How businesses can hit hiring goals with effective headcount planning

Published

May 31, 2024

Author

Under-hiring strains employees and impedes your company’s growth. Over-hiring squeezes budgets and threatens your profitability. So how can you make your workforce’s size and structure a Goldilocks-approved just right?

The answer: headcount planning. Since, according to the Human Capital Management Institute, headcount makes up 70% of a company’s operating expenses, it’s vital to figure out which roles your company needs to hire, how many employees you should manage at once, and what compensation packages you should offer.

If you want to flesh out your hiring goals while staying within budget and aligning every team member involved in the hiring process, this guide has you covered. We’ll touch on what headcount planning is, why it’s so important, and how businesses can ditch manual processes in favor of an automated solution that can help keep your workplace adequately staffed year-round.

What is headcount planning?

Headcount planning is the strategic process businesses use to make the ideal quantity of quality hires. That involves filling skill gaps now, anticipating workforce needs later, and collaborating with employees across departments—human resources, finance, recruiting, and the C-suite—to determine a company’s ideal size and structure.

A good headcount planning process also sets budgets for compensation ranges and ensures businesses allocate the right training and support resources to new hires. It can even lower attrition rates by forecasting staffing shortages and protecting employees from overwork.

Benefits of effective headcount planning

Headcount planning can help businesses:

Hire the right people: You can align teams on hiring the best candidates to fill available roles—and onboarding the right number of employees with complementary skill sets.
Stay within budget: Control costs by ensuring you’re not hiring too few or too many new employees and offering sensible compensation packages.
Clarify organizational structure: Headcount planning is sometimes called “org charting,” because it lets teams visualize hierarchies and team sizes.
Fill hiring gaps year-round: Prepare for new product launches, sales sprints, and leaves of absence that may require you to hire more (or fewer) employees.
Promote equitable hiring and compensation: Ensure equitable pay ranges across different employee attributes by visualizing compensation bands across roles.

6 best practices for headcount planning

Get headcount planning right and your company can flourish. Here are some pointers.

Determine your business goals

First things first: set up a roadmap for how you’d like your business to evolve. Think about measurable KPIs like sales revenue growth rates and cost of hiring to help tease out both who and how many people you need to hire.

Keep in mind that in order to set achievable company goals, you’ll need as much employee data as you can gather. So tap into your different workforce management tools—like your HRIS, ATS, and spend management system—for metrics that inform your headcount plan (salaries across departments, annual budgets, attrition rates, etc.) While these systems are often scattered across different tech stacks, you’ll save time if you can consolidate them into a unified platform.

Solicit employee feedback

In your fact-finding mission, it’s also crucial to hear from current employees about their workload, engagement, and how they view company culture. This way, you can better assess whether teams could benefit from adding employees. And while hiring managers and others involved in the headcount planning process can’t talk to every employee, surveys can help you cast a wide net.

Identify skill and hiring gaps

When assessing your current workforce, measure the skills you have against the skills you need. Look at your org chart by department and see which attributes can round out teams. If your marketing team struggles churning out audience-engaging LinkedIn posts, consider hiring a social media specialist. If you’re looking to scale, prioritize growing your sales team.

You should also research pay scales for roles you’re looking to fill—so you don’t over-budget or offer an aberrant rate. If you could use a hand, look out for software platforms with compensation band data built into hiring workflows.

Align with HR, finance teams, and recruiting teams

With a lack of proper communication between every department involved in the hiring process, headcount planning can quickly go awry. If a department head isn’t on the same page with a hiring manager about skill gaps, the finance team about compensation packages, or HR professionals about headcount, you’ll struggle to find the right hires to meet your strategic goals.

To ensure easier collaboration, look for headcount planning systems that let you share plans across your organization and tee up approval workflows to make sure hiring managers and recruiting teams have sign-off before posting a new role or sending an offer letter.

Forecast costs

While individual departments may want to grow their headcount, you need to see what makes financial sense for the whole business before going on any hiring sprees. That means heeding your cash flow statement, pulling reports on your revenue, and monitoring all your expenses—from labor costs to employee spend.

Once finance teams figure out how many new employees your company can take on, talk to HR about compensation bands and work salary expectations for new roles into your headcount modeling. It’s important to envision both present and future needs, thinking about contingency plans in case of a market downturn, spike in sales, or even a slew of employees taking leave at around the same time.

