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Solve Your Headcount Planning Headaches by Avoiding these 8 Common Mistakes

December 11, 2019

If you’re not already thinking about your team’s 2020 headcount, then you should be! Headcount planning is an integral part of a company’s strategy, forecasting, and budget setting for the next fiscal year. Proactive and thoughtful headcount planning will get you ahead of the game and help your recruiting and hiring team have a less stressful year with fewer surprises. Moreover, if your company is in a high-growth phase, you’ll need to focus even more on hiring a ton of new employees in an incredibly crowded and competitive talent market. Finding the most accurate headcount number and understanding what can make you go over budget is of paramount importance.

 

Every good hiring manager has a plan at the start of the year, but why does it always seem that the plan is never the reality? Avoid these 8 common headcount planning mistakes and solve your headcount planning problems!

 

1. Hiring Managers and CFOs often forget to ask their recruiting team for input on timing for hires.

Your recruiting team is made up of subject matter experts that can give you real-time information regarding time-to-fill and candidate pipeline generation. Without discussing hiring targets (often Q1) with those employees who have boots on the ground in the trenches of finding top candidates every day, hiring managers often create unrealistic goals or, worse, set up their team for failure and unnecessary stress. With an average time to fill of 42 days, the process is lengthy, industry-specific and even employer-specific. Look at past hiring performance. How many applications, phone screens, and interviews did it take to get one hire? Be sure to consult with your recruiters and manage expectations about the time it will take to fill each role.

2. Hiring Managers and the finance team don’t ask for feedback from the recruiting team regarding compensation for hires.

Your recruiting team is comprised of subject matter experts that understand compensation within your industry and geographic areas, so use them! Most compensation professionals and CFOs budget for employee salaries using internal equity (existing salary ranges) in addition to e some further industry research. These methods and resources are often dated and then used to arrive at what they believe is today’s reasonable compensation. But is reasonable competitive? Recruiters have real-world, everyday experience about salaries and compensation within your target talent pools. They know what salaries are necessary to attract the level of talent the company is seeking for their new hires. The recruiting team can speak to losing great candidates due to compensation or even when the finance team has overvalued a role. They are living and breathing the supply and demand of compensation versus talent; take the time to double-check your compensation budget as you start your headcount plan.

Planning your #EmployeeHeadcount for the #NewYear is challenging, as it’s nearly impossible to nail down an exact number. @IQTalent compiled the 8 most common mistakes to avoid:Click to Tweet

3. The budget doesn’t account for relocation.

When the headcount budget is reviewed for the upcoming year and the plan for last year is reviewed, everyone searches for answers for “what went wrong.” In today’s competitive environment for top talent, you must plan for relocating new hires in order for them to accept the position with your company. The best person for the role likely won’t be down the street, and you’ll need to be realistic about the costs of relocating. When a hiring manager can’t hire the best person, because there isn’t a budget for relocation, it creates a bad experience for the candidate and hiring manager. Ultimately, this can affect the overall performance of the company because there’s no wiggle room in the budget.

4. The budget doesn’t account for signing bonuses.

See point #2 above. In order to get a great candidate to leave their current position, it may take a sign-on bonus as added compensation. Especially with executive-level and senior roles, these candidates can often expect a signing bonus as a part of their first-year salary. If this extra compensation isn’t included in the budget for headcount planning, it will result in significant overages in spending in this category. You can’t go over budget if you already planned for the potential of a sign-on bonus!

5. Failure to discuss opportunities for remote employees.

Is working remotely an option with your firm? If it’s not, should it be? For specific types of talent, remote work is considered the norm. If your firm isn’t discussing this option during your headcount planning meetings, then you’ll be excluding many qualified candidates. If you do offer employees to work remotely, be sure to include these expenses in the budget. While a remote employee may not need a relocation budget, he or she will have travel costs, home office expenses, and other work-related expenditures, which will need to be considered. Low cost of living areas could result in lower salaries, but these other expenses need to be considered in the budgeting process to determine the cost savings.

6. Cutting the budget.

Maybe you did discuss real-life compensation, signing bonuses, and relocation with your recruiting team and considered their input valuable. However, when the rubber meets the road and the CFO, CEO, or certified Ruler of the Budget steps in and wants to start cutting, these items are reduced in order to meet a predetermined budget number. When this happens, you’ll either go over budget or see a loss of headcount at the end of the year due to overspending on earlier hires. We’ve even seen clients remove roles from the headcount if these roles remain open longer than a predetermined amount of time. If the role is open for too long, is it really vital to the department/function?

Every good #HiringManager has a plan at the start of the year, but why does it always seem that the plan is never the reality? Here’s how you can be proactive with your approach:Click to Tweet

7. Overlooking employees with multiple roles.

Is your Director of Operations also your Head of HR? Is the Marketing Director simultaneously in charge of developing new business? When headcount planning for the coming year, have you considered which employees are managing two or more roles? We all love to hire high performers and overachievers who will do more than is required of their actual job description. Still, at some point, in order to grow, that person will need to focus on their primary responsibility, and you’ll need to hire someone new to manage the other role. Take an honest look at your current employees when headcount planning and address employees working multiple roles and whether it’s time to split the roles or hire someone to assist that person.

 

8. Lack of consideration for attrition and promotion.

Headcount planning doesn’t just account for “new” roles. Usually, roles will need to be backfilled due to attrition, promotions, and/or internal mobility. Be sure to consider your company’s average attrition rate and include that in headcount planning for the coming year. Likewise, assess the current talent on your team. Do you have employees who are qualified for a promotion? Maybe you have an open position that can be filled with a current team member. By evaluating your firm’s current talent, hiring can focus on adding people who bring additional skills and value. The headcount plan will be more accurate when attrition and promotions are included.

 

Employees are almost always the highest cost for any given company. When creating a strategy for headcount planning, be sure to consider ROI. What will these roles cost the firm versus the impact/revenue he or she can generate? Planning for an accurate headcount is challenging, and there’s always a lot to consider; it’s nearly impossible to nail the number 100%. But, by having a proactive approach and avoiding some common mistakes, you can create a plan destined for success. You’ll also want to make sure you consult all of the subject matter experts in HR, Finance, and Talent Acquisition to make sure you’re asking and answering all of the right questions.

 

Need help? Try this quick checklist to be sure you’ve covered all the headcount bases! 

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