5 Essential Workforce Planning Tools for any HR professional
Workforce planning tools are an essential part of the HR professional’s toolkit. In this article, we’ll go over 5 strategic workforce planning tools, explain their use, and give examples and excel templates on how to use them.
If you want to know more about how you can apply the basics of Strategic Workforce Planning to help your organization thrive, check out our HR Metrics & Dashboarding Certificate Program.
What are workforce planning tools?
Workforce planning tools are instruments that help analyze current capabilities and future needs for the employee population.
These tools are data-driven instruments that help identify the gap between current capabilities of the workforce and its future needs. In addition, they help you come up with ways to fill this gap.
In this article, we will discuss five strategic workforce planning tools.
- Strategic workforce planning map
- 9-Box grid
- HR dashboarding
- Compensation and benefits analysis
- Scenario planning
Most of these tools help to identify the current workforce capabilities. Some, especially the compensation and benefit analysis and scenario planning, help to identify the future needs of the workforce.
All workforce planning tools we´ll discuss in this article fall somewhere along this spectrum.
1. Strategic workforce planning map
The first workforce planning tool is the workforce map. This map shows how workforce planning activities align with the bigger picture, like the organizational strategy.
An often heard critique about HR policies is that it doesn’t follow organizational strategy. The beauty of workforce planning is that it offers tools to add value to the latter.
The model below shows this very clearly. You don’t start with strategic workforce planning (SWP, which is step 3). No, strategic workforce planning is the result of organizational strategy (step 2).
The board of directors sets a strategy for the organization. This strategy is not made up – it is derived from three key factors:
- What’s happening in the market? E.g. trends in demand and supply.
- What products and/or services are we already producing?
- What is the competition doing? You don’t want to just copy your competition. No, you want to outsmart them through process, product or business model innovation.
These factors influence the strategy that the board sets. This forms the beginning point of strategic workforce planning as it helps us determine where the organization wants to go in the next 3-5 years. This is the target.
The next step is to identify where we are now. This is step 3 in the model: the quality and the quantity of the workforce. An excellent tool to do this is the performance-potential matrix that we will talk about next.
Based on these insights, the HR strategy is created. This strategy is executed in all the different functional HR areas, like recruitment, performance management, rewards & promotions, etc.
2. 9-Box grid
The performance-potential matrix, also called 9-box grid or HR3P matrix, maps employees’ performance and potential in one model.
As you can see, the matrix maps employees in different categories, ranging from “talent risk”, which are low potential and low performance, all the way to “consistent stars”, who are high potential and high performance.
This is just one of the models (source) out there that visualize performance and potential. An advantage of the model is that it’s easy to understand. However, this is also a disadvantage because this lower complexity has a reduced usability. Take the following matrix as an example. This is not a 3×3 9-box grid, but a 4×4.
This model divides potential and performance in four categories. Using these categories, employees can be managed very effectively. Let me give you an example.
- Phase 1: Yellow. When new employees join the company, they don’t perform optimally yet but have a lot of growth potential. They fall in the left bottom corner of the model.
Effective talent management policies are training and coaching, performance based pay (PBP) to increase productivity and a growth in base salary to retain them (they are your future stars).
- Phase 2: Dark green. After working for a year or two, these employees perform well and are still bursting with potential. In this case, they are in the right bottom corner of the model.
In order to capitalize on their potential, they need more learning and development, challenging assignments that help them grow and a salary growth to retain them. - Phase 3: Light green. After a few promotions, these employees may start to hit their ceiling. They are at full potential but are performing excellently!
You want to further develop the competencies they need for their roles and focus on performance based pay so they stay focusses. You don’t want to grow their salary much further as that may become a burden over time. - Phase 4: Red. In the final phase, these employees may become disengaged and performance may lower (left top corner).
In this case, a development plan to get their performance back on track is the best solution. Salary shouldn’t increase for these people as you don’t necessarily want to retain them.
To create such a four-by-four, you need to assess people on their performance and potential. The performance-potential matrix is thus a great strategic workforce planning tool, not only to assess talent but also to manage it.
3. HR Dashboarding
A third workforce planning tool that a lot of companies are actively investing in, is the HR dashboard. The HR dashboard is a very effective instrument to show current workforce capabilities.
