As workforce management (WFM) guru Irina Hollatz succinctly puts it, "WFM capacity planning is still the least understood and mastered part of the whole WFM cycle. Ironically, it is also the most strategic one". What makes it so strategic? To put it bluntly, even if your organization is world-class at workload forecasting and staff scheduling, if you simply have the wrong number of employees on the payroll, you are going to be in deep trouble.
WFM capacity planning is frequently misunderstood, but in essence it's about making sure that you have the right number of people with the right skills to cope with the anticipated scale of the business in the long term, typically in the coming financial year. For business process outsourcers (BPOs), it's about right-sizing the teams that will deliver against service level agreements (SLAs) and thus growing an efficient business.
As Irina states, the level of mastery of WFM capacity planning is patchy. Let's take a look at some common mistakes and how to avoid them.
Does this sound familiar? You determine the required headcount by dividing the available staffing budget by the average fully-loaded cost per full-time employee (FTE). Capacity plan: done! What could possibly go wrong? Quite a lot, in fact.
The fundamental problem is that this is a finance calculation, not a capacity planning calculation. It tells you how many people you can afford, not how many people you need. The calculation completely ignores workload drivers. Required headcount depends on workload, not the available budget. Workload is influenced by contact volume, average handling Time (AHT), service level goals, occupancy targets, and more. The method also assumes that every employee delivers the same coverage of demand. In reality, different groups of agents will have different attrition rates, shrinkage levels, skill levels, and absence rates. It also ignores the realities of hiring and training. The budget may be sufficient to increase headcount to 500 FTEs, but you also need to plan for hiring and onboarding, both of which take time.
In short, if your capacity plan is based simply on the available budget, it's extremely likely that you will suffer chronic understaffing, with dire consequences for customer experience, employee burnout, staff turnover, and business reputation. If you're a BPO, you'll have to choose between failing to meet your SLAs or running the campaign with reduced profit or even at a loss.
Of course, professional planners would never do WFM capacity planning in this way. But if company culture dictates this approach, it's time to educate company leadership about the benefits of a more scientific method of WFM capacity planning.
It's true that when doing long-range forecasting, some granular details can be overlooked. For example, the distribution of contact volumes within days is a critical input to the scheduling process, but it's less important for long-range forecasting. That doesn't mean you don't need to apply the same rigor to long-range forecasting that you use with short-range forecasting.
Many capacity plans simply extrapolate past contact volumes by adding a growth/decline percentage. But it's not as simple as that. You need to take into account:
Don't forget that you need to forecast workload, not volume. Workload is a function of volume and average handling time (AHT). But workload is also influenced by the amount of After Call Work (ACW), occupancy goals, and shrinkage.
Underestimating shrinkage is a common mistake in WFM capacity planning. Over the period of a long-range capacity plan, there may be changes to time off policy (increased vacation entitlement), major training programmes, more intense onboarding processes, and system migrations, all of which tend to increase shrinkage.
When it comes to AI migration, remember that AI may reduce the volume of contacts that humans need to handle, but the remaining contacts are likely to be more complex and have longer AHT. We explore the phenomenon of the 'Hard Call Tax' in our LinkedIn Newsletter.
Staff attrition, sometimes called staff turnover, is a fact of life in every business: People leave, either voluntarily or involuntarily. Your capacity plan needs to factor this in. The annual attrition rate is calculated as the number of employees who left in a previous 12-month period divided by the total number of staff positions available. The simplest way to adjust for attrition is to reduce the total available FTEs each month by 1/12 of the annual attrition rate. The problem is, attrition tends not to be consistent across the year. There are peaks and valleys. It is therefore good practice to perform a more granular calculation, based on known patterns in your organization. Which months are your peak season for resignations? September typically sees above-average leavers, while few people resign in December.
Voluntary attrition occurs when employees resign from the organization. Involuntary attrition occurs when employees are dismissed. In each case, the underlying reasons for departure are different, and the monthly pattern of departures will be different. That's another reason why assuming 1/12 of annual attrition per month is a mistake.
Some in-house contact centers produce a capacity plan for the coming financial year partway through the current financial year. Once the plan is produced and the headcount is approved, it's not revisited until the following year. That approach keeps things simple, but there are problems with it.
To quote the famous boxer Mike Tyson, "everybody has a plan - until they get punched in the mouth". Nowhere is this more true than in WFM capacity planning. Forecasts turn out to be inaccurate. IT projects run late, delaying the launch of productivity improvements. New product launches are delayed. Assumptions about hiring lead times and training timescales turn out to be optimistic. These deviations from plan compound week over week. If you stick to your originally planned staffing numbers, by the time the gap becomes visible, it's too late.
That's why WFM capacity planning should mean having an always-current plan that adapts as business reality changes, so you can spend your time on strategy, not struggling to catch up. You can see an example of how this can be achieved in Peopleware Capacity Planning.
Best practice is to implement a rolling planning process, including:
This keeps the plan aligned with changes in the business and avoids nasty surprises.
Any WFM capacity plan is only as credible as the assumptions on which it is built. It's easy to underestimate the importance of carefully documenting those assumptions. Without documentation, leadership will struggle to understand, challenge, and confidently approve the plan. Without documentation, the owners of the plan will struggle to explain and justify the numbers it contains. This is particularly important where the capacity plan forms a business case for hiring more staff, or is part of a BPO contract.
No forecast is ever perfectly accurate. This is true for the detailed forecasting that planners do to inform the scheduling process, and it's equally true for WFM capacity planning. If the capacity plan turns out to be inaccurate, it's important to know what assumptions underpinned the plan, so you can avoid making the same mistakes next time.
WFM capacity planning involves multiple stakeholders: operations management, Finance, HR, and Training, as well as the Planning team. Without a shared understanding of the assumptions and the numbers underlying the plan, it will be difficult to get all the stakeholders on board with the capacity plan. With tools like Peopleware Capacity Planning, there is a single set of numbers, and plans can be easily shared across departments.
Remember to document assumed workload growth/decline, shrinkage, attrition, hiring lead times, productivity improvements flowing from new technology, and indeed anything that could affect future headcount. As well as enabling continuous improvement in your WFM capacity planning process, it gives leadership confidence that all risks have been taken into account.
After investing a lot of time, effort, and thought into your WFM capacity plan, it's tempting to produce a single set of figures, supported by well-documented assumptions and careful calculations. That's a mistake. In producing a single plan, you are assuming that you know exactly how the future will pan out. In reality, contact centers exist in a world of uncertainty, where customer demand, staff behavior, technology deployment, and business priorities can change significantly over the period of the capacity plan. A single plan creates a false sense of security that leaves the business ill-prepared if the assumptions turn out to be wrong.
Every capacity plan is built on assumptions about volume trends, marketing activity, and so on. If there is only one version of the plan, you have no visibility of what happens if any of the assumptions are wrong. Decisions are made as though there is only one possible future. Finance and HR generally want a range of possible scenarios rather than a single number. E.g. the cost, headcount, hiring, and training implications of customer demand being as expected, more than expected, or below target.
It's good practice to create at least 3 versions of your capacity plan. For example, Most Likely, Best Case, and Worst Case. At first glance, that implies increased effort. Using traditional WFM capacity planning tools, evaluating multiple strategies means building and manually reconciling parallel files, usually in spreadsheets. That can be a pain, and it's why most teams skip the extra work and commit to a single plan that isn't fully stress-tested.
It doesn't have to be like that. Tools such as Peopleware Capacity Planning let you produce multiple versions of the capacity plan in one place. Metrics are shown in graph and table form, with the differences highlighted for every period. This enables you to experiment with different workforce strategies.
Ah, spreadsheets. The Swiss Army knife of the planning world. It's amazing what a skilled user can do with Excel (other spreadsheet software is available). But spreadsheets have serious limitations when it comes to WFM capacity planning.
With spreadsheets, demand data, organization data, shrinkages, hiring pipelines, and costs typically sit in multiple files. Reconciling them is manual, error-prone, and slow. Calculation logