Workforce Forecasting: 5 Steps To Predict Staffing Needs

Workforce forecasting is an essential part of a company’s overall workforce management process, as it’s critical for a business to know how many people it requires to meet its needs. Accurately forecasting workforce needs helps organizations avoid talent shortages, reduce turnover, and remain competitive.

This article discusses the importance of workforce forecasting, different methods you can use, and best practices to observe to ensure effective workforce planning.

Contents
What is workforce forecasting?
Why is workforce forecasting important?
How workforce forecasting works
5 steps to take for effective workforce forecasting
9 examples of workforce forecasting methods and models
Best workforce forecasting practices for HR
Tools and software for effective workforce forecasting

What is workforce forecasting?

Workforce forecasting is the process of estimating an organization’s future staffing needs to help ensure it has the right people with the right skills at the right time.

Forecasting involves looking at historical data and identifies trends over time, allowing you to see where and when your team needs help. It can also help align your company’s workforce capacity with its strategic goals.

Key aspects of workforce forecasting include forecasting workforce management, demand, and scheduling. Workforce management forecasting focuses on operational parts of the business (e.g., scheduling and shift planning), while workforce demand forecasting estimates future demand for specific roles, skills, or headcount.

Workforce scheduling involves the accurate, efficient distribution of resources and workload, such as assigning employees to certain shifts or schedules. This provides a balance between workforce supply and demand and can help prevent employee burnout by decreasing the amount of extra shifts or overtime.

Why is workforce forecasting important?

Workforce forecasting allows companies to anticipate future labor needs to keep business running without major disruptions. By understanding and forecasting staffing needs, management can allocate resources to staff in each department more effectively.

This is essential for strategic workforce planning, effective HR allocation, and minimizing operational slowdowns or interruptions. Work scheduling practices can also affect employees. Those with unpredictable schedules have up to a 42% likelihood of quitting in six months, compared to a 24% turnover rate among those with more stable schedules.

Other key benefits of workforce forecasting include:

• Syncing staffing levels and long-term business needs: This ensures the right number of staff with the right skills at the right time to help achieve business objectives.
• Supporting talent forecasting for long-term growth: More effective resource allocation can reduce excess hiring and training expenses, aiding in cost-effectiveness.
• Preventing staffing shortages: Efficiently forecasting staffing needs can help companies avoid staffing shortages and operational disruptions. 
• Improving job satisfaction: Through better resource allocation, effective workforce forecasting can increase job satisfaction, employee engagement, and retention. 
• Ensuring legal compliance: Accurate workforce forecasting can minimize legal risks through proactive planning for workforce changes that might impact regulatory requirements.

How workforce forecasting works

The process of workforce forecasting involves three primary components:

1. Data analysis: Data analytics can help predict future workforce needs. Use and analyze historical data, market trends, and predictive analytics to assess previous staffing patterns and identify skills gaps and turnover trends.
2. Technology tools: Where possible, software should integrate with HR systems and automate repetitive tasks. It should also offer simulation, scenario planning, and complex data analysis to help predict future issues and needs.
3. Communication and collaboration: Include and communicate with cross-functional teams and key players in your workforce forecasting efforts to help align goals and strategies.

5 steps to take for effective workforce forecasting

Here are five steps involved in workforce forecasting you can use in your organization:

Step 1: Assess the current workforce

Start by thoroughly analyzing your current workforce. This involves evaluating the number of employees, their skills, roles, and overall performance. Look for gaps in skills or knowledge, and identify areas where additional training or hiring may be necessary.

Regularly updating this assessment ensures your data remains accurate and reflective of your organization’s needs. Tools like skills inventories and performance management systems can streamline this process, giving you a clear picture of your workforce’s strengths and weaknesses.

Step 2: Identify business goals

Workforce forecasting should align with your company’s strategic objectives. Begin by defining your organization’s long-term and short-term goals—such as expanding into new markets, launching products, or increasing operational efficiency.

Use strategic planning sessions to map out how workforce needs fit into these objectives. Next, establish measurable Key Performance Indicators (KPIs) to guide your efforts, such as reducing turnover, improving employee productivity, or achieving specific revenue targets.

Step 3: Forecast demand

Anticipate future workforce needs based on historical data, market trends, and business growth projections. Data analytics tools can help you understand how factors like seasonal demand, technological advancements, or industry-specific trends might affect staffing.

Also, work closely with department leaders to gain insights into specific needs for roles, skills, or team sizes. Use predictive analytics and scenario planning to explore various future possibilities, ensuring your forecast considers both best- and worst-case scenarios.

Step 4: Analyze supply

Assess your current and future talent availability to identify any mismatches between supply and demand. This involves reviewing hiring pipelines, internal talent pools, and potential challenges like retirements or high turnover in certain departments.

Be sure to also consider economic factors, such as labor market conditions and industry competition, that might impact recruitment or retention. Flexible workforce plans, including strategies for upskilling, internal promotions, or using contingent workers, can help address gaps and prepare for unexpected changes.

Step 5: Develop and implement a plan

Bridge the gap between your workforce supply and demand with a clear, actionable plan—this involves outlining steps for hiring, training, and reallocating resources to meet future needs. Additionally, include initiatives like recruiting for hard-to-fill positions, offering cross-training opportunities, or creating rotational programs to expand employee skill sets.

Make contingency plans for fluctuations (e.g., a sudden increase in demand or a dip in the labor market). Finally, communicate the plan across teams and schedule regular checkpoints to track progress and make adjustments as needed.

9 examples of workforce forecasting methods and models

There are a variety of workforce forecasting methods and models you can use to highlight and forecast staffing and scheduling patterns. These include:

Qualitative methods

1. Delphi method: The Delphi method uses expert consultations or surveys to gather information about the current workforce and opinions on future labor demands, which it then aggregates to forecast needs. It involves soliciting expert opinions from senior leaders, subject matter experts, and other key players who offer qualitative insights.
2. Scenario planning: By developing future scenarios based on specific assumptions, businesses can visualize a broad scope of potential workforce needs. HR can provide input on best- and worst-case scenarios to identify various possible outcomes. This helps organizations adapt and respond to different scenarios in a timely manner.
3. Judgmental forecasting: This method ultimately relies on HR expertise, experience, and intuition, which contributes to more subjective forecasting. This kind of forecasting can sometimes be a part of scenario planning. 

Quantitative methods

4. Time series analysis: This method examines past trends and historical data, such as headcount trends, to predict future needs.
5. Regression analysis: This method examines how certain factors—such as financial performance, growth, market demand, and staffing—may impact workforce needs.
6. Workforce analytics tools: Data analytics tools or software allow organizations to automate forecasting methods by analyzing datasets to predict staffing requirements. This helps analyze past employment numbers, turnover rates, and detect growth or decline patterns.

Hybrid models 

A hybrid technique can refine workforce forecasting by blending quantitative and qualitative methods. This approach uses both data and options to identify workforce patterns and trends. Some examples include:

7. Integrating expert judgment with statistical analysis
8. Blending AI forecasting with human oversight
9. Using scenario planning alongside machine learning tools.

Effective forecasting relies heavily on good data insight into current and past workforce fluctuations, clarity about the business’s strategic goals and objectives, and monitoring labor market trends that will influence your planning.

Dr Dieter Veldsman, Chief Scientist (HR & OD), AIHR

Best workforce forecasting practices for HR

Observing the following best practices can help you maximize the effectiveness of your workforce planning and forecasting:

Start with clear goals and objectives

Understand key business goals, whether it’s filling specific skills gaps or managing seasonal workforce fluctuations. This critical first step acts as the foundation and main driver of your talent forecasting process.

Use workforce forecasting tools

Instead of relying on manual processes, use workforce management and scheduling software to help develop a strong and reliable forecasting process in a shorter amount of time. This will ensure the process is not only less time-consuming but also more efficient, effective, and accurate.

Monitor data regularly

Ensure your predictions remain current and accurate by revisiting your forecasting on a regular basis. Adjust forecasts as needed based on real-time data. This will lead to more accurate predictions about future hiring needs, skills gaps, or areas where attrition might spike.

Promote cross-departmental collaboration

Partner with other departments to obtain critical input and information to help align forecasts with organizational strategies. This can help foster a more integrated approach to talent management and allow you to better anticipate workforce needs, identify potential challenges, and develop strategies aligned with the broader organizational goals.

Train HR teams

HR plays an integral role in the overall workforce forecasting process, so make sure to train your HR teams to have the skills and knowledge to use forecasting methodologies and tools effectively.

HR tip

Brainstorm different scenarios. Make it a priority to conduct brainstorming sessions and use scenario planning tools to test various future business conditions. You can then determine the best staffing solutions for your organization. Being proactive can save you time if one of your tested scenarios does end up becoming a reality.

There are many options for workforce forecasting tools and software—be sure to choose tools that will make your forecasting process simple and effective. Using unsuitable tools or software can create more work for you and fail to produce the desired results. Some workforce forecasting software and system options include:

• ADP Workforce Now: This comprehensive workforce forecasting tool has forecasting capabilities to help streamline functions like talent management scheduling.
• Ceridian Dayforce: This workforce management platform offers real-time data capabilities for predictive analytics you can use for staffing forecasting.
• PeopleFluent Talent Management: This system focuses on optimizing the talent management process and includes integrated forecasting and scheduling features. 
• SAP SuccessFactors Workforce Analytics: This system provides historical and predictive data that you can use to forecast staffing needs.
• UKG Dimensions: Formerly called Kronos Workforce Dimensions, this platform focuses on workforce scheduling and forecasting and can help optimize labor costs and staffing needs.

HR tip

Considering the many workforce forecasting software/system options available, you can request demos for them. This allows you to review them thoroughly to ensure they meet your company’s specific needs. Once you’ve selected a software or system, run a pilot program with it to make sure it has all the necessary capabilities and include key players in the process.

To sum up

Workforce forecasting is necessary for companies to remain competitive. By using data, technology, and collaboration, you can anticipate your organization’s staffing needs and align them with long-term goals. Effective workforce forecasting supports operational stability and growth by helping to reduce turnover and improve employee satisfaction.

Best practices and the right tools also allow businesses to make workforce forecasting a proactive advantage instead of a reactive process. Whether you need to fill immediate skills gaps or plan for future growth, workforce forecasting ensures you have the right people in the right roles at the right time.

Andrea has 20+ years of human resources experience, including career coaching, employee relations, talent acquisition, leadership development, employment compliance, HR communications, training development and facilitation. She consults and coaches individuals from diverse backgrounds, including recent school graduates, union employees, management, executives, parents returning to the workforce, and career changers. Andrea holds a B.A. degree in communications and is certified facilitator of various HR training programs. She’s worked in the utility, transportation, education, and medical industries.