The Hidden Costs of Absence of Strategic Workforce Planning: A Matter of Numbers
Strategic Workforce Planning (SWP) is a critical process for aligning a company's human capital with its long-term goals. While many businesses understand the value of SWP, some may underestimate the hidden costs of neglecting this essential practice. In this article, we'll look at the potential consequences of ignoring SWP and provide figures for these hidden costs, highlighting the real impact on your organization's bottom line.
1. The Increase in Employee Turnover
Neglecting Strategic Workforce Planning (SWP) can lead to increased staff turnover. High turnover rates are expensive, it is estimated between 50% and 200% of one's annual salary, the cost of replacing an employee depending on the position and the sector of activity. By investing in SWP, businesses can identify and address workforce challenges, improving talent retention and reducing turnover costs.
2. Talent Acquisition Difficulties
Without Strategic Workforce Planning, businesses can struggle to attract the right talent to meet their changing needs. A study by the Society for Human Resource Management (SHRM) showed that the average cost per hire is $4,129 and that it takes an average of 42 days to fill a position. SWP helps organizations identify skills gaps and develop targeted talent acquisition strategies, allowing them to attract the right candidates and remain competitive in the marketplace.
3. Organizational growth hampered
Neglecting Strategic Workforce Planning can limit an organization's ability to grow and adapt to changing market conditions. The cost of missed opportunities is difficult to quantify, but it's critical to consider the potential revenue and market shares that could be lost due to inadequate workforce planning. Implementing SWP allows organizations to plan for the future proactively and position themselves for sustainable growth and success.
4. Reduced employee productivity
The absence of Strategic Workforce Planning can also lead to a decrease in employee productivity. Gallup estimates that disengaged employees cost the American economy between $450 billion and $550 billion a year in lost productivity. By investing in SWP, businesses can optimize their workforce, ensuring that employees have the skills, resources, and support they need to perform at their best.
5. Rising training and development costs
When businesses overlook Strategic Workforce Planning, they can face higher training and development costs as they work to fill skills gaps and meet new needs. Responsive training efforts can be expensive and time consuming, with a Training Industry study showing that businesses spend an average of $1,286 per employee on training each year. SWP allows businesses to proactively identify workforce development needs and implement targeted training programs, resulting in more effective and efficient talent development strategies.
Conclusion
According to our estimates, the cost of not having a SWP is equivalent to an average of 10% of your annual payroll.
Neglecting Strategic Workforce Planning can in fact have significant consequences for organizations, impacting employee retention, talent acquisition, growth, productivity, and training costs. By adopting strategic workforce planning, businesses can mitigate these risks and optimize their workforce for long-term success. Investing in strategic workforce planning is not only a proactive approach to human capital management, it is also an essential strategy for maintaining a competitive edge in today's dynamic business landscape.
