Workforce Forecasting: Strategies, Tools & Challenges

Workforce forecasting gives you the foresight to align your human resources with your strategic objectives, ensuring you have the right people, with the right skills, at the right time.

In this short guide, we’ll explore what workforce forecasting is, its benefits, and offer examples and tool recommendations to help you get started. Dive in to understand why forecasting is essential and how to begin.

• What is workforce forecasting?
• Importance of workforce forecasting
• Workforce forecasting examples
• Best practices for effective workforce forecasting
• Workforce forecasting tools

What is workforce forecasting?

Workforce forecasting is a part of workforce management that involves predicting future staffing needs. It's done by analyzing current or past staffing data and matching it to the volume of work in the pipeline. 

When you forecast your workforce needs, you’re not just filling roles - you’re shaping the future of the company. By anticipating gaps in skills and headcount, you can proactively plan for growth, avoiding disruptions that could derail your strategy. This means you can focus on innovation and market expansion, rather than scrambling to cover critical roles.

It’s an important element for driving the most benefits of workforce planning that helps organizations determine whether:

• You've got the capacity to take on more clients and work
• Your staff is spread thin or is under-utilized

It also helps you understand how diverse your staff and skills pool are. However, labor forecasting isn’t always long-term. It can also be short-term where the focus is on meeting seasonal demand instead of business goals.

On a very basic level, forecasting is also about understanding the composition of your workforce. Is it more full-time employees? Is it contractors? Is it part-timers? Is it another type of employee? So it's developing a much more cohesive picture, looking at what your organization actually needs to become sort of an efficient machine in delivering [your] projects.
- Lyssa Parisella - VP Customer Success, Runn

The importance of workforce forecasting

Modern businesses understand a successful company is led not only by thoughtful leadership and a great product or service but also its talented staff. Managing your people, in turn, calls for the need for workforce forecasting to:

• Understand utilization and optimize capacity
• Ensure employees are not burned out at any time
• The company is talent-wise adept to expand or grow its market share

Keeping this in mind, the importance of workforce forecasting extends to the following:

1. Improve staffing and save costs

To begin with, staff forecasting is crucial for improving workforce planning, optimizing, and hiring.

By showing you how diverse and capable your organization’s skill pool is and where it needs improving, personnel forecasting helps you:

• Allocate resources to the right projects
• Strategically recruit and hire talent

In turn, ensuring staff is doing work that’s the best match for their skill set, improves productivity and employee engagement. Moreover, strategic staffing also saves you from hasty recruitment processes which can raise the cost per hire.

In doing so, you save hiring costs. Employee turnover costs also potentially go down.

2. Analyze and optimize operations

Having an understanding of your staffing trends and future needs helps you:

• Take on projects or pursue business goals you have the skill set for
• Allocate work to individuals based on their expertise and optimal capacity
• Recruit strategically so you aren’t wasting money on under-optimized or hasty hiring processes

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All this helps optimize operations — contributing to significantly improving workforce management.

Further reading: How to Improve Operational Efficiency 

3. Close the organizational skill gap

By determining the skills your organization will need in the future, you strategically close skill gaps. Not only does this help a business meet its goals but it also gives it a competitive edge.

4. Improve employee retention

Since workforce forecasting optimizes resource allocation, it helps make sure staff is working on projects that align with their skills, interests, and growth perspectives. In turn, this boosts employee engagement and motivation. 

Related: Empowering Your Workforce: A Guide to Workforce Development

The same can be said about the new staff you hire. For one, they're strategically hired based on need, which ensures their contribution doesn’t go undervalued. Similarly, when the right work is allotted to them, motivation jumps up.

Strategic workforce scheduling adds further to the mix — boosting not only staff productivity but also operational efficiency.

All this has a domino effect. With employee motivation going up, you retain staff better, which reduces turnover and associated costs. 

5. Mitigate risks

A handful of risks come associated with under and overstaffing. With an accurate workforce forecast though, you can save the organization from the high costs of overstaffing and hasty hiring.

You also save costs related to understaffing that leads to avoidable consequences like employee burnout. 

Workforce forecasting examples

Say you work in a Dutch SaaS company with over 300 employees that wants to expand to Dubai. In this case, you’ll need a strategic workforce forecast to determine: 

• What roles and subsequent skills do you need to expand to a new market
• Do you have the skills in your current workforce that you can use for the expansion
• How many new employees would you need to hire to meet the new goal

But workforce forecasting isn’t always long-term. It can help you on a much smaller magnitude too. For instance, to forecast and schedule staff to meet increased foot traffic during the holiday season in your area.

Best practices for effective workforce forecasting

As you comb through staffing historical data, keep these best practices in mind:

• Make data hygiene a priority. Data is the bedrock of effective forecasting; you need your staffing historical data to be as clean as possible if you want to accurately assess turnover trends, peaks and falls in seasonal demand, regression analysis, and internal supply analysis — and create reliable projections.
• Communicate with stakeholders. From project owners to the C-suite, your stakeholders play a big role in effective workforce forecasting. Keeping in regular communication helps you stay on top of priorities and shifting business goals.
• Keep an eye on industry trends. Determining future workforce needs means looking at not only customer demand but how changing industry expectations will impact demand.
• Create a skills inventory. Creating a skills inventory helps you understand your current workforce’s strengths and shortcomings and how your talent pool stacks up against market trends.
• Embrace intelligent tools. Resource forecasting tools help increase forecasting efficiency. By gathering your data in one place, they make understanding your workforce easier than ever before.

Learn more: Forecasting Best Practices for Resource Management (Webinar 🎥) ➡️

Tools and technologies for accurate workforce forecasting

Before you leave, here are some departing resources you’ll find helpful for nailing staff forecasting: 

• List of tools: 11 workforce planning tools you can’t miss
• Niche guide: Workforce transformation 101: Expert Insights & best practice

We also recommend you look for a powerful software that helps you build a skill inventory and plan workforce capacity. To this end, Runn is one platform you can explore. It gives you project and staff data to determine demand as well as helps you build a skills inventory to leverage and build your organization’s skill pool.Experienced business leaders are not just concerned with where their business is at today, but where it’s headed.