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What Is Workforce Optimization?

Workforce optimization
9 minute read

Workforce optimization (WFO) is a deliberate procedure of enhancing labor processes to improve organizational and employee efficiency and decrease operating expenses. It’s a strategic approach to balancing employee productivity and operational efficiency with employee job satisfaction with the aim of meeting business goals. 

WFO is a step above “normal” resource management and covers a variety of processes, including:

  • Staffing optimization
  • Headhunting or talent acquisition
  • Performance and productivity management
  • Optimization of employee engagement
  • Creation of employee training and development programs
  • Implementation of new technologies
  • Creation of workforce analytics

The Difference Between Workforce Optimization and Workforce Management

Often used interchangeably, workforce optimization and workforce management are two similar terms that have distinct meanings.

Workforce optimization (WFO) is a broader term encompassing a wider range of strategies and processes that aim to maximize workforce performance and efficiency.

Workforce management (WFM) has a more narrow focus. It deals with predominantly operational aspects of managing the workforce, such as scheduling, time and attendance tracking, distribution of tasks, etc. 

WFM is less about decreasing operating costs while maintaining efficiency and more about ensuring that resources are allocated at the exact time they are needed. This can lead to decreased resource wastage and optimization, but it’s not the main goal of WFM.

Key Components of Workforce Optimization

1. Workforce Planning

Workforce planning is a term that describes the process of gathering and analyzing data to forecast future staffing demand (the number of workers and their skill levels). The data is then used to make informed decisions on how to improve or increase the current workforce to satisfy that staffing demand.

Workforce planning is an important part of workforce optimization, as it allows companies to forecast future workforce needs centered around growth projections and industry or market trends. It can be summarized as using data to evaluate the current workforce, assess the future staffing demand, and perform actions to bring those two closer together.

2. Recruitment

Having a well-established recruitment strategy is a key part of workforce optimization. When developing their talent acquisition programs, companies should ensure they can attract the best talent for the roles they need to fill. 

The focus should be on ensuring that potential candidates possess the skills for the job and have values that align with the main company objectives.

3. Employee Scheduling

Well-organized scheduling and employee time and attendance management are vital parts of any workforce optimization endeavor. This process revolves around creating an employee scheduling system that takes into account the following:

  • Business needs (i.e., business demand)
  • Peak times or periods
  • Staff availability 

The idea is to balance employees’ job satisfaction, flexibility, and availability with workforce optimization so that they don’t negatively impact business needs.

4. Managing Performance

Employee performance management revolves around assessing the work performance of each employee, comparing them to set performance goals, and using that data to provide employees with feedback and continue to create productivity and performance goals. 

Another important part of performance management that can get overlooked is recognizing and praising high performers. This can increase employee job satisfaction and overall productivity and improve morale.  

5. Employee Training Programs

Organized training programs for employees can help companies achieve two important things in the overall workforce optimization process:

  • By investing in their employees’ professional development, companies can improve the overall skills and expertise of their workforce.
  • By involving the current workforce in training programs and helping individual employees improve their job skills, companies can effectively invest in employee job satisfaction and productivity while also promoting a culture of high-performers.

Best Practices for Workforce Optimization

1. Get the Workforce Aligned With Company Goals

An important aspect of WFO is ensuring every employee understands the business goals and objectives. It’s also important to let everybody know how their position impacts and contributes to the company's goals. 

The main idea is to create a shared vision of the future. By instilling meaning and purpose into every employee, businesses can create a culture of high-performers and increase overall productivity.

2. Use a Data-Driven Approach

Using data to evaluate employee performance, productivity, and engagement levels can provide companies with vital information that can further inform the entire decision-making process. 

Instead of relying on instinct, businesses can make data-driven decisions about recruitment, staff scheduling, performance, and productivity management and ultimately improve the efficacy of various processes while drastically lowering costs.

3. Utilize Technology and Digital Solutions

Utilizing technology and various digital solutions can have a tremendous positive effect on the workforce optimization process. Everything from workforce management to time and attendance software can aid companies in streamlining repetitive and boring tasks while ensuring their employees focus on the work that helps the company reach its business goals. 

Tasks like managing payroll or employee availability, creating staff schedules, and ensuring that different resources are fully utilized can all be streamlined with modern technological solutions.

4. Create and Promote a Culture of Constant Improvement

An important part of the workforce optimization process is the understanding that this practice isn’t solely about improving processes — it also involves a cultural shift or change. It’s important to create a culture of continuous learning in which employees are encouraged to find new and better ways of doing things.

This type of company culture will help employees learn while also minimizing the effect single mistakes can have on their job security. The culture should reward employees who keep up with new trends and always seek to provide more value to the company.

5. Use Flexible Work Arrangements

Flexible work arrangements give employees more freedom in choosing the way they perform work. As long as they meet performance goals, things like flexible work hours and remote or hybrid work can all greatly benefit both the employees and the company. 

Employees will have higher job satisfaction and better work engagement and productivity, while the companies will get to reap the benefits of better-performing employees.

6. Perform Workforce Assessments and Gap Analysis

A good workforce optimization strategy involves performing workforce assessment and gap analysis. These two are meant to serve as a form of a health check — a way for the company to get valuable data about its overall performance and ability to reach its business goals.

 Workforce assessments can involve different methods, such as:

  • Performance and skill reviews
  • Employee engagement surveys
  • Various feedback surveys
  • Workforce planning and forecasting

Gap analysis allows companies to identify the gap between the skill levels of their current workforce and the skill levels they need to have in order to reach business objectives. The gap analysis typically involves the process of evaluating current skills while also assessing future skill requirements.

7. Create Clear Goals and Performance Metrics

Having clear goals and performance metrics helps employees perform better by giving them a clear performance target they should strive to reach. 

It can help keep their motivation and focus levels high and ensure the entire workforce is aligned with the company's main objectives.

Benefits of Workforce Optimization

Workforce optimization can bring a lot of benefits to you company, including:

1. Increased Efficiency

Business efficiency revolves around having the right resources that provide the highest possible returns. With workforce optimization, companies can acquire a better understanding of how many employees they actually need to reach their business goals.

Also, they can determine where and in which positions those employees are the most productive and how they can build the mechanisms to support them.

2. Better Productivity

WFO analytics allow businesses to identify performance issues and create optimal workloads.

Additionally, if a company’s workforce optimization process includes the introduction of automation solutions (with the goal of eliminating or reducing tedious and time-wasting tasks), that can further encourage employees to increase their overall work performance and productivity.

Or, simply put, employees will be able to do more in less time.

3. Lower Costs

Having too many employees on a company's payroll can be as big of a problem as not having enough of them. Workforce optimization can aid businesses in finding the perfect balance, accurately assessing business needs and employee capacity, and using that information to optimize scheduling. 

WFO also allows companies to identify new revenue streams, like cross-selling, which can lead to existing employees bringing in higher returns without the need to increase staffing.

4. Better Employee Engagement and Satisfaction

A big part of workforce optimization is about creating opportunities for employee training and growth. 

This process revolves around giving employees enough room for professional development and career advancement while also creating a positive work environment and promoting work-life balance. Once a company does this, employee engagement and satisfaction levels will go through the roof, with turnover almost always decreasing.

Multifaceted process to improve the efficiency

Workforce optimization is a multifaceted process that aims to improve the efficiency of companies and their employees while simultaneously decreasing operating costs. It’s typically far more involved than “regular” resource management.

Getting all of these processes in place and then streamlining them on both the micro and macro level can be challenging. One way to ensure that the effort actually increases a company’s efficiency and decreases costs is to leverage digital tools and adopt a data-driven approach.

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