By Steven B. McKinney

McKinney Consulting Inc.

The penalties for having the wrong size organization and the wrong amount of human assets for the mission can be costly. No leader wants to have too many or too few bodies and minds on the job, but it can be difficult to know what the right number is. Figuring out the right size of your workforce requires some careful analysis, planning, and execution.   Read on

Some of the painful results of having the wrong size workforce include

1. Too Many - Loss of efficiency from too many personnel – Economies of scale are lost when what could have been accomplished by less people is accomplished by more.
2. Too Few – Loss of orders, and customers.  Customers who don’t get served don’t come back. Orders can be missed or passed over because of not having enough manpower to handle the job.
3. Too Many – Loss of profits. Overstaffing causes waste. Further waste is created when the overstaffing situation is addressed. The costs of reducing redundancies can be considered a cost of improper workforce planning in the first place.
4. Too Few – Loss of quality. Jobs may be hurried and corners cut in order to get the product out the door.
5. Too Many – Loss of ownership and achievement. Chaos may result from having too many people wondering what they are supposed to be doing.
6. Too Few – High Turnover and Loss of Superstars. If the organization is in a situation where ‘those who can – do’ then those who can may leave. Understaffing means too many hours worked and too much reliance on a few superstars. It also means great danger should any of the understaffed positions suddenly become open.

Planning staffing levels requires a careful assessment of present and future needs of the organization. Future plans should be compared with present and future forecast resources so that the supply of manpower equals the demand for it.

Analysis of Personnel information will give you a “10,000 foot” level view to see where the organization stands in terms of skills, capabilities, gender, flexibility, and potential. Then the analysis can takeover from there with forecast of this same workforce over the next 3, 5, and 10 years taking into account all the things planned and some potential unplanned to arrive at a likely future workforce supply. This picture of supply is just an extrapolation of the way the future would look were you to do nothing at all now. It can be tweaked, with various variable changes to see how they propagate through the years, to arrive at the level of supply that meets future forecasted demand.

But how do we know how many people we’ll need?  Demand can be forecasted similarly by looking at some of the factors that generate demand for human resources. Some of these factors include:

1. Sales and growth forecasts – Where does the company plan to be in 3, 5, 10 years based on sales and growth forecasts. Predicting these is, of course, no easy task, but it is something you will probably be doing anyway.
2. Effects of Technological change – How will technology lower and raise the demand for your human assets?
3. Variations in the labor force – Is your labor force going to be substantially different tomorrow than it is today? It could vary in so many mind-boggling ways, including efficiency (due to technology, maybe!), productivity, flexibility, skills sets (as a result of training, diversity, immigration), organization, incentives, etc.
4. Changes in employment policies – More or fewer temps? More or fewer outsourcing going to happen? What about insourcing?
5. Legislative environment changes – Are there going to be new requirements for your labor force in the future? Are you not going to be able to put them to as many hours?
6. Others – Changes to other variables that could effect demand that are pertinent for your industry.

Of course all this involves more than just thinking about how many people you are going to hire. It also prompts very beneficial thinking in other areas as well. Leaders going through this process will find themselves pondering how much outsourcing they might want to do, and how much training they should be investing in. Thinking on how much over-time to require and how to reduce turnover will enter into the equations. 

Lastly, it is clear that is not a fire and forget missile. This sort of workforce planning will have to be a regular exercise to go through and adjust as external factors change. But once started, it promises to create benefits that ripple through an organization in so many ways you’ll be glad you did it.

About the author: Steven B. McKinney is the founder and president of McKinney Consulting Inc., Korea's most trusted executive search firm.  McKinney Consulting offers a comprehensive range of personalized, professional resource services to a wide cross-section of companies operating in Korea and Asia.  Mr. McKinney is a globally established commentator on international management.  He can be reached at This email address is being protected from spam bots, you need Javascript enabled to view it