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The ultimate headcount planning checklist for finance leaders

Headcount planning requires several stages and cross-functional teams. Do you want to learn how to create a comprehensive headcount plan? Keep reading.
7
min read
|
May 17, 2023
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Nowadays, headcount planning is a non-negotiable priority in fast-growing companies. As a finance leader, headcount planning not only helps you make smart financial decisions but also allows you to ensure that the organization has the right headcount to meet its long-term goals. 

However, poor headcount planning could lead to several challenges, namely: 

  • Inconsistency between headcount strategy and business objectives
  • Budget misallocation due to inaccurate forecasting

The truth is that headcount planning should be based on clear processes and best practices. And that’s what we'll go over in this article.

In today's post, we'll share:

  • What headcount planning is
  • Why headcount planning matters for fast-growing companies
  • Our headcount planning checklist for finance leaders

Without further ado, let's dive in.

What is headcount planning? A quick overview

As a finance leader, you’re likely familiar with what headcount planning is. But just to make sure everyone is on the same page, let's define it briefly.

Headcount planning is the management of the number, profile, and cost of employees to achieve your company’s goals within a defined budget. Simply put, it’s about assigning the right people to the right roles to achieve your organization's mission, considering current and future circumstances.

Comprehensive headcount planning typically involves:

  • Collaboration between HR, Finance specialists, Talent leaders, and hiring managers.
  • A scalable, holistic, and iterative strategy to determine the optimal org design without overspending or underspending.
  • Headcount planning tools to analyze real-time headcount data, update budget forecasts and keep all stakeholders in the loop.

All in all, good headcount planning allows your company to maximize the productivity and performance of your workforce. 

Why headcount planning is important for fast-growing companies

You might be wondering, "Why should I invest time and resources into headcount planning?" Well, there are several reasons. Proper headcount planning will help you:

  • Allocate resources strategically
  • Facilitate revenue growth
  • Properly forecast headcount expenses

Let’s briefly explore each benefit. 

Better resource allocation

A company’s headcount could represent 70-80% of the P&L. However, poor headcount planning can result in significant cost increases and wasted resources.

Designing a proper headcount strategy requires understanding HR’s priorities and Talent’s resource needs. With those teams’ input, you can allocate resources strategically to meet your headcount goals without compromising your company’s financial strategy. 

Facilitate revenue growth

As headcount planning plays an essential role in developing your budget, it can also affect whether you’re equipped to achieve your goals. Proper headcount planning will help you facilitate revenue growth.

As Somrat Niyogi, Head of Business at Gusto, said in The Headcount People podcast:

"Leaders should constantly be asking themselves, ‘What type of organization am I really trying to build?’ Planning around this question can really dictate the success of your business.”

With a well-aligned headcount approach, stakeholders can:

  • Invest in employee development and assign hiring priorities according to key insights
  • Identify skill gaps and good fits for specific job positions
  • Recruit top talent to achieve specific financial goals

Ultimately, good headcount planning can help companies develop accurate workforce plans to meet key business objectives and revenue goals. 

Better forecasting

Headcount planning isn’t just about preparing to recruit. It’s an ongoing effort to effectively track and forecast your company’s spending. The longer you’re committed to it, the more information you’ll have to make better headcount decisions in the future.

The key to smart, efficient company growth is accurate forecasting, which is impossible to do without accurate headcount planning and management. 

Our 5-step headcount planning checklist 

Now you know what headcount planning is and why it matters for fast-growing organizations. So, let’s move on to how to do headcount planning with our step-by-step checklist. 

To build an effective headcount planning strategy we suggest you: 

  1. Align with HR & Talent around a joint plan
  2. Gather data in a single source of truth
  3. Make plan reconciliation part of your routine
  4. Update the headcount model based on internal changes
  5. Analyze your headcount forecasts

1: Align with HR & Talent around a joint plan

For starters, it’s imperative that headcount planning considers and aligns with:

  • Organizational goals
  • Department needs
  • Your annual budget

And to do so, you’ll need to combine both top-down and bottom-up collaborative approaches. Simply put, this involves incorporating input from senior management, who set strategic targets, and team leaders, who understand daily operational needs.

