More and more, FP&A teams are being asked how they can add value beyond traditional financial reporting and basic planning.
In the not-so-distant past, a good answer was often hard to come by. Yet today, FP&A has more opportunities than ever to go beyond the core financials to evaluate and forecast for other key aspects of the business. One prime example: workforce planning.
While key responsibilities for workforce planning traditionally live in HR, emerging predictive and forecasting tools have created a prime opportunity for finance to add real value—and to strategically partner with HR to develop a workforce strategy that drives better business results.
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Data deletes the guessing game
The potential payoffs for finance to get in the workforce planning game are clear. Developing good workforce planning models that help forecast future needs can deliver huge benefits to corporate planning while mitigating staffing disruptions. Relying on data significantly reduces the annual guessing game as managers try to predict how many people they will need—or not need—to get the job done as efficiently as possible in the months or years ahead. After all, it only makes sense to determine staffing based on a thorough analysis of the cost for new employees and the anticipated growth or slowdown of the business.
Here at Adaptive Insights, we use cloud-based workforce planning software (our own, of course!) to build a model for anticipating future business growth and staffing needs. It helps us gain a clearer picture of hiring plans and, if necessary, scheduled staff adjustments. Beyond these clear benefits, workforce planning also offers a key way for our finance department to collaborate more effectively with HR and other business line leaders, bolstering the strategic role and perception of the finance team.
That’s because, unlike single-user spreadsheets, cloud finance software offers a centralized solution that easily integrates finance and operational departments across the organization.
A dramatic difference
Using best-practice workforce planning models for flexible, more accurate headcount planning, budgeting, and reporting can be a true game-changer. These models can be configured to your hiring, retention, and reduction processes. Further, you can integrate compensation planning into the process, forecasting payroll expenses, modeling commissions, and balancing full-time and contingent workers.
Finance-owned data integration is also important. One of the keys to making my job easier is bringing in data directly from our payroll system. The benefits are speed compared to manually updating our headcount data, and confidence—for both us and our business partners—that the data in our planning system is accurate.
Case in point: It used to take us the better part of two days to update our headcount. We’ve reduced that to about two hours.
And trust me, as someone who previously worked on a finance team that was reliant on spreadsheets and a cumbersome legacy system, the difference is dramatic. With the legacy system, if we wanted to change any assumptions or make data revisions for forecasting purposes, it required a drawn-out process of requirements-gathering and testing. While testing and requirements-gathering still occurs, it’s vastly accelerated with cloud technology like the Business Planning Cloud—largely because it enables FP&A to build/test everything ourselves, rather than go through IT.
Finance and HR collaborate to build workforce planning models
So, for instance, when I am updating our headcount forecast these days, it’s pretty much a self-service affair. I can get all my information out of our HR information system and quickly load our latest personnel data into Adaptive Insights software.
Of course, this is also a big win for HR as well, allowing them to focus on more high-value tasks instead of responding to an endless stream of requests for updated information. And once I have the information I need, well, that’s when the fun really starts because I can model and forecast with ease.
Let’s say, for example, I wanted to model out specific aspects of our variable compensation. Being able to bring in the right data enables detailed analysis to drive business change—for example, a review of sales compensation might require data on on-target commissions, quotas, in-quarter sales attainments, etc.
Another example: A business leader wants to know the impact of hiring five employees to handle a new big project. I can create a cloned version of the forecast, enter the number of projected employees, add projected compensation assumptions, and, in short order, have a clear picture of the impact of the hires.
Ultimately, this process provides managers with greater insight into creating hiring strategies aligned with their business plans, while giving finance and HR instant visibility into current and future expenses.
The bottom line: Workforce planning models take much of the guesswork—and pain—out of managing your staffing. Bringing in the right data quickly and accurately can drive better planning and forecasting. The result is minimal staffing disruptions while still ensuring there is enough talent to get the job done and accommodate growth.
It’s yet another way that FP&A can add value—and help drive better business results.