Conducting a Workforce Analysis

Workforce analysis is a critical component of strategic workforce planning. It helps organizations understand their current workforce, identify gaps, and plan for future needs. As businesses face an increasingly competitive and dynamic landscape, having the right talent in place is essential to success.

This page offers an in-depth look at what workforce analysis is, the recommended process, who should be involved, and its key inputs and outcomes. Drawing on relevant research studies, this guide is designed to help HR managers and business leaders effectively conduct workforce analysis to support their organization’s strategic goals.

What is Workforce Analysis?

Workforce analysis is a systematic process of evaluating an organization’s current workforce capabilities, identifying gaps between current and future needs, and developing strategies to address these gaps. This essential practice is grounded in data collection and analysis, focusing on employee skills, demographics, performance, and external labor market trends.

According to a study by Deloitte, organizations with mature talent analytics capabilities are twice as likely to improve their recruitment efforts and leadership pipelines (Deloitte, 2017). For HR managers, understanding the value of workforce analysis is crucial in making informed decisions about recruitment, retention, training, and development, ultimately ensuring the right talent is in place to achieve strategic objectives.

One key aspect of workforce analysis is understanding the skill sets and capabilities of the current workforce. A study by the Society for Human Resource Management (SHRM) found that 83% of HR professionals reported difficulty in recruiting suitable candidates due to a skills gap (SHRM, 2019). By analyzing the skills of existing employees and comparing them to the skills required for future organizational goals, HR managers can more effectively address skills gaps through targeted recruitment, internal training, or talent development programs.

Another important component of workforce analysis is assessing employee demographics, such as age, gender, and tenure. Research from McKinsey & Company revealed that companies in the top quartile for gender and ethnic diversity are 15% and 35% more likely to outperform their peers, respectively (McKinsey, 2015). By understanding the workforce’s demographic composition, HR managers can create more inclusive recruitment and retention strategies to cultivate a diverse and high-performing workforce.

Performance metrics also play a vital role in workforce analysis. Regular performance evaluations can help HR managers identify high-performers and those in need of additional training or development. A study by Gallup found that organizations with a high level of employee engagement report 21% higher profitability and 20% higher productivity (Gallup, 2016). By leveraging performance data, HR managers can tailor their talent management strategies to enhance employee engagement and drive organizational success.

Finally, assessing external labor market trends allows HR managers to anticipate and respond to potential challenges and opportunities. For example, research by the World Economic Forum estimates that by 2025, 50% of all employees will require reskilling due to the effects of automation and technological advancements (WEF, 2020). By staying informed about labor market trends, HR managers can better align their talent strategies with future workforce needs.

In summary, workforce analysis is a critical process for HR managers, enabling them to make data-driven decisions about recruitment, retention, training, and development. By incorporating research findings and best practices, HR managers can ensure their organizations have the right talent in place to achieve strategic objectives and maintain a competitive edge.

Why Conduct Workforce Analysis?

Workforce analysis is essential for organizations to:

Align talent with strategic goals: Workforce analysis helps ensure you have the right people in the right roles to support your strategic objectives. A study by the Corporate Executive Board (CEB) found that organizations with effective talent management strategies experience a 15% increase in revenue and a 30% reduction in voluntary turnover (CEB, 2013). By aligning talent with strategic goals, HR managers can drive organizational performance and achieve better results.
Optimize recruitment and retention: By understanding workforce trends and gaps, HR managers can make better decisions about hiring, training, and retaining talent. Research by the Society for Human Resource Management (SHRM) found that the average cost per hire in the United States is $4,129, and the average time to fill a position is 42 days (SHRM, 2016). By optimizing recruitment and retention strategies through workforce analysis, HR managers can reduce hiring costs, shorten time-to-fill, and ensure a higher quality of talent within the organization.
Foster agility and resilience: Workforce analysis allows organizations to proactively address potential talent shortages, reducing the risk of disruptions and enhancing overall resilience. According to a report by McKinsey & Company, organizations that build a resilient workforce are better positioned to adapt to changing market conditions and recover more quickly from disruptions (McKinsey, 2020). Through workforce analysis, HR managers can identify skill gaps, anticipate future workforce needs, and develop strategies to maintain a flexible and adaptable talent pool.

