Annual planning is an important part of any business, but for retailers in particular, labor planning can make the difference between having a successful, on target year or facing struggling locations. It’s critical for retailers to align their corporate strategy with operational execution to create a successful labor plan. The planning process involves many factors, from the financial goals of the business to budget constraints, to the skills needed across different roles and locations. Without the right plan in place, store managers could be caught short-staffed and unable to create balanced schedules. A solid labor plan can increase productivity, improve the employee experience, and lead to higher satisfaction for your customers.
To create the best annual labor plan, let’s break down the steps to consider.
Understanding the basics of labor planning
Labor planning starts with a review of the long-term corporate strategy and mapping out the goals of the year ahead. The goal is to ensure that the human capital strategy can meet the operational goals. Key components include:
- Headcount Forecasting: using the historical data and business goals to predict the number of employees needed across different locations and departments
- Skills Gap Analysis: review of the current skills and what will be required in the future to get ahead of possible gaps
- Budgeting: Reviewing the cost of labor, considering wages, benefits, retention and training expenses
In addition to these core components, it’s important to bring the right decision makers together. Developing an effective labor plan requires collaboration between the operations, finance, and HR teams. Each department brings unique insights that are crucial for developing a comprehensive plan that meets the needs of the entire organization. The operations team focuses on the labor model, finance team ensures alignment on budgets and targets, and HR considers staffing and recruitment timelines. With the right team in place, they can start to build an optimized labor plan for the year ahead.
Steps to building an effective labor plan
Step 1: Analyze past labor data
Reviewing the historical labor data to understand past trends and patterns is a great starting point. This analysis helps make informed decisions about future labor needs. Was there a local holiday that affected stores differently, or was there a shift in the market that changed how many employees were needed? Was there a change in turnover or training that affected employee count? This review may also include a look into the current labor standards and an evaluation on whether the details need to be adjusted. By analyzing and understanding the data, you’re able to make better decisions for the future.
Step 2: Forecast future labor needs
Using those insights from the historical data, you can start to predict the future labor need. It’s important to factor in seasonal variations, market changes, or even the opening of a new retail location. Looking ahead over the next year and planning out different scenarios will help align the right staff at the right time. Having the long-term forecast in place will help with the short-term forecasting done by each location. Having an accurate forecast will help retailers create the optimal schedule that puts employees at the right location at the right time to best serve their customers.
Step 3: Budget and cost planning
Develop a detailed budget that outlines the financial resources needed for recruitment, training, and employee development. It’s important to be realistic about costs and ensure alignment with your overall financial goals. This could include budgeting for strategic initiatives outside of the planned labor for the year on top of the budget needed for labor.
Step 4: Identify critical skills gaps
Assess the current workforce to identify any skills gaps. Is there an ideal mix of part-time and full-time employees that fits best? Or are there enough employees with the right skills? This step is an opportunity to plan training or hiring to fill these gaps and ensure the workforce has the necessary skills to meet business objectives. In addition to helping the business fill skill gaps, as retailers invest in upskilling, they will be able to better retain their top talent, reducing turnover and improving the employee experience.
Step 5: Build a contingency plan
Finally, develop a contingency plan to address unexpected changes in labor needs. This could involve strategies for rapid hiring, training programs for upskilling, or even temporary staffing solutions. Every good plan needs flexibility and agility.
Tools and technology for labor planning
Incorporating data-driven insights and technology into your labor plan can help to make better decisions. This could include real-time analytics to spot trends or track productivity, all working to help refine the labor plan as needed. AI and machine learning can help optimize forecasts and identify problems. The latest tools with generative AI can help quickly answer questions and provide teams with more time to focus on their strategic work.
Leveraging modern tools and technologies can support everything from the high-level long-term forecasting, down to the day-to-day experiences of employees. Retailers can leverage workforce management software for planning, forecasting, recruitment, scheduling, timekeeping and improved employee experiences. Using an integrated AI platform across an organization can bring together everyone from operations leaders to store managers to frontline workers – giving each person crucial insights to their day-to-day work, increasing productivity and adding millions of dollars in savings.
Ensuring alignment with organizational goals
To ensure your labor plan is effective, it must align with your organization's strategic objectives. It’s key for teams to regularly review business goals and adjust labor needs as necessary. An annual labor plan should be dynamic rather than static. It’s important to establish a routine for reviewing and adjusting the plan throughout the year to keep it relevant and responsive to changing business conditions, and to share any changes with the appropriate teams. In an industry with constant change, retailers need to ensure alignment with business goals and adapt to the market.
Key takeaways
Creating an annual labor plan is not a one-time task but a dynamic process that requires continuous review and adjustment. By following these steps and leveraging modern tools and technologies, retailers can ensure they have the right workforce to achieve their goals. Long-term workforce planning is essential for sustained success, and an effective labor plan is a key component of this process.
With a well-designed plan for creating and reviewing a labor plan in place, retailers can see the benefits across the organization – from better collaboration with executives, to managers creating accurate and balanced short-term forecasts and schedules, to reducing overtime and employee burnout. By ensuring the right employees are working at the right time, retailers can improve service and boost their bottom line.
Learn more about how end-to-end labor planning solutions enhance retail workforce efficiency, reduce costs, and improve employee satisfaction.
