HR & finance must collaborate on headcount planning, McLean asserts

HR and finance departments must work together on headcount planning, the McLean says in its report

Headcount planning is vital for organizations because it ensures operational efficiency, cost control, and strategic alignment. Businesses can avoid both overstaffing and understaffing by accurately forecasting the number of employees required, which can result in financial waste or decreased productivity.

A well-executed headcount planning process enables organizations to manage their human capital effectively, improve operational performance, and drive long-term growth.

According to a report released on May 24 by McLean & Company, headcount planning can increase efficiency and reduce labor costs in a volatile economy, especially when HR and finance teams collaborate to create an effective process.

Companies can use headcount planning to prepare for position changes while aligning labor spending with business strategy, promoting swiftness, employing HR initiatives, and figuring out how labor costs can be effectively distributed.

“The primary goal of headcount planning is to determine the appropriate number of jobs and positions required to meet organizational objectives while remaining within budget constraints.” “There are missed opportunities to achieve that goal without collaboration between HR and finance effectively,” Will Howard, director of HR research and advisory services at McLean & Company, said in a statement.

“Headcount planning has a lot of moving parts, so HR’s involvement in all of the steps aligns stakeholders, brings focus and clarity to the process, and gives a larger perspective to the individual steps,” he explained.

According to McClean & Company research, when HR is included as a strategic partner in planning alongside finance, organizations are 1.5 times more likely to be highly effective at changing quickly at scale. While finance executives understand labor costs and budgets, HR executives understand quantitative and qualitative people-focused data, which can lead to data-informed decisions during headcount planning.

Furthermore, the report highlighted the distinctions between headcount planning and workplace planning, the procedure of forecasting talent supply and demand gaps, and a three-step process for leaders to implement an effective headcount plan.:

Make a rough draft: 

Determine stakeholder responsibilities and collect data to help with headcount planning, such as labor budgets and workforce costs.

Participate with stakeholders: 

Create, evaluate, and submit the headcount plan for approval in collaboration with department leaders and stakeholders.

Interact and iterate: 

Implement the approved headcount plan with department leaders, identify the implications for HR programs, and plan for a periodic review.

According to a global survey of CHROs and CFOs, a strong relationship between HR and finance can also benefit companies by increasing employee engagement, boosting productivity, and higher corporate earnings. Teams can collaborate to gain a better understanding of how employee experience affects the bottom line.

A recent article stated that HR leaders could use data and analytics to improve common HR tasks and demonstrate value to others. Similarly, by working together, finance leaders can improve their people skills and decision-making.

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