Knowing how many employees are needed to meet demand at any given time is crucial to managing labor costs and productivity. But predicting market forces and staffing requirements – also known as workforce forecasting – can be challenging. That’s why employers rely on predictive analytics tools to evaluate workforce data and deliver actionable, evidence-based recommendations for hiring, retention and overall budget.
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What is workforce forecasting?
Workforce forecasting is the process of determining in advance the workers and skills that an employer will need to conduct business successfully. Organizations that use ad hoc measurements or combinations of historical data from different sources for this purpose may be limited to short-term forecasts. Achieving workforce planning maturity usually requires sophisticated analytics.
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A workforce forecasting strategy is essential for seasonal businesses. For example, resorts and retail companies depend highly on having adequate staff during their busiest times of the year. These employers may have to look beyond manual headcount calculations, which can be inaccurate, and invest in software capable of creating in-depth workforce forecasts.
The benefits of workforce forecasting
Workforce forecasting requires adequate tech, but the yields can be astounding. Employers who proactively use predictive analytics may be able to understand the following better:
- What workforce changes are expected and how to create reasonable budgets
- Where there will be hard-to-fill job openings requiring recruitment or internal training efforts
- How industry trends, flight risks and retirements could impact their workforce in the future
- Situations that may lead to retention issues or problems arising from subpar employee performance
- Factors that drive turnover and the scope and cost of the associated risks
Workforce forecasting best practices
Accurate workforce forecasts may be difficult to achieve without a well-planned organizational strategy. Here are four tips for using predictive analytics:
- Determine the purpose
Beyond cost savings, employers must understand why predictive analytics make sense for their organization and the key outcomes expected. - Address pain points
Analytics and workforce forecasting tools are able to delve deep and identify problems that may not be immediately obvious. With this information, employers can more readily prescribe the right solution. - Create a comprehensive workforce picture
When forecasting, it’s essential to analyze data sources from both inside and outside the organization. Internal metrics may include employee attendance data, feedback surveys and performance reviews. External sources may consist of wage comparisons, benefits analyses and market trend data. - Focus on the user experience
Predictive analytics loses its ability to support decision-making if the end-user is not kept in mind. Data collection should be appropriate, seamless, and straightforward. The data should also be transparent and actionable for managers and their team members.
Workforce forecasting methods
Traditional workforce forecasting methods focus on predicting the number of employees or independent contractors that will be needed. However, not all workers are the same and diverse types of workers present unique forecasting challenges. As such, headcount models don’t provide the full scope of the organization’s workforce.
A more precise forecasting method is to not only estimate headcount, but also consider the core competencies of the employees and contractors. With the right workforce forecasting software, employers can analyze data to develop monthly headcount predictions that account for both high-turnover, hourly workers and salaried employees.
Frequently asked questions about workforce forecasting
What are the five key elements of workforce planning?
Although there isn’t a consensus on what workforce planning and forecasting means for every organization, here are five aspects of the process that many employers experience:
- Creating structure and processes
- Planning for skills requirements
- Identifying and sourcing critical talent skill sets
- Recruiting new people to close skill gaps
- Retaining valued employees
What is labor forecasting?
Using data analysis to inform recruitment and talent succession strategies is known as labor forecasting. It can help align HR with operations and finance, improve internal training programs, and identify opportunities for increased profitability.
What is the work demand forecast?
Work demand forecasting is how employers ensure they have the right people with the right skills to meet their objectives. When backed by the most current data available, forecasts can account for potential spikes or lulls in business to help optimize service and reduce risk.
This guide is intended to be used as a starting point in analyzing workforce management forecasting and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
