic, you can start by having more cross-functional conversations, to understand the challenges managers face as well as leadership priorities.

For example:

  • What is the organisational strategy and goals?
  • What do department leaders see as their biggest long-term challenges?
  • What are your core business priorities and which people are critical?
  • What skills are different departments crying out for, but can’t find?
  • What challenges do managers have with major trends like flexible working?

Questions like these can be a productive ramp-on point for building planning sophistication, by growing HR and business leaders’ visibility over emerging talent issues and helping you take sounder steps forward. 

HR leaders can then apply their own expertise and knowledge to address these broader business problems, moving towards a bigger picture, longer-term, and more strategic view of talent management. Workforce planning will naturally become more sophisticated as data maturity, confidence, and analytics capability builds.

There’s no right answer to tackling inflation but nonetheless, HR leaders must lead their organisations to formulate a response, to protect against long-term business performance consequences. In today’s context of constant volatility, strategic workforce planning is cementing itself as a critical capability.