There’s a lot to tell about the HR dashboard. On a conceptual level, the dashboard is filled with information from different source systems, like a payroll system, applicant tracking system, and other Human Resources Information Systems. Based on this data, metrics are calculated and displayed.
The model below shows this process. Systems are extracted, data is transferred and loaded into a data lake or data warehouse. Reporting software uses this data to report on it.
Not all organizations have fully automated this process. If there’s no data warehouse present, data can be extracted from different systems and aggregated manually. This is slower, manual reporting.
However, the goal is always the same: to create an overview of the current status of the workforce. This can be in terms of a workforce dashboard, diversity map, performance dashboard, etc.
On a more practical level, check out our dedicated article about what an HR dashboard is and it most important metrics. This article has multiple templates and metrics that can be used in a dashboard. An example of an interactive dashboard is included below.
This is a dashboard that we teach our students to make themselves in the HR analyst course.
4. Compensation & benefit analysis
We haven’t written a lot about compensation and benefit analysis yet. However, it does provide a number of great opportunities for data analysis. For two reasons.
First of all, compensation and benefit data is highly structured and accurate. Secondly, it is directly related to a financial outcome and thus bottom line performance.
The simplest analysis has two elements:
- Set an internal pay benchmark and group people in (severly) overpaid and (severly) underpaid categories
- Retrieve performance data and categorize people in overperforming or underperforming
You want your overperforming people to be overpaid and your underperforming people to be underpaid. If there’s a difference in the two you either run the risk of losing top performers because of underpay or not losing bad performers because of overpay. The latter is referred to as the golden cage.
This data can be enriched by labor market statistics. You can use payment benchmarks from outside your organization to adjust for internal payment discrepancies.
You can also use job market information to control for external demand and projected demand for certain jobs. These kind of numbers are available for any industry and can be very beneficial in anticipating and adjusting to future workforce needs.
5. Scenario planning
Scenario planning is the ultimate workforce planning tool. It helps to anticipate multiple possible futures so that you won’t be caught off-guard. In the words of futurist Peter Schwartz: “if you haven’t thought about it, you’re unlikely to see it in time”.
In scenario planning, you imagine different potential futures that have a severe impact on your business and that you will be unlikely to see coming. These scenarios can involve technological innovation, new legislation, natural disasters, changes in attitudes of the general public, etc.
By thinking about these scenarios, analyzing them and describing how they will make an impact on day to day business, you can develop a strategy for unlikely but impactful events.
One of the early pioneers in this approach was Shell. According to Schwartz´s book the art of the long view, Shell used scenario planning to develop strategies for dealing with the 1973 energy crisis, the 1979 oil price shock, the fall of the Soviet Union, and the increasing pressure on companies to address environmental issues.
If you think about the figure that we started with, scenario planning is really about imagining the future – or imagining multiple possible futures. For a full overview of how to do a scenario planning exercise, check appendix A in this document. I included a summarized version below.
How does scenario planning work as a workforce planning tool?
- First of all, you want to analyze the focal issue of concern for the workforce. This is the issue that the planning exercise centers on.
- Secondly, you want to identify driving forces of change. These can be external and internal. Examples are the specific demographic driver, environmental drivers, sociopolitical drivers, market drivers, and so on. The challenge is to make these drivers as specific as possible. For example, don’t use ‘global warming’ as a driver but define it as the increasing of drought periods in California (or any specific region).
- Thirdly, you want to rank these specific driving forces on their importance and uncertainty. Importance refers to the impact the driver will make on the workforce. Uncertainty refers to the uncertainty of your estimation. This step is required to select the most relevant and divergent conditions.
- Next, the two most uncertain and important driving forces are selected and two polar opposites are selected. These are mapped on a 2×2 grid.
- This creates four distinctly different and impactful workforce challenges. For each of these scenarios, a name and story are created related to how they will play out and impact the workforce. In the final step, strategies are created to resolve these challenges.
This exercise is not something you do in half an hour. It usually takes a team at least half a day up to a few days, depending on the level of complexity. However, it can be a very useful one!
You have now had a description of 5 essential workforce planning tools. They are essential tools for any HR professional working in a larger organization. Most of these tools are described in much more detail in our HR analytics course. If you want to learn more about it and also practically apply them to real employee data, check the course page!
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