Conducting a Workforce Planning Gap Analysis

In an agile workforce planning approach, we will have established a baseline and created forecasts of both supply, the evolution of the workforce, and demand, the evolution of work. Having established the truths of supply and demand, the gap analysis is focused on defining the problem. Not only is this a key activity, but it is also one that is ill-defined in more traditional approaches to workforce planning.

How Does the Gap Evolve to the Future Organisation?

The single biggest mistake in the traditional approach to the workforce planning gap analysis is how the delta between the current workforce and the future demand is established. These are two snapshots of distinct points in time: a photograph of today and a painting of the desired state at the end of the planning horizon.

To plan against the traditional gap is to embark on an interplanetary flight, where a rocket flies through the vacuum of space until it reaches the final destination. It is an approach that ignores the necessity for an organization to conduct business throughout the planning horizon and is prevalent in horizon two and three approaches.

In reality, workforce planning is like sailing a vessel to an island; setting forth on the ocean and adjusting the rudder and the sails as the winds change and the waves hit.

how to approach a gap analysis 

To illustrate the difference between the two, the two charts above have an x-axis of time and a y-axis of the value of whichever of the seven rights we are looking at.

For example, in assessing the Right Size, the values on the x-axis would be either the headcount or FTE of the workforce. In an organization that aims for growth, the derived demand will translate into an increase for a higher number of workers. During the same period, the supply of workers will always decrease due to turnover. These aspects are identical in both charts.

More traditional approaches assess and plan on a single variant, the gap between the current level of supply to the future level of demand (shown as Gap a). In this instance, the approach is ignorant of the change that will naturally take place within the workforce. This approach often results in restructures and redundancies, dismissing workers equivalent to what would have departed anyway during the planning horizon.

Contemporary thinkers have recognized this issue and recommend an approach that compares both the workforce and demand at the end of the planning horizon (shown as Gap b). This, unfortunately, ignores a second critical flaw of the traditional approach. By its very nature, it overlooks the demand requirements over the course of the planning horizon; no consideration is given to the achievement of organizational goals and objectives before the endpoint. Such an approach, as we can imagine, would be disastrous for an organization to implement. As a result, this traditional approach lies behind the common problem of being unable to translate workforce plans into action.

Instead, in the agile approach, we examine the gap throughout all the points in the evolution towards the end of the planning horizon. The gap is multivariant, in that it is based on every point of the supply being contrasted against every proceeding instance of the demand. The reason for this is that traditional workforce planning has treated the gap between supply and demand as a constant factor in the organization. Therefore, aiming to bridge the gap at a future point in time is clearly better than never bridging the gap.

The Impact of Scenarios

The longer the planning horizon, the greater the extent that the gap between supply and demand is influenced by multiple scenarios. These scenarios, identified during environmental scanning and agreed with our key stakeholders, produce a range of possible outcomes. The extremes of these ranges are the best-case (B-C) and worst-case (W-C) scenarios, with the most-likely (M-L) scenario sitting within the range. It is essential to recognize that these apply separately to both the supply and the demand, as seen in the following chart.

how to gap analysis

If we think back to our earlier example of the Right Size, considering an organisation with a growth ambition, then:

  • The best-case scenario would be high consumer demand, which would lead to a high derived demand for labour.
  • The worst-case scenario is clearly the opposite, low consumer demand and low derived demand for labour.
  • The most-likely scenario sits between these two ranges.

It is, of course, possible that the most-likely scenario is also either the best or the worst-case. The best-case scenario, when looking at the size of the supply, is for a lower level of turnover that leads to a lesser reduction in workforce numbers and a smaller gap to bridge. In the worst-case, the reverse is true with high turnover and a greater workforce reduction. As we can see from this example, the combination of a best-case demand scenario and a worst-case supply scenario results in the largest gap to overcome through planning. In an organization with poor planning, that combination is likely to be the worst-case scenario for a human resources department.

The Gap in the Seven Rights

The gap analysis is quantified along six strands of the seven rights: capability, size, shape, location, time and cost. The gap in the risk cannot be gauged at this stage as it relates to the secondary demand generated in the action plan. The nature of the six strands will look quite different depending on the organizational level and planning horizon. Here I will endeavour to provide the broadest steer for all practitioners.

The Right Capability

A simple approach is to start with the key capabilities that exist in the workforce today. Next, be clear on the nature of capabilities that are demanded now and what is expected at the end of the planning horizon. The final stage is to consider any capabilities that might be needed during the planning horizon that have not yet been captured.

The Right Shape

At an inter-capability level, our demand calculation will enable us to calculate each other element within the internal supply chain based on the representative ratios. Therefore, er will have a clear indication, for example, of our frontline customer service staff and the associated management and support infrastructure that they would require.

The Right Time

By the process of understanding the gap as something that evolves, we will have captured the nature of each gap based on time. Time must be the constant factor across all forecasts. The critical aspect is to recognize that this gap will evolve during the next phase of agile workforce planning, the creating the action plan.

The Right Size

For this, we will need to look at the macro level as well as the meso level. The macro level is the biggest expected gap existing between the best-case demand and the worst-case supply. At a meso level, this can look quite different. To understand the implications of the right size fully, it must be overlaid against the right capability. That means quantifying the size of each of the capabilities that have been defined.

The Right Location

If the organisation is not expected to change, then at both a geographic and structural level, there will be gaps through the decline of supply. If there are existing plans to open new locations, then there will be an obvious deficit as there will be no supply at that location. Conversely, if there are proposals to close an existing location then we can anticipate a surplus over a short planning horizon; the gap is reversed by having a demand of zero at an existing location, accompanied by some form of existing supply.

The Right Cost

This is the gap between the forecast workforce and the two dimensions of the cost of the derived demand and the budget. Though this is typically the easiest gap to forecast, planners often look to close the gap between the workforce and the budget without solving the problem of getting work done.

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