The Ultimate Guide to Headcount Planning And Forecasting

Headcount planning and forecasting can be critical to organizational success. It affects everything from production to customer service to employee morale. It’s affected by everything from employee turnover to labor market trends to budget planning.

Without the right tools, headcount planning and forecasting can be inaccurate and inefficient, leading to deficits in your workforce and difficulties in filling skills gaps. Headcount planning ties directly into your larger hiring intelligence and acquisition strategy for building a future-proofed workforce.

What Is Headcount Planning? 

Headcount planning and forecasting is a pair of processes designed to make sure that your organization can meet its short- and long-term business needs while staying within a defined staffing budget. 

You’ll always need a minimum number of employees with sufficient skills to achieve company goals without overspending on labor. Since these goals and the skills required can be constantly in flux, it’s critical to be able to accurately predict future headcount needs and plan for how to fill them.

Headcount is often used to simply mean how many seats a company has, but forecasting and planning should be about more than filling empty seats. It should be about identifying current and future skills needs, attracting the right people to fill those needs and making plans to retain them and reduce attrition company-wide.

The #1 priority of recruiters worldwide is improving Quality of Hire. Without this approach to headcount planning and forecasting, skills gaps will widen. Plan on combining headcount forecasting strategies with workforce L&D to achieve your recruitment and business goals.

• 87% of executives say their organization is or is expecting to experience skills gaps

• 59% of L&D experts worldwide say upskilling and reskilling is their current #1 priority  

What Is A Headcount Planning Model? 

Your headcount planning model is built on data. A solid headcount planning model will focus on drawing together and analyzing the following crucial data points:

• How many workers are needed to cover all necessary labor hours for peak productivity 

• Anticipated growth (how many new employees will be needed over the next year)

• Anticipated churn (how many existing employees or new hires will quit)

• Cost per hire

• Time to hire

• Skills gaps (current and anticipated)

• Skills potential (in current employees)

• Sources of hire (historical data to guide resourcing)

• Labor budget

• Worksite occupancy and space utilization

All department heads, senior executives, human resources, and finance specialists should be part of the process so if there is a need to shift or pivot, it can be accomplished painlessly and efficiently. They can all be invaluable in helping to define which data sources are the most reliable and accurate for creating your headcount planning model.

How To Do Headcount Planning Effectively

The key to headcount planning is to be proactive instead of reactive. If you wait until you’re desperate for new hires and employee churn is through the roof, you’ll be scrambling to play catchup. 

In a tight labor market, this can spell disaster as a lack of qualified talent and widening skills gaps are impacted further by a revolving door of recruitment. Be future-focused and play the long game of talent acquisition and retention.

A template is a good place to start. Our free, customizable, downloadable headcount planning template lets you track your hiring progress by recruiter, department, and hiring stage while helping you crunch the numbers to predict headcount needs over the coming year.

Best Headcount Planning Strategies

Top strategies have a carefully laid out series of steps to get your organization from point A to point B. When it comes to headcount planning, follow these steps for a solid set of strategies that will pave the way to success.

Gather All Applicable Data

You’ll need access to short-, mid-, and long-term business plans for the company, strategic goals, and the budget to establish meaningful key headcount metrics. Look for the following datasets to help you build your headcount approach:

• Job role requirements

• Salary data

• Employee data including diversity stats and skill sets

• Organizational hierarchy (by department if necessary)

• Performance ratings across all employees and departments

• Attrition rates and frequency

• Retirement and benefits eligibility

Once you establish benchmarks, you can track key metrics over time, making your headcount forecasting more accurate.

Analyze Your Current Headcount State

Running a headcount planning exercise can help you get a 360-picture of the current state of your workforce. You’ll be able to lay out a clear picture of hiring priorities, skills gaps, and total workforce costs to help you project future headcount needs and challenges. 

Evaluate the Current Workforce

You also need to drill down and granularly evaluate your current workforce to build the profile of what an ideal employee looks like. You can also use analysis to spot patterns and reveal:  

• Where critical roles are staying empty for too long

• When, how, and why attrition is occurring

• Competitiveness when it comes to salary and benefits  

• Which employees should be considered flight risks

• Current and potential skill gaps

• Opportunities to nurture employees for internal promotion.

Develop Your Headcount Plan

You’ll need to identify specific business challenges that may affect the company’s headcount needs in the months or years ahead. Consider:

• Shifting customer demand

• Talent sourcing and availability

• Regulatory changes in the industry

• New approaches to identify top talent
  

• Plans for scaling or other growth

Execute On Your Strategies

Before you can execute, figure out if budgets align with workforce requirements, and make adjustments as needed. Tailor your strategies for any special circumstances.  You may be able to close skills gaps and retain high-value employees with upskilling or reskilling. Likewise, close seasonal or temporary headcount gaps with part-time or temporary hires or contractors.  

Evaluate, Revise, Repeat

Monitor your headcount planning and execution over time, measure your progress against set milestones, and be prepared for the need to revise plans in a challenging and ever-changing market that may make labor easier or harder to acquire and retain. Re-deploy your forecasting and planning strategies as needed to maintain Quality of Hire and keep all seats filled.

Benefits of Effective Headcount Planning and Forecasting 

Headcount planning is critical for keeping productivity in line with business goals. When done correctly, this process can help your organization achieve additional, more subtle goals.

Top Talent Acquisition

Without headcount planning, there is an increased risk of misalignment between talent acquisition strategy and the ability to execute that strategy. Headcount planning makes it easier to identify and hire the right people for each open role and keep that role from becoming vacant again before the year is out. It dovetails with your recruitment strategy, helping you develop a talent pipeline that will feed you, highly-qualified candidates, practically on demand. 

Better Budget Adherence

Staying within budget is more than keeping salaries under a certain mark for each new hire. Attrition, re-recruiting, and lost productivity all rack up additional labor costs that can blow the budget out of the water. If your business has been struggling with keeping hiring efforts in line with the approved headcount budget, it’s time for a realistic headcount strategy that gets recruiters and finance managers on the same page.   

Streamlining Headcount 

Many headcount strategies go off the rails when employee types and schedules don’t line up with standard 40-hour-a-week expectations. Proper headcount planning looks at the company’s needs holistically and allows room for employee downtime as well as different schedules and worker classifications. Some businesses may find it more cost-effective to bring in contractors or seasonal employees to handle spikes in production, while others may turn to automation to reduce labor needs and free up employees for more challenging tasks.

Better Workspace Management 

A common challenge for companies that are in growth mode is space. Constraints on available equipment and workspace areas can make scaling difficult. In today’s more flexible hiring environment, remote employees can neatly solve this problem, lowering the total costs of employing each worker. It is also beneficial for recruitment efforts, opening up negotiations with new hires who may be happy to take a 5%-10% pay cut in exchange for a flexible arrangement and who will be more likely to stay with the company long-term.

Get started with headcount planning today by downloading the free and fully customizable headcount planning template developed by the Crosschq team.

For more information on how Crosschq can help your organization predict and plan for recruitment needs while improving retention and Quality of Hire, contact our hiring intelligence team for a free demonstration of our entire suite of products today.