Conducting workforce analysis is vital for HR managers as it enables them to align talent with strategic goals, optimize recruitment and retention, and foster organizational agility and resilience. By leveraging research findings and best practices, HR managers can create data-driven talent strategies that drive organizational success and maintain a competitive edge.

Workforce Analysis Benefits

Workforce analysis is a powerful tool that enables organizations to optimize their human capital and achieve strategic objectives. By understanding the composition and capabilities of their workforce, HR managers and business leaders can develop targeted talent management strategies that drive performance, foster innovation, and enhance resilience. This section delves into the specific benefits of workforce analysis, providing relevant research studies and insights on how organizations can outperform competitors by embracing this strategic practice.

Improved Decision-Making: Workforce analysis provides data-driven insights into the current and future talent needs of an organization. A study by Bersin by Deloitte found that organizations with mature talent analytics capabilities are twice as likely to improve their recruitment efforts and leadership pipelines (Deloitte, 2017). By leveraging workforce data, HR managers and business leaders can make more informed decisions about recruitment, training, retention, and succession planning, ensuring a higher return on investment in their talent management initiatives.
Enhanced Talent Alignment with Strategic Goals: Workforce analysis helps organizations align talent with their strategic objectives, ensuring that they have the right people in the right roles to drive success. Research by the Corporate Executive Board (CEB) found that organizations with effective talent management strategies experience a 15% increase in revenue and a 30% reduction in voluntary turnover (CEB, 2013). By identifying and addressing skill gaps, HR managers and business leaders can better position their organizations to achieve their strategic goals and outperform competitors.
Optimized Recruitment and Retention: A thorough understanding of workforce trends and gaps enables HR managers to develop targeted recruitment and retention strategies. The Society for Human Resource Management (SHRM) found that the average cost per hire in the United States is $4,129, and the average time to fill a position is 42 days (SHRM, 2016). By leveraging workforce analysis to identify the skills and capabilities needed to support organizational goals, HR managers can reduce hiring costs, shorten time-to-fill, and ensure a higher quality of talent within the organization. This competitive advantage in talent acquisition and retention can significantly contribute to an organization’s long-term success.
Enhanced Workforce Agility and Resilience: Workforce analysis allows organizations to proactively address potential talent shortages and respond to changing market conditions, fostering agility and resilience. A report by McKinsey & Company revealed that organizations with a resilient workforce are better positioned to adapt to changing market conditions and recover more quickly from disruptions (McKinsey, 2020). By identifying skill gaps, anticipating future workforce needs, and developing strategies to maintain a flexible and adaptable talent pool, HR managers and business leaders can enhance their organization’s ability to thrive in a dynamic business environment.
Increased Diversity and Inclusion: Workforce analysis helps organizations understand the demographic composition of their workforce, enabling HR managers and business leaders to create more inclusive recruitment and retention strategies. Research by McKinsey & Company showed that companies in the top quartile for gender and ethnic diversity are 15% and 35% more likely to outperform their peers, respectively (McKinsey, 2015). By promoting diversity and inclusion through workforce analysis, organizations can foster innovation, enhance decision-making, and improve overall performance.