Track your progress

Headcount planning shouldn’t just happen once a year; it works best when everyone involved regularly monitors progress. For maximum visibility into whether you’re fulfilling your staffing needs, look for ways to view all the relevant data on one dashboard that lets designated employees see open headcount by team, real-time planned vs. actual costs, and total compensation packages (including salary and equity compensation).

Why headcount planning can be such a mess

While a thoughtful headcount plan is crucial for managing and growing your business, you can hit roadblocks org charting via spreadsheets or disconnected HR and finance systems. When data is siloed, it’s hard to get all your hiring stakeholders on the same page, leading to a tedious back-and-forth to align on approved hires, compensation packages, and open vs. filled headcount.

And this misalignment can be costly. Without proper information, hiring managers can potentially greenlight out-of-plan hires at compensation packages noncompliant with company policies, failing to get needed approvals from the finance team. You also run the risk of paying two employees in the same role dramatically different salaries.

Manual processes like approving requests over Slack or scrambling to find the right approvers can also slow you down. This drains time that could potentially be the difference in landing a talented new hire, since stellar candidates aren’t always available for long.

The easiest way to share, track, and hit your hiring plans

Luckily, you can offload the most tedious parts of headcount planning by using software. With the right solution, you can track approved headcount and compensation bands from a single source of truth.

Ditch opaque spreadsheets

Instead of poring through multiple Excel documents looking for the data you need, headcount planning solutions help hiring managers, finance teams, and HR teams view all plans across departments within a single dashboard.

Standout software systems take things a step further by letting you assign role-based permissions that ensure employees can only see information relevant to their job. For instance, while a sales manager can see headcount plans for their department, they won’t be able to access hiring information for available engineering roles.

Seamlessly track headcount progress

Headcount planning software can also help teams quickly access data-driven reports on their hiring progress. You can track remaining headcount by location, start date, and cost, factor in “new joiners” who haven’t started work yet, monitor budget by department, and chart target headcount against current headcount (while visualizing attrition rates and transfers).

Customize approval chains to enforce your plan

Instead of waiting for approvals for each potential hire from finance teams and other stakeholders, premium headcount planning systems can trigger them for you automatically based on the agreed upon plan. If a prospective new hire meets headcount planning criteria you set for their job family, seniority level, and location, you can automatically send them an offer letter. If they don’t match the plan (e.g., their compensation is above or below the usual pay range or the role isn’t within the headcount plan), the platform can automatically route the request to the appropriate approver.

Align with recruiters

Headcount planning solutions can also keep recruiters in the loop so they know what kind of talent to source. Look for systems that can automatically notify talent acquisition teams when headcount is approved, listing the appropriate department and role details. Once the position is filled, it helps to use a platform that automatically notifies recruiters so they avoid any redundant hiring.

Control headcount costs with compensation bands

Headcount planning tools are most handy when they help you manage pay scales for prospective hires. Rippling Headcount Planning, for instance, has a Compensation Bands feature that lets HR, recruiting, and hiring managers know exactly how much they can (or can’t) pay new hires—based on their role, level, location, and more.

Rippling also flags out-of-band compensation offers so you can catch inequitable or out of policy pay. And with role-based permissions, only the appropriate employees get visibility into the pay bands.

What’s more, Rippling Headcount Planning can integrate with our HRIS, Rippling Spend, and our entire suite of products—allowing you to leverage employee data as your single source of truth to automate the most time-consuming aspects of hiring, paying, and managing your workforce.

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Frequently asked questions

What is the difference between workforce planning and headcount planning?

Headcount planning is typically thought of as a subset of workforce planning, which is the broader process of not just hiring talent, but implementing retention efforts, providing professional development opportunities, and gaming out succession plans when employees churn. Headcount planning is more about hiring logistics while workforce planning also involves talent management.

How do you determine your workforce’s headcount needs?

To figure out staffing needs, companies need to determine their business objectives, identify skill gaps, gather feedback from employees, source revenue data from finance teams, and forecast costs.

Who is responsible for headcount planning

Headcount planning is typically a collaborative effort between HR, recruiting, finance, business leaders, and department managers looking to fill a role. This is why the most effective headcount plans come from a single source of truth that every party can use to collaborate.

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