How to determine your workforce size

Shipra Arora / New Delhi

The Indian IT industry is back on the recruitment path. Recruitment being a reflection of the health and well-being, companies often go overboard. The vice versa had happened during the downturn. How does a company know that it needs to hire 1,200 professionals and not 1,250, or maybe 1,100 professionals? This is the question that the HR manager not only answers but also substantiates to the CEO and CFO. Justifying new positions and even demonstrating the need for layoffs can be a tough task. So, is it possible for HR managers to do a quantitative analysis to demonstrate whether the company has ‘too many’ or ‘too few’ employees?

Methodologies for quantitatively measuring the right amount of workforce required, or simply put, the process of determining ‘head count fat’, may not be an exact science but one that nevertheless helps HR managers in arriving as close to the magic number as possible. The awareness levels relating to these methodologies may not be very high among Indian companies, but the scenario is fast changing. This is especially in software services, which, off late, has witnessed the most dynamic recruitment trends—both in terms of downturn and revival. “Most Indian IT companies have started realising the importance of quantitative methodologies. Since IT is a people-driven business, the ability to calculate the right size of the workforce is very essential as it is directly linked to the ability to deliver revenues,” says Sanjay Purohit, associate vice president—corporate planning, Infosys Technologies.

After the negative effects of the slowdown, this issue has gained greater importance and organisations have become conscious of the “right size” of human capital to promote profitability and organisational efficiency. It is good to have the size right than having less or more which could lead to a damage control exercise later.

Why is it critical?

What makes the quantitative measuring very critical is the possible negative repercussions that excess and under-recruitment can lead to. It is people who build the organisation, consequently any mismatch in people-related statistics, whether in terms of number or quality may upset the whole organisational dynamics and its objectives. Says Purohit, “The criticality arises from the basic need to balance and effectively manage the supply chain. However, an added dimension is that in the knowledge-based industry, the supply chain deals with talent and intellectual capital and hence balancing it is important, not only from a financial perspective, but also from a people perspective.”

Palash Aggrawal, manager—HR, Infogain India, believes that employee head count has a direct impact on the cost but indirect impacts are far more sensitive, particularly when you are dealing with the knowledge workforce. Right size of the organisation in terms of number of human resources has direct link with people development, succession planning and job en-richment plans. “Ad-hoc(ism) without a right perspective and an improper utilisation of the workforce could come in the way of setting good productivity standards, promoting favourable working climate and not being in tune with the development structure of people and the organisation,” adds Sunder Rajan, GM HR & administration, Infinite Computer Solutions.

Right-sizing the workforce

How does the HR manager determine the right size of the workforce required? Purohit points out that the adequate amount of workforce can be ascertained using a set of quantitative methodologies and productivity parameters.

An organisation must forecast its revenue correctly and also have an efficient planning and recruitment engine in place. There are various quantitative approaches in use for determining either the shortage or redundancy. Determining whether the company needs more positions or layoffs is based on a series of ratios.

By looking at historical patterns within the firm, one can generally determine a reasonable range for these ratios. “Each organisation has different environment and processes. Therefore, the ratios will be organisation specific. However, for comparison purposes, some standards are worked out and agreed upon before sharing the data,” adds Kumar.

Some of the complex internal ratios taken into account by HR managers are revenue per employee; employees to managers; employees to new customer orders or backlogged orders; employees to number of customers, etc Apart from these, various external factors also come into play like the condition of the economy, etc.

Test of credibility

How credible and reliable are the various methodologies is a moot question. Answers Purohit, “Quantitative methodologies are very credible and reliable and have been well-proven over many periods. They are transparent to all stakeholders and dynamic in nature to factor the changes in the business environment and internal capabilities on an ongoing basis.”

Aggrawal puts the onus of success and credibility of these quantitative techniques on the organisation itself. “It is not the credibility or reliability of the concept or technique, but the organisation’s capability to sustain the current business and to grab the new business which makes the difference.”

Notable advantages

As these quantitative meth-odologies are shared with all business units and recruitment numbers are agreed upon based on current and projected business plans, the biggest advantage is assurance of consistency and transparency.“Quantitative methodologies help meet the revenue projections. It is also important from the de-risking perspective as competencies, typically possessed by individual planners, are captured in a parameterised model. Even if an individual is not available, the model ensures that the knowledge base is not lost,” explains Purohit.

Moreover, these quantitative methodologies are refined on a continuous basis, as the database of the company gets enriched over time and the company is able to draw better correlation between the various operating parameters.

One cannot lose sight of the fact that quantitative methodologies are just a tool for arriving at a decision and they do not give decision themselves. It is the HR head and the organisation that eventually have to take the decision. However, with the help of these enablers, this decision can be brought closer to accuracy. Quantitative methodologies if employed as a tool for enabling the right decision at the right time, can help the company remain afloat.

shipra@expresscomputeronline.com