Effective workforce planning occurs when an organization considers both internal and external factors to determine its future staffing needs and long-term organizational structure. This type of planning offers a range of benefits. It can help to ensure that the company has the talent it needs, where it needs it, and when. It also helps employees remain productive and engaged, and ensures that they have the necessary skills to help the company continue to grow. On the other hand, poor workforce planning can lead to inadequately skilled employees, low morale, and reduced productivity. In a survey of corporate executives, 73 percent said that poor workforce planning resulted in talent shortfalls that caused an inability to meet business objectives. Other executives in the same study said they also experienced lower margins and workforce cost overruns as a result of inadequate workforce planning.
Neglecting workforce planning can cause organizations to miss out on the benefits of growth, and in some cases it can cause real harm. Here are six ways poor workforce planning can derail business growth.
A key element of workforce planning is understanding the level of talent required for an organization’s future state. For example, if an organization currently relies heavily on individual contributors, there may be a need to increase the number of team leaders in two years when the organization has grown larger, more complex, and has a broader range of products and services.
Effective workforce planning envisions the training that will be necessary to develop the skills of existing employees both now and in the future, and it also forecasts what new skills the organization can acquire through hiring. Poor workforce planning fails to consider the skills and knowledge employees will need in the future, and as a result, existing skills become quickly outdated and provide diminishing value to the organization over time. Without a well-thought-out workforce plan that forecasts employee training needs, employees can’t work smartly or efficiently because they lack the skills and knowledge to do so.
For some time now, employee engagement has remained at low levels on average. Gallup reports that only 34 percent of U.S. employees are engaged and possess high levels of enthusiasm and commitment to their work and their company. Poor workforce planning can further erode already low employee engagement, because it can cause employees to feel undervalued and forgotten. After all, it’s hard for employees to be engaged when their company seems to be taking purely reactive steps to develop a structure and staffing plan that keeps pace with company growth.
A lack of transparency about workforce staffing plans contributes to employees feeling uninformed about company decision-making, which can also lead to poor employee engagement. A TINYpulse study found that only 25 percent of surveyed employees believe management is transparent. If company leaders fail to plan (or don’t at least send clear signals that there is a plan), employee commitment can wane over time. Poor transparency can have a particularly negative impact on the engagement of leaders outside the C-suite. When department and division leaders feel left out of key staffing decisions they’re expected to implement, they can become disengaged and unmotivated.
Poor workforce planning can lead to hiring decisions that are reactive and, therefore, too late in the game to meet evolving business needs. Persistent talent gaps in high-growth areas can lead to an overreliance on existing staff to pick up the slack, which can cause employee stress, burnout, and turnover. In a recent Hays salary survey, 92 percent of companies reported they experienced higher turnover and lower productivity due to an inability to hire skilled employees.
Failure to adequately plan for and manage turnover further stunts company growth because it costs time and money to replace an employee. Some estimates peg the cost of replacing an employee at 50 percent to 200 percent of salary. When workforce planning is lacking, the human resources department and company managers spend more time and resources creating workarounds to address talent gaps and recruiting for replacement positions, which leaves them less time to focus on activities that will support growth, such as training and developing existing staff.
The more productive employees are, the faster and more efficient they can be in helping a company meet its growth goals. However, poor workforce planning can lead to an insufficient focus on the technologies, training, and other resources that can boost employee productivity. Employee productivity can take a direct hit without workforce plans that build the right organizational structure to overcome challenges related to employee workload and skill level.
Lackluster workforce planning also prevents an organization from getting to the heart of the most value-added employee activities and optimally organizing talent around what’s most critical for company growth. Workforce planning doesn’t just address staffing levels; it also helps to ensure that teams and individuals are working on the right things. One company increased productivity by 6 percent when it implemented a workforce plan that reorganized work responsibilities across multiple functions.
Organizational growth requires that employees be organized according to their specific accountabilities—for example, by product type, geography, function, or project. As the organization grows in complexity and teams increasingly require day-to-day management and guidance, the need for leadership talent grows. When workforce plans fail to recruit and develop a sufficient number of individuals for the leadership pipeline, an organization can quickly outgrow the capability of its existing managers.
Workforce planning is not just about forecasting the need for individual contributors and frontline staff; it’s also about identifying the number of leaders needed, their and skill levels, and where they need to be deployed throughout the organization as it grows. Building the leadership pipeline is a critical element of workforce planning. Without sufficient planning, organizations can experience some of the following negative outcomes of insufficient leadership bench strength:
Managers have no time to develop a connection with employees and relationships of trust with their team.
Leaders lack the skills and training to set expectations and give feedback to guide employee performance effectively.
Emerging leaders are pushed into management roles before they’re ready, simply because of a shortage of leadership talent elsewhere in the organization.
Executive leaders must be hired from the outside because not enough have been developed internally.
Company growth and innovation go hand in hand, but a company will have a hard time innovating if its teams are broken, disjointed, and not organized in a way that allows for maximum communication and collaboration. In addition to staffing and hires, workforce planning must also focus on building an organizational structure in which teams are properly aligned to collaborate, share information and ideas, and work well with each other. Operating without a sensible workforce plan can create teams that operate in silos and are so inwardly focused that they prevent innovation and organizational growth from happening.
Workforce planning can help any organization overcome the tide of a changing labor market and ensure long-term growth. However, failure to effectively forecast staffing and organizational structure needs can distract an organization from its growth plans and create employee productivity and engagement challenges. A good place to start to prevent some of the negative consequences of poor workforce planning is to use available planning tools, such as a live org chart. A live org chart makes it easier to leverage, hire, and reorganize talent to meet organizational growth goals. It can help leaders collaborate on plans for reorganization and scale for growth, allowing workforce planning to evolve as the organization grows.