Workforce Analysis Process

A comprehensive workforce analysis process typically involves the following steps:

Define Objectives: Clearly outline the goals and objectives of the workforce analysis, aligning them with your organization’s strategic plan. A study by PwC found that organizations that align their workforce planning with business strategy experience 26% higher revenue growth compared to their peers (PwC, 2012). HR managers should ensure that the workforce analysis objectives support the organization’s overall strategic goals.
Collect Data: Gather relevant data on your current workforce, such as employee demographics, skill sets, performance metrics, and turnover rates. Research by Deloitte suggests that organizations with mature talent analytics capabilities are more likely to improve their recruitment efforts and leadership pipelines (Deloitte, 2017). Comprehensive data collection is crucial to gain actionable insights into workforce trends and gaps.
Analyze Data: Assess the collected data to identify trends, gaps, and areas for improvement. A study by the Society for Human Resource Management (SHRM) found that 83% of HR professionals reported difficulty in recruiting suitable candidates due to a skills gap (SHRM, 2019). Thorough data analysis enables HR managers to make informed decisions about workforce development and talent management.
Forecast Future Needs: Based on your organization’s strategic goals, project future workforce needs in terms of skills, competencies, and headcount. Research by the World Economic Forum estimates that by 2025, 50% of all employees will require reskilling due to the effects of automation and technological advancements (WEF, 2020). Accurate forecasting of future needs helps organizations stay ahead of workforce challenges and capitalize on emerging opportunities.
Identify Gaps: Compare your current workforce with future needs to identify talent gaps and surpluses. A report by McKinsey & Company revealed that organizations that proactively address skill gaps are better positioned to adapt to changing market conditions and recover more quickly from disruptions (McKinsey, 2020). By identifying and addressing gaps, HR managers can enhance workforce agility and resilience.
Develop Strategies: Create targeted action plans to address identified gaps, including recruitment, training, development, and retention initiatives. A study by the Corporate Executive Board (CEB) found that organizations with effective talent management strategies experience a 15% increase in revenue and a 30% reduction in voluntary turnover (CEB, 2013). Strategic workforce planning allows HR managers to optimize talent allocation and drive organizational performance.
Monitor and Evaluate: Regularly review and update your workforce analysis to ensure its continued relevance and effectiveness. A study by Gallup found that organizations with a high level of employee engagement report 21% higher profitability and 20% higher productivity (Gallup, 2016). By continuously monitoring and evaluating workforce analysis outcomes, HR managers can adapt their talent management strategies to evolving organizational needs and maintain a competitive edge.

By following this recommended workforce analysis process, HR managers can effectively identify and address workforce trends and gaps, making informed decisions that support their organization’s strategic objectives and outperform competitors in today’s dynamic business environment.

Key Inputs for Workforce Analysis

Essential inputs for workforce analysis include:

Organizational Strategy: Your organization’s strategic plan serves as the foundation for workforce analysis, guiding the identification of workforce needs and priorities. A study by PwC found that organizations that align their workforce planning with business strategy experience 26% higher revenue growth compared to their peers (PwC, 2012). HR managers should ensure that workforce analysis is informed by the organization’s strategic objectives and key performance indicators.
Workforce Data: Information on employee demographics, skills, performance, and turnover is critical for understanding your current workforce. Research by Deloitte suggests that organizations with mature talent analytics capabilities are more likely to improve their recruitment efforts and leadership pipelines (Deloitte, 2017). Key workforce data points for HR managers to consider include skill sets, education, experience, performance metrics, and employee engagement levels. This data enables HR managers to identify trends, gaps, and areas for improvement within the organization.
Labor Market Data: External labor market trends, such as supply and demand for specific skills, can help HR managers anticipate future workforce challenges and opportunities. A report by the World Economic Forum estimates that by 2025, 50% of all employees will require reskilling due to the effects of automation and technological advancements (WEF, 2020). By staying informed about labor market trends, HR managers can better align their talent strategies with future workforce needs, ensuring their organization remains competitive and adaptable to changes in the business environment.

In summary, the key inputs for workforce analysis include organizational strategy, workforce data, and labor market data. By leveraging these inputs, HR managers can conduct a comprehensive and data-driven workforce analysis, enabling them to make informed decisions about talent management, address workforce gaps, and support the organization’s strategic objectives. This approach helps organizations maintain a competitive edge and achieve long-term success in a rapidly evolving business landscape.

Outcomes of Workforce Analysis

The results of a comprehensive workforce analysis include:

A clear understanding of your organization’s current workforce capabilities and gaps: By conducting a thorough workforce analysis, HR managers can gain valuable insights into the skills, expertise, and demographic composition of their organization’s workforce. This understanding enables them to identify areas of strength and areas where improvements are needed. A study by Deloitte found that organizations with mature talent analytics capabilities are more likely to improve their recruitment efforts and leadership pipelines (Deloitte, 2017).
Projections of future workforce needs based on your strategic goals: Workforce analysis allows HR managers to forecast future talent needs in terms of skills, competencies, and headcount, ensuring that the organization is well-positioned to achieve its strategic objectives. Research by the World Economic Forum estimates that by 2025, 50% of all employees will require reskilling due to the effects of automation and technological advancements (WEF, 2020). Accurate forecasting helps organizations stay ahead of workforce challenges and capitalize on emerging opportunities.
Targeted action plans to address workforce gaps and support organizational objectives: By identifying workforce gaps and surpluses, HR managers can develop targeted action plans that include recruitment, training, development, and retention initiatives. A study by the Corporate Executive Board (CEB) found that organizations with effective talent management strategies experience a 15% increase in revenue and a 30% reduction in voluntary turnover (CEB, 2013). These strategic workforce planning efforts help optimize talent allocation and drive organizational performance.
Improved decision-making regarding recruitment, retention, training, and development initiatives: Workforce analysis equips HR managers with the data-driven insights needed to make informed decisions about talent management. A report by Gallup found that organizations with a high level of employee engagement report 21% higher profitability and 20% higher productivity (Gallup, 2016). By leveraging the outcomes of workforce analysis, HR managers can improve decision-making related to recruitment, retention, training, and development initiatives, contributing to a more engaged and high-performing workforce.

In conclusion, the outcomes of a comprehensive workforce analysis provide HR managers with a clear understanding of their organization’s workforce capabilities and gaps, projections of future needs, targeted action plans to address gaps, and improved decision-making in talent management. By utilizing these outcomes, HR managers can effectively support their organization’s strategic objectives and maintain a competitive edge in the rapidly evolving business landscape.

Who Should Attend Workforce Analysis?

Workforce analysis should involve a cross-functional team of key stakeholders to ensure a comprehensive understanding of organizational needs and promote buy-in for the resulting strategies. The following stakeholders play a crucial role in the workforce analysis process:

HR Managers: As the primary drivers of talent management, HR managers are responsible for gathering workforce data, analyzing trends, and identifying gaps. They bring in-depth knowledge of the organization’s talent pool and expertise in human resources best practices.
Business Leaders: Executives and senior management help to align workforce analysis with the organization’s strategic goals, providing insights into the company’s vision, objectives, and key performance indicators. Their involvement ensures that the analysis remains focused on supporting the organization’s overall success.
Department Heads: Managers from various departments offer valuable perspectives on the specific skills, competencies, and workforce needs within their respective areas. Their input helps to identify role-specific talent gaps and develop targeted action plans to address them.
Learning and Development Professionals: These experts contribute insights into the organization’s training and development programs, helping to design and implement initiatives that address identified skill gaps and support employee growth.
Workforce Planning Specialists: Professionals who specialize in workforce planning can provide expertise in data analysis, forecasting, and strategy development, ensuring that the workforce analysis process is both data-driven and aligned with industry best practices.
Representatives from Employee Resource Groups (ERGs): Including members of ERGs can provide valuable input on diversity and inclusion initiatives, ensuring that the workforce analysis and resulting strategies consider the organization’s commitment to creating an inclusive work environment.

By involving a diverse cross-functional team of stakeholders, organizations can ensure a comprehensive and well-rounded workforce analysis that addresses various perspectives and needs. This collaborative approach not only helps to create effective talent management strategies but also fosters a shared understanding of the organization’s workforce goals, promoting buy-in and commitment from all involved parties.