When a company grows, many leaders may emphasize the need for "headcount planning."
While headcount planning may seem like a buzzword, it is one of the most crucial aspects of any company. Instead, it could be as important as financial planning and may shape what your current and future needs are.
What is headcount planning?
Headcount planning is where a company goes over the organizational structure of the company and reviews its staff to ensure they are all beneficial to the company. Usually, executives or leadership would re-interview and analyze current employees to see if they truly fit into the present culture and future of the company.
Sometimes companies would hire consultants to analyze if there are any redundancies in the company so that they can make the company very efficient and effective. Often, leadership and organizational structure a headcount strategy to lay off or smart hiring many staff that fit their vision of the company.
Why is the headcount planning process necessary?
Headcount planning can be crucial because it helps the company shape its vision while preparing for the future of the company. With startups in constant change, it is essential to look back at the staff and decide if they still fit in the company's future and can help the business achieve its business objectives.
While this decision-making may seem challenging for many founders, sometimes changes are needed for a company to reach its potential.
Sometimes companies even implement changes to the headcount to stabilize the company's future. Founders may implement succession plans so that investors can believe in the long term of the company.
For example, when an investor starts funding a company, they will usually want some say in it; therefore, they may help change the structure of the company as a whole. Doing this enables the startup to prepare for future growth and structure that an investor may prefer.
Team members involved in headcount planning
Leaders from different departments work together to plan the number of current employees in their organization. Departmental leaders, senior executives, human resources, sales team, and finance specialists play a role in the headcount planning team.
The work includes:
- Hiring plans.
- Reducing employee churn.
- Analysis of worksite occupancy and space utilization data.
- Organizational insights and direction specific to the company.
Usually, the most involved member of the headcount planning team is the executives or human resources experts.
Know Before You Grow
Over half of executives are unaware they can implement effective headcount planning exercises. The complexity is often too much to plan for. Furthermore, managing headcount plans often fail because of internal and external factors, which may lead to a low company budget and poor future stability.
To plan efficiently, you must understand your current business, personnel, and targets. Unless you know and understand the truth, mistakes will happen. Take this opportunity to avoid the traps that scar your life. Make sure you learn the basics, so you don't have to go too far in this journey.
- Your industry is growing.
- If your market or industry is ready to grow, it might be time to grow your business with it. According to the financial firm Fundera, some of the fastest growing industries in the United States are currently real estate, hospitality, and consumer retail. Grow over the next five years, including cannabis, online grocery delivery, and healthcare.
- Steady Cashflow
- Make sure you are financially prepared for growth, as cash flow is usually steady. Before making significant decisions, you should have a track record of consistent revenue and new customer acquisition. Steady gains mean you'll be able to grow sustainably, and you don't put the cart before the horse.
- More Customers
- If your business is growing faster than you can handle, you may need to grow business. Of course, sudden spikes in sales don't always mean that demand is high - this could be a coincidence. Therefore, ensure there is always more demand than you can supply.
- Ask your customers how satisfied with your business, how interested they are in new products, and what kind of feedback they have about your business. Consider the responses you receive to find patterns. If your customers want more of your product, faster delivery, or additional services, that's a good sign.
Evaluate your current workforce
Let's start measuring metrics now. When considering the workforce, you must look closely to understand the critical roles. This includes leadership positions typically accounted for during an employee selection process.
Whatever role you need to implement your business strategy, immediate or mid-term. Other critical positions include sales, support services, research and development associates, or project managers. There may be more interesting books on successful strategic workforce planning.
When should headcount planning occur?
In the past, the companies planned annual headcounts. Nonetheless, when external factors arise or industry-specific fluctuations occur, companies should be capable of planning more iteratively and agilely.
It is usually wise to have a defined budget for the short term. But for the long term, it is essential to be flexible. The best budget plans can be written as living documents that leaders regularly revisit to make changes in response to real-time data. This will allow an organization to react rapidly to external forces causing disruptions within a business.
Identify your business challenges.
A break-even analysis can help you see which expenses you need to cut in order to stay in the black. This calculation can help you see which expenses are necessary for your business to succeed.
