4 ways HR forecasting can improve workforce planning

How many employees do you have? How do you need? How many will you need next month or next year, and where will you find them? If your answers rely on instinct more than data, HR forecasting is where to start.

A properly configured HRMS, populated with up-to-date employee data and equipped with the right analytics functions can be very useful in answering these questions.

Rather than scrambling to fill gaps when they emerge, you model the future and prepare for it in advance. Here's how that translates into better workforce planning in practice.

1. Balance your supply and demand

Workforce planning is a question of supply (the people available to you) and demand (the people you need), and the trick is to maintain the balance between the two. 

On the demand side, your HRMS (particularly when integrated with your ERP) can calculate the number of staff you need by role, location and skill level at a given point in the future.

Recommended download: Find an HRMS which provides the right functionality for your forecasting activities

On the supply side, it accounts for your current workforce and adjusts for anticipated turnover, retirements and internal transfers. The gap between the two is what you need to source externally.

Something worth flagging here is your unit of measurement. Workforce planning works better in FTEs than in raw headcount since a role covered by two part-time employees still represents one FTE. Since you aren't just simply counting heads, keep that in mind when you're modelling budgets and resource allocations.

2. Align HR function more closely with organizational strategy

The cliché that HR is ‘not strategic enough’ or does not contribute to the bottom line still exists. Data-based HR forecasting is one way to demonstrate that your department is making a direct contribution to organizational efficiency. The basic steps are:

• Establish the organization’s strategic aims and agreed KPIs.
• Calculate what those goals require in personnel terms.
• Assess your current and near-future internal resources in skills and capabilities, not just numbers.
• Identify the gaps that recruitment and training plans must address.
• Agree HR activities that put the right people in the right roles at the right time.

Not only is the HRMS fulfilling its function, but HR's contribution stops being administrative and starts being demonstrably operational.

3. Carry out different kinds of HR forecasting

HR forecasts don't have to follow a single template. Running different scenarios gives you a more complete picture of what your workforce will need.

• Staffing-driven forecasts focus on anticipated internal changes like turnover rates, promotions, retirements and planned restructuring. These form the baseline for most workforce planning exercises.

• Event-driven forecasts respond to significant external or internal shifts: new legislation that affects your workforce, a major acquisition, or a decision to enter a new market.

• Process-driven forecasts look at operational changes such as a shift in manufacturing methods or a new client engagement model that will have a downstream staffing effect.

For event-driven forecasting in particular, it's worth running your assumptions through an external-factors lens.

The PESTEL framework (Politics, Economics, Society, Technology, Environment, and Legislation) gives HR teams a structured way to assess how market and regulatory trends will affect hiring decisions, something your internal HRMS data alone won't capture.

4. Reduce costs

The bottom line for any technology-based change or function should include a cost saving. Overstaffing carries an obvious cost, but so does understaffing through overtime, agency spend and the productivity losses that come with rushed hiring decisions.

A forecast that gives you enough lead time to recruit deliberately rather than urgently tends to reduce both. The improvement in forecast quality should show up as reduced agency reliance, lower turnover costs and a recruitment pipeline that avoids emergency fees. If it doesn't, that's as useful a signal as any, and your HRMS data will show you where the model needs adjusting.