Annual Workforce Plans Are Costing You Millions — Fix It With This Shift
Opinions expressed by Entrepreneur contributors are their own.
For companies, workforce planning isn't about to get any easier. Just ask Intel, which is laying off up to 20% of employees from its chip-making division, after slashing 15% of its workforce last summer. Tens of thousands of roles were eliminated in a matter of months.
This kind of dramatic shift is increasingly the rule, not the exception. AI is a key culprit, causing headcounts to plummet in some areas and surge in others. Geopolitics and tariffs are also increasingly a factor. My company works with an exercise equipment manufacturer whose prices spiked 40% overnight, turning its workforce plans upside down.
All of these points point to a stark conclusion: The way most companies approach workforce planning is no longer viable. Any business that still relies on a rigid annual plan is asking for trouble. In fact, businesses are expected to suffer a staggering $8.5 trillion in unrealized annual revenue by 2030, partly thanks to poor workforce planning.
It doesn't have to be that way.
By taking a much more dynamic approach to workforce planning, companies can match their people with business goals and changing economic conditions in real time. And as it turns out, AI is a key part of the solution. Here's why sticking with the status quo is so risky, and how businesses can break free.
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The high cost of an outdated workforce planning
If you work at a company where workforce planning is a yearly exercise, you're far from alone.
Traditionally, that's how businesses have anticipated their workforce needs. Managers identify sales and revenue goals, then work backward to set budgets and headcounts across different departments.
Because yearly planning is a guessing game, it isn't very effective. I know this firsthand from coming up through the software industry, where workforce plans often morph as quickly as they're written.
This kind of episodic approach to workforce planning has a number of serious drawbacks:
The typical cadence of workforce planning is ill-adapted to the pace of modern work. Almost 40% of companies create 12-month plans. But digital transformation has already compressed business cycles, and AI is now accelerating change at an even faster pace. Plans made last month may already be obsolete.
People planning tends to be rudimentary and superficial. Only about one-third of HR leaders say their organization is good at using data for workforce planning, while more than two-thirds said their workforce planning is limited to headcount alone, with no analysis of underlying capacity.
More than half of companies lack a clear picture of their employees' current skills and the roles that are likely to face disruption. Planners are still thinking strictly in terms of butts in seats versus a more nuanced assessment of discrete skills needed.
What is the consequence of all that? Companies often end up with way too many people, or way too few. This translates either to bloated payrolls or, even worse, inability to serve surging demand. When we surveyed leaders, three-quarters said talent shortfalls left them unable to meet business objectives. Domino effects of poor planning include diminished productivity, burnout and diminished morale, and loss of business to the competition.
Related: Why Workforce Efficiency Isn't Just Code for Layoffs
How companies can embrace continuous planning
Imagine a nationwide bank in the throes of an AI makeover. That's exactly what's happening at JPMorgan Chase, which plans to use AI to shrink its workforce by 10%. With more than 300,000 employees, how can JPMorgan plan and adapt on the fly?
Here's where continuous workforce planning comes in. A marked departure from annual exercises, this approach incorporates real-time data to create a flexible plan that can be reconfigured in response to changing conditions. Surging demand? Challenges with retention? A spike in costs? Continuous workforce planning adapts instead of waiting to catch up.
The key to that flexibility? Gaining insights into how people drive business results in real-time.
Historically, accessing and understanding the information needed to make that happen has been an obstacle. People analytics platforms change everything by breaking down silos between departments, unlocking data previously trapped in spreadsheets and hard drives. Plus, AI can now connect the dots to business outcomes, while making those insights instantly accessible in plain language.
For companies looking to embrace continuous workforce planning, there are three important steps:
Know who your people are and where they work. People data, which covers things like headcount, seniority, engagement, training and pay, is often surprisingly hard to access. Start by leveraging the latest people analytics tools to weave together data from disparate human capital management systems, as well as email, chat, calendar and other employee apps — providing a clearer picture of your team.
People data, which covers things like headcount, seniority, engagement, training and pay, is often surprisingly hard to access. Start by leveraging the latest people analytics tools to weave together data from disparate human capital management systems, as well as email, chat, calendar and other employee apps — providing a clearer picture of your team. Know how your people work. The next step is to connect that people data with business data, which includes metrics like revenue, profitability and customer satisfaction. Which sales teams generate the most revenue? What's our least profitable division? What kind of training translates to improved customer retention? This shows how employees are contributing to actual business goals. New platforms enable connecting the dots between people and business results, providing a clearer picture of overall productivity.
The next step is to connect that people data with business data, which includes metrics like revenue, profitability and customer satisfaction. Which sales teams generate the most revenue? What's our least profitable division? What kind of training translates to improved customer retention? This shows how employees are contributing to actual business goals. New platforms enable connecting the dots between people and business results, providing a clearer picture of overall productivity. Harness those insights to build a dynamic workforce plan. AI-powered workforce planning tools enable companies to continuously model scenarios and adjust resources based on shifting demands. To hit next year's financial targets, what workforce mix do we need? Given the impact of tariffs on the bottom line, how should we adjust our headcount? What's the most cost-effective way to fill current talent gaps? New platforms use real-time data and predictive capacity to guide companies toward the best plan.
Related: Here's What Leaders Need to Try Before Resorting to Layoffs
Continuous workforce planning in action
Done right, continuous workforce planning can be a game-changer for companies:
One of our clients, a financial services firm with 50,000 employees, needed a plan to navigate changing customer expectations and volatile markets. It was also juggling a mix of in-house employees, remote workers and contractors. Breaking workforce planning out of its silos, the company adopted a more dynamic model that gave it a holistic picture, aligned with business goals and enabled it to react to market fluctuations.
Another customer is a healthcare provider that used our workforce planning tool to forecast job vacancies accurately. By proactively hiring some 2,000 caregivers with the right skills at the right time, it ultimately saved more than $3 million.
Getting the most out of continuous workforce planning
When it comes to continuous workforce planning, I've seen so many companies struggle to get over a few critical obstacles. Here are some key tips to bear in mind:
Continuous planning isn't possible until you overcome siloed thinking, too. Whether it's finance, marketing or HR, executives are often stuck in their own departments. The question they should ask: How can I get a holistic view of understanding people and how they work?}
Whether it's finance, marketing or HR, executives are often stuck in their own departments. The question they should ask: How can I get a holistic view of understanding people and how they work?} Not all businesses can turn on a dime. Ability to change course varies by industry, with manufacturing moving much slower than, say, software. For example, Donald Trump might want Apple to build iPhones in the US, but moving only 10% of its supply chain stateside could take three years.
Ability to change course varies by industry, with manufacturing moving much slower than, say, software. For example, Donald Trump might want Apple to build iPhones in the US, but moving only 10% of its supply chain stateside could take three years. It's important not to confuse plans with reality. As helpful as workforce plans are, they do have limits. So resist the temptation to over-plan and get into the weeds. The best plans are a continually evolving model, not an exact picture of conditions on the ground.
In a time of AI and economic uncertainty, agility is the only option. By shifting from static to continuous workforce planning, businesses can improve their odds of not just surviving but also thriving in turbulent times.
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