Many companies monitor this frequently so that they can address issues immediately. For example, if you know you have to produce an average of 10,000 pieces per day to cover fixed and variable expenses, monitor how many pieces you have that are made per day.
If you only look at the numbers from one week, you may have lost days of production that will be difficult to make up.
Pitfalls to headcount planning
There are many reasons why executives fail when doing headcount planning. While this may seem because many executives lack the leadership skills to lead, this is not true. It is because leaders don't have enough context to inform their decisions.
Many companies don't have the resources to truly understand their business from the inside out. This may mean they don't know what the company lacks or what seems redundant. Without this deep knowledge of the situation, it leads to the company's ultimate failure.
Often, leaders lack the understanding of what their company can reach and overestimate or underestimate the company's potential.
When this happens, companies have the potential to fall apart as they are not prepared to reach the growth that they expect, leading to unhappy investors.
Many companies can't adapt to the situation during different periods, such as the unprecedented Covid-19 pandemic and economic recessions.
This leads to massive layoffs that may be unexpected for the company to stay afloat. This will therefore change the headcount planning process.
Recruitment may be a challenging aspect for many companies. In our world today, highly skilled people are very hard to find. Companies put in a lot of money and resources to find a suitable member that fits the company.
However, companies usually find staff that is not suitable, which wastes even more money and time. By not being successful in recruiting, it is, therefore, necessary to change the headcount planning process.
On average, ninety-one percent of Millennials expect to stay in a job for less than three years. This means that turnover for staff can be quick. So even if companies successfully hire the right member, they may leave for greener pastures in merely a few years or even months.
This heavy turnover will heavily affect a company as it slows down the growth process and restricts your headcount plan.
How do you develop successful business goals?
There are many stages to developing a successful headcount plan which can help you reach your business goals, but we have combined this complex plan into three basic steps: analyze, execute, and review.
One aspect we should consider first is looking at every sector of your business in a new light. Many companies look at what each department and staff do with data to see if they are genuinely redundant.
Companies should look at their budgets to see if their big workforce is sustainable and if skills are suitable for future challenges while also identifying the main priorities in the company.
Sometimes, a whole department is redundant or unnecessary, so it would be crucial to cut such a financial hole. However, it also means highly skilled employees have a path toward leadership.
When the headcount plan has been finalized, it is essential to execute it well. While this part may be very challenging, it is essential to do it well. It allows a possible smooth transition of the "old" company to the new one.
With new employees, departments, and more, it is crucial for leadership to let everyone know the final destination and talent management strategies they can use to achieve it.
Moreover, it can help to ensure that the HR teams and finance department can handle any staffing needs and provide budget information respectively to ensure each area of the company aligns, such as talent acquisition efforts, with its business and company goals. One such example many HR teams focus on is aligning talent acquisition efforts and talent management. While it is difficult, with excellent execution, it can ultimately lead to your company's success.
Headcount plans should be regularly reviewed to see if it is working. It may take a few months to see how well the plan is, but if it doesn't work, it is necessary to restart this process.
Also, with the world changing so quickly, a company's plan may need to change. This is why founders must check with their staff to understand what is happening and see if their actions are helping the company trend on the right path.
Benefits of the workforce planning process
There are many benefits to headcount planning.
Headcount planning is one of the most effective ways to improve a workforce. By looking at data points, companies can look at staff members' skill sets and give them the most suitable job responsibilities.
Doing this will save time and money and help improve your company's culture since staff members will enjoy doing what they are good at.
Headcount planning must be very flexible since a company constantly changes. With the markets, investors, and technology changing all the time, headcount plans can quickly adapt to new goals.
More importantly, it will help the company continue making a product that the market wants, rather than an outdated one.
How gini can help business leaders like you
Overall, headcount planning is one of the most crucial aspects of any business, so we insist any founder do one with their company if they have yet to do a plan. It helps in succession planning and also helps you in hiring succession-eligible employees. If any company needs help with headcount planning, our platform, gini, offers a unique opportunity for businesses to assist you in any headcount planning needs.