Strategic workforce planning (SWP) is a critical process for aligning an organization’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 blog post, we’ll delve into the potential consequences of ignoring strategic workforce planning and provide figures related to these hidden costs, showcasing the real-world impact on your organization’s bottom line.
1. Increased Employee Turnover
Neglecting strategic workforce planning can lead to increased employee turnover. High turnover rates are expensive, with estimates suggesting that replacing an employee can cost anywhere from 50% to 200% of their annual salary, depending on the position and industry. By investing in SWP, organizations can identify and address workforce challenges, leading to improved talent retention and reduced turnover costs.
2. Difficulty in Talent Acquisition
Without strategic workforce planning, organizations may find it challenging to attract the right talent to meet their evolving needs. A study by the Society for Human Resource Management (SHRM) found that the average cost per hire is $4,129, and it takes an average of 42 days to fill a position. SWP helps organizations identify critical skill gaps and develop targeted talent acquisition strategies, ensuring they can attract the right candidates and remain competitive in the market.
3. Hindered Organizational Growth
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 essential to consider the potential revenue and market share that could be lost due to insufficient workforce planning. Implementing SWP enables organizations to proactively plan for the future, positioning them for sustainable growth and success.
4. Reduced Employee Productivity
A lack of strategic workforce planning can also lead to decreased employee productivity. Gallup estimates that disengaged employees cost the U.S. economy between $450 billion and $550 billion per year in lost productivity. By investing in SWP, organizations can optimize their workforce, ensuring that employees have the necessary skills, resources, and support to perform at their best.
5. Increased Training and Development Costs
When organizations overlook strategic workforce planning, they may face higher training and development costs as they scramble to address skill gaps and emerging needs. Reactive training efforts can be expensive and time-consuming, with a study by Training Industry showing that companies spend an average of $1,286 per employee on training each year. SWP allows companies to proactively identify workforce development needs and implement targeted training programs, resulting in more efficient and effective talent development strategies.
On average, according to our estimates, the cost of not performing SWP roughly equivalates to 10% of your annual payroll.
Neglecting strategic workforce planning can indeed have significant consequences for organizations, impacting employee retention, talent acquisition, growth, productivity, and training costs. By embracing SWP, businesses can mitigate these risks and optimize their workforce to achieve long-term success. Investing in strategic workforce planning is not only a proactive approach to managing human capital but also an essential strategy for maintaining a competitive advantage in today’s dynamic business landscape.