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Why Finance Loathes Headcount Planning – and How to Change That

Nov 22, 2021| Reading time: 10min

BY ChartHop

Headcount planning is complicated.

Even in the best of times, it creates unique challenges as finance and people leaders come together to understand company growth, budget constraints, and the skills needed to operate within that framework.

The uncertainty in the world and the job market that we’ve experienced over the past couple of years only exacerbates the situation.

Finance leaders, in particular, must constantly reconcile budgets with ever-changing headcount plans, all while understanding the larger implications of what each headcount scenario means for the company.

But it doesn’t have to be this way. With the right approach, finance can partner with people leaders to make headcount planning a competitive advantage. Let’s take a look at the challenges that typically prevent this from happening and what you can do to overcome them.

How CFOs can confidently approach headcount planning in 2022

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Why Finance Loathes Headcount Planning

Traditionally, headcount planning is decentralized, the actual plan changes constantly, and details beyond salary costs can be challenging to forecast. Plain and simple, these factors make it extremely difficult for CFOs to get the information they need.

Decentralized, constantly changing plans

For example, HR’s top level plan often looks very different from the one finance has. Disconnects between teams also mean that even when executives set high level numbers for people and budget for the entire organization, each department ends up competing for those resources.

Further, once everyone does align on a final plan, that plan is never truly final; it changes constantly and that impacts budgets and forecasts. Specifically, hiring someone for a role earlier than planned can require additional budget, while hiring someone later than planned can lead to missed growth targets. At the same time, a lack of control around compensation bands can easily lead to teams going off-budget to get top talent.

Of course finance is also typically the last to know about these changes. And even when CFOs request an updated plan, it can take a while to deliver, meaning that by the time they do get it, more has already changed.

Lack of a big picture view

On top of all that, it’s nearly impossible to get the complete picture of how the headcount plan will impact everything from software costs to office costs and real estate needs — despite the fact that all of those depend significantly on headcount.

Consider the following: Bringing in two new account executives will require two new CRM licenses, among other software costs, and the exact location of those hires might impact office space or costs (if the team is in person) or home office setup expenses (if they are remote). However, that equation changes slightly if you end up promoting an existing business development representative into one of those roles, since that person likely already has a CRM license and an office setup, but may have had other software licenses in their old role that they no longer need.

As complicated as that already is, it’s only one example of what FP&A needs to think through to get the big picture view of growth plans. Understanding this domino effect at scale is next to impossible with traditional, spreadsheet-based headcount planning.

How to Make Headcount Planning a Competitive Advantage

Making headcount planning an ongoing, strategic activity doesn’t have to be so complex.

In fact, finance teams can even make headcount planning a competitive advantage with the right approach — one that’s centralized, automated, and regularly considers internal and external changes in the workforce.

Flipping the script on headcount planning requires:

Increasing Visibility

First and foremost, visibility into headcount plans (and the many changes through which they’ll inevitably cycle) is essential.

The best way to ensure this visibility is to take headcount planning out of spreadsheets and move it into a centralized solution that can capture changes across teams and approvals of those changes in real-time.

This approach ensures that everyone has immediate access to the most up-to-date information and provides visibility into the complete picture by sharing details like open roles, including their job descriptions and target hire dates, budgets, and forecasts.

Along the way, finance should easily be able to keep tabs on progress by pulling up data like open headcount by location, open headcount by department, open roles by base salary, estimated recruiting costs, and more.

Headcount planning data in ChartHop

Strengthening Collaboration and Alignment

Introducing a centralized solution for headcount planning can also improve collaboration throughout the process by giving everyone from finance and HR to front line managers the same view of hiring plans.

This collaboration can shed light on hiring dependencies and enable more informed, cross-functional planning to meet key business goals. For example, high volume recruitment in engineering may require a need for roles in product management, while ramping up sales headcount by 50% may trigger new roles for marketing.

It can also help bring in complete information about company growth plans, skills needs, and resource allocations to better inform everything from the need for new headcount to the appropriate pace of hiring.

Introducing Controls and Approvals

Another benefit of bringing headcount planning out of spreadsheets and into a centralized solution is the ability to introduce more controls and approvals throughout the process. Doing so can avoid situations in which roles get double counted and those in which teams go rogue on budget.

For instance, finance teams can easily set compensation bands for different types of roles and levels that cover everything from base salary and bonus to equity compensation. This allows the recruiting process to move faster and more smoothly without creating any worry that hiring teams might overpromise what they can actually deliver.

Headcount planning controls and approvals in ChartHop

Furthermore, requiring teams to operate within set ranges and to go through a set approval process (which includes the CFO) for all new headcount will help ensure the finance team always has access to an accurate, up-to-date view of hiring plans. In turn, this accuracy can improve forecasting capabilities to better manage expected costs and help finance leaders understand how well the company is positioned to meet key goals.

Continuous Planning

Finally, headcount planning shouldn’t be a one-and-done exercise. Rather, it should be an ongoing effort as company goals, team needs, and external factors change throughout the year.

The teams that regularly evolve their headcount plans and do so in a highly collaborative way can spot risks early and adjust course accordingly. Additionally, this early and often approach helps ensure that roles are filled and new team members are onboarded by the time their skills are needed — which goes a long way toward helping the organization meet customer commitments and growth targets.

Of course, for all of this to work, the CFO needs to be a part of these ongoing conversations, maintaining visibility and collaboration and managing approvals every step of the way.

Flip the Script on Headcount Planning for Your Organization

Traditionally, headcount planning has proven troublesome for CFOs. But it’s time to change that.

Flipping the script on headcount planning requires finance leaders to increase their visibility into planning efforts and strengthen collaboration and alignment with cross-functional leaders at every step of the way.

Introducing the right technology can make this possible and even turn headcount planning into a competitive advantage that helps drive faster growth, greater innovation, and even a better employee experience that leads to increased retention.

Interested in learning more about what it takes and the unique complexities CFOs will face during the 2022 headcount planning process? Click here to download the CFO edition of our guide, How to Confidently Approach Your 2022 Headcount Planning.

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