By integrating both perspectives, you can develop a comprehensive headcount plan that effectively addresses your organization's needs.

Additionally, it bears repeating that proper headcount planning isn’t just about Finance. Talent and HR will be your best allies. 

For instance, to determine your total envelope, you should collaborate with HR and hiring managers by answering pertinent questions and setting strategy points.

These questions may include:

  • What are our investors' expectations?
  • What’s the existing headcount structure? 
  • What kind of talent do we need to address each department’s needs?
  • Can we swap current employees between departments to fill gaps?
  • What new roles do we require to meet business objectives?
  • How many recruiters will we need to carry out the hiring process? 

Additionally, it's key to determine new hires' compensations, benefits packages, and proposed starting dates. 

2: Ensure governance with a single source of data and standard workflows

A collaborative workflow among relevant stakeholders is essential for headcount planning. But, who is involved in headcount planning?

Relevant headcount stakeholders include:

  • Finance leaders
  • The HR team
  • Hiring managers
  • The Talent team

And why is a collaborative workflow important? Well, you need to ensure that: 

  • All stakeholders are on the same page.
  • They follow the right steps during the headcount planning process. 

And to make this possible, everyone needs to have access to a single source of truth for decision-making. Luckily, many fast-growing organizations are investing in headcount management tools that provide a single source of data and streamline these workflows. 

This is not only about seeking the right approvals but also communicating effectively and ensuring that everyone has visibility into the progress of the plan. Ultimately, coordinated planning is essential to your company’s success.

3: Make plan reconciliation part of your routine

Your headcount planning efforts aren’t done after you’ve set up a strategy. Connect with Talent and HR leaders on a regular basis to follow up and reconcile your plan. 

Are you at risk of going over budget? Is the recruiting progress going as planned?

This should be done on a regular basis, depending on your headcount plan. Some companies run a headcount reconciliation process weekly, others can survive doing it monthly. If you’re reconciling headcount any less frequently than quarterly, it will be really difficult to forecast with any level of accuracy or to keep budget variance under control.

4: Update the headcount model based on internal changes

An effective headcount planning process should not only focus on the hiring process but also on how internal changes affect your hiring model.

For instance, maybe you’ve approved the budget to hire for a leadership position, but team leadership decides to promote internally instead. You’ll want to take notice of that and modify your plan accordingly.

To this end, having open lines of communication with Talent and HR is key. 

5: Analyze your past headcount forecasts

Analyze previous headcount forecasting models. Your past forecasts can provide valuable insights and help you learn from past inaccuracies.

By evaluating the accuracy of your past headcount forecasts, you can assess the effectiveness of your forecasting methodology. Comparing forecasted numbers with actual results will allow you to identify discrepancies and understand the factors that influenced the variances. 

Additionally, understanding how headcount has changed over time (including the impact of internal transfers, promotions, or seasonal variations) will enable you to make better decisions regarding resource allocation.

Furthermore, examining historical data helps you:

  • Identify trends and patterns within your organization
  • Pinpoint areas where projections fell short or exceeded expectations
  • Mitigate financial risks associated with inaccurate projections

Take control of your headcount planning and forecasting with TeamOhana 

In this post, we provided a step-by-step checklist for creating a solid headcount plan as a Finance leader. And it’s fair to say that the key to effective headcount planning is keeping stakeholders aligned through accurate data and forecasts. And here’s where TeamOhana can help.

With TeamOhana, you can plan your headcount based on:

  • Unified data. Reconcile ATS and HRIS systems and other data sources and avoid data silos.
  • Collaboration. Notify stakeholders promptly of any changes in headcount planning.
  • Governance. Make sure that the correct workflows are followed.
  • Scenarios. Create case scenarios through real-time headcount insights and predictive analytics so you can anticipate budget variances.
  • KPIs. Track key headcount planning metrics, such as turnover rate, attribution rate, ramp time, and time-to-hire.
  • Real-time updates. Track expenses against the headcount budget, and anticipate budget variances.
  • and more.

Curious? Book a TeamOhana demo today →

To learn more about TeamOhana and strategic headcount management, contact us.

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