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How to create a dynamic headcount plan

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Abacum Team


7 min read · Published: August 22, 2022

How to create a dynamic headcount plan

Headcount planning, also known as org charting, headcount forecasting, or workforce planning, is an essential process for all companies, but especially so for scaling startups. It is the process of optimally planning out the workforce to meet your company’s business needs, all within a defined budget.

With conditions of market turbulence in mind, companies are increasingly turning to a more sophisticated form of this traditional workforce planning method, known as dynamic headcount planning.

What is dynamic headcount planning?

This is the process of using advanced technologies to model different business scenarios and see how these outcomes may influence staffing decisions. A dynamic headcount plan allows you to alter headcount accordingly to see its impact on changes in revenue and staffing, helping provide real-time insights on how these factors influence overall revenue targets.

By gathering data from across your organization, you are able to execute detailed scenario planning with regard to your workforce needs to meet business demands. 

By adjusting metric values such as revenue or employee ratios, you can get a better understanding of the workforce needs that your company requires to meet its goals. It can take on different levels of detail and intricacy.

For instance, you may also factor in different potential market condition changes, such as rising salary rates when conducting your headcount forecasting. Below, we will be explaining how to forecast headcount for your business to ensure your team is properly equipped to support organizational growth.

How does dynamic headcount planning differ from traditional practices?

Traditional workforce planning practices tend to be increasingly unfit for the modern working world. 

Changes in the world of work

Traditional methods tend to be based on assumptions that would no longer be applicable, such as that all employees would be full-time, on-site, and that more employees mean increasing office space and equipment demands. A contemporary company may have a mix of full and part-time staff, while they may also employ external consultants and contractors. Moreover, they likely operate a hybrid office environment mixing on-site and remote work scheduling. 

The rise of data

While HR departments traditionally did use data to some degree, the advances in data technology means that companies can gather insights that are on a completely different level of detail, relevance, and timeliness compared to before. Another key difference is that subjectivity was typically key in workforce planning.

For instance, department heads were consulted on their workforce needs or the board would simply identify roles that they wanted to fill. A lot of the time, such decisions would be based on subjective opinion and not come from a detailed analysis of departmental and wider organizational needs to meet business goals in an optimal manner.

Increasing prominence of the financial department

The human resources department has traditionally led the headcount planning process, with critical input from the financial department. The leadership team and the various departments of a company have also played an imperative role in the overall headcount planning process. However, the increasing importance of strategic finance to companies’ overall success is seeing the financial department take a more central role.

How a dynamic headcount plan can help you navigate a volatile market

There are a number of key benefits that implementing dynamic headcount planning can produce.

‍1. Agility

Having a process on-hand that enables ease of scenario planning and that uses key data in real time positions your company to make fast decisions and course-correct as needed in response to market shifts.

2. Maximized preparedness

It allows for enhanced ability to prepare for potential coming eventualities by delivering highly precise data-driven insights. As a result, your organization can make the necessary preparation for all scenarios. Such a proactive approach can also identify potentially negative developments that would otherwise go unnoticed, such as if a client goes out of business and defaults on a payment, and the impact on the workforce budget. For such a scenario, it may highlight the importance of more conservative company cash flow management.

3. A streamlined workforce

Achieving the optimal headcount number across an organization is always a significant challenge, whether it is having too many or too few employees. Moreover, companies also have to keep salary levels down while simultaneously attracting the right caliber of talent and implementing measures to reduce staff churn and keep productivity high.

Dynamic headcount planning can empower your organization to make more informed decisions and execute on them regarding these challenges by using specific data metrics in your scenario planning. As a result, you are better-positioned to achieve streamlined workforce planning.

4. Cost reduction

By successfully increasing staff retention rates and identifying the optimal head counts across departments to achieve business goals, you can markedly reduce costs associated with recruitment, salaries, training, and office space and equipment.

5. Digitalization

The rapid corporate migration to digital processes is only set to continue. By upgrading traditional workforce planning to dynamic headcount planning, your company further enhances its digitalization drive. This also helps future-proof your company for the continuing rise of data and cross-company data processes.

How to make a dynamic headcount plan: 3 best practices

You can achieve maximized dynamic headcount planning success with a series of steps.

‍1. Move away from traditional workplace concepts

Former working practices, cultures, and expectations tended to be much more predictable than they are now. For instance, some CEOs are still married to the idea that employees should all return to the office. Such positions may be risky in that they may be out of step with current workplace expectations. As a result of being inflexible, you may demotivate your staff and alienate potential hires.

By embracing change and flexibility from the beginning, which reflects the modern world of work, your headcount planning can achieve optimal outcomes.

2. Form dynamic, temporary work groups

By placing rigid working structures and practices to the past, your company can introduce dynamism into how it approaches different business challenges. By embedding flexibility into your workforce, you can set up teams specifically to work on company needs that may call on diverse skill sets and collaboration from departments and individuals who would otherwise not work together. Once a project is complete, these teams can then be disbanded.

3. Drive dynamism by integrating FP&A software

By using financial planning and analysis software, your organization can equip itself to really turbocharge its headcount management performance. The right FP&A software can gather all highly relevant data sets from across the organization and empower interdepartmental collaboration. As a result, the financial department can drive unrivaled data-driven insights for maximized headcount planning results.

The importance of efficient headcount planning

Headcount planning was traditionally a set-and-forget process that took place on an annual basis. However, in volatile economic times and the need to adapt quickly to sudden market changes, your company can benefit much more from a dynamic system that is live, continually referred to and updated throughout the year in a rolling forecast manner.

Your company can drive efficient headcount planning with FP&A software that equips you to maximize data analytics use from across the organization in addition to enabling seamless cross-departmental collaboration. Such software should also leverage advanced capabilities in automation and support your ability to scale.

Abacum is a financial planning and analysis platform designed to accelerate optimal headcount planning initiatives. It empowers everyone in an organization to come together to plan, report, analyze and share.

NEW Product Release! Model, forecast and plan your headcount in one place with Abacum 🚀 📊

Abacum is already helping scores of the world’s leading companies in streamlining their finance initiatives to support growth, align all departments on company financials, and position the organization for maximized success over the short, medium, and long term.

If your team is looking to improve its financial processes, request a demo today to see how Abacum can help.

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