Workforce planning: headcount maths, attrition and hiring lead times
How many people a business needs, how many it must hire to stand still, and how early it must start.
Key takeaways
- Workforce planning answers three questions: how many people the work needs, how many you must hire to reach that number when some staff leave, and how early you must start because hiring takes time.
- Common traps: Planning hires for growth only and forgetting leavers.
- Headcount: the number of people employed. FTE (full-time equivalent) counts part-timers as fractions, so two half-time staff are 1 FTE.
- Productivity: output per person, such as calls handled per hour or claims closed per day.
- Shrinkage: the share of paid time not spent on the core work (leave, training, meetings, sickness).
Key idea
Workforce planning answers three questions: how many people the work needs, how many you must hire to reach that number when some staff leave, and how early you must start because hiring takes time.
Four terms
- Headcount: the number of people employed. FTE (full-time equivalent) counts part-timers as fractions, so two half-time staff are 1 FTE.
- Productivity: output per person, such as calls handled per hour or claims closed per day.
- Shrinkage: the share of paid time not spent on the core work (leave, training, meetings, sickness). Paid 40 hours with 25 percent shrinkage gives 30 productive hours.
- Attrition: the share of staff who leave in a year. Leavers each year are roughly average headcount x attrition rate.
The core formula is: people needed = workload / productive hours per person. Then: hires needed = growth in headcount + people who leave. Attrition is often the bigger number. A company that wants to grow by 10 percent with 15 percent attrition must hire about a quarter of its workforce in a year.
Worked case
Hiring plan for an IT services firm in India
The prompt
A fictional IT services firm in Bengaluru has 10,000 staff and has won contracts that need 11,000 by the end of the year. Attrition is 15 percent a year. Each recruiter fills 8 roles a month. Filling a role takes about 45 days, new hires often serve a 60 day notice period at their old employer, and they then need 30 days of training before they can work on a client project (illustrative numbers). How many people must it hire, how many recruiters does it need, and how early must hiring start?
The structure
- Hires = growth + leavers; recruiters = hires / capacity; start = lead time before the need
- Growth in headcount
- Key: Leavers: average headcount x attrition
- Recruiter capacity per year
- Lead time: time to fill + notice + training
Working it through
1. Growth
11,000 minus 10,000.
Growth in headcount:11,000 - 10,000 = 1,0002. Leavers
Average headcount over the year is about 10,500; 15 percent of that leave.
Leavers in the year:(10,000 + 11,000) ÷ 2 × 0.15 = 1,5753. Total hires
Growth plus replacement of leavers.
Hires needed in the year:1,000 + 1,575 = 2,5754. Recruiters
Each recruiter fills 8 a month, so 96 a year. 2,575 divided by 96 is about 26.8, so 27 recruiters.
Recruiters needed (before rounding up):2,575 ÷ (8 × 12) = 26.825. Lead time
Days from opening a role to a productive person.
Lead time (days):45 + 60 + 30 = 1356. Cost of attrition
If each leaver costs about INR 3 lakh to replace (recruiting, training and lost output), what does cutting attrition from 15 to 12 percent save?
Yearly saving (INR crore):10,500 × (0.15 - 0.12) × 300,000 ÷ 10,000,000 = 9.45
The recommendation
The firm must hire about 2,575 people, not 1,000: replacing leavers is the larger part of the plan. That needs about 27 recruiters, and because a hire takes about 135 days (four and a half months) to become productive, roles for projects starting in month 6 must open in month 1. Cutting attrition from 15 to 12 percent would save about INR 9.45 crore a year and remove 315 hires from the plan, so retention deserves as much attention as recruiting.
Risks: Attrition is often higher in the first year of employment, so a fast-growing firm may lose more than 15 percent; Some roles take far longer to fill, such as senior specialists.
Next steps: Split the plan by skill and seniority; Check attrition by team to find where people leave most.
A contact centre in Manila receives 12,000 calls a week. Each call takes 6 minutes including the notes afterwards. Agents are paid for 40 hours a week and shrinkage is 25 percent. How many agents does it need, ignoring the timing of peaks?
A hotel group in Dubai has 2,000 staff, wants to stay at 2,000, and has 30 percent attrition a year. How many people must it hire each year just to stand still?
Planning hires for growth only and forgetting leavers. Using paid hours instead of productive hours. Ignoring lead times, so the plan is right but the people arrive months late. Treating headcount as a pure cost: in services firms, people are the capacity that earns revenue, so too few is as costly as too many.
Why is attrition often the largest part of a hiring plan?
Paid hours are 40 a week and shrinkage is 20 percent. How many productive hours does each person give?
Sources for this lesson (1)
- Recognized public explanations of case-interview concepts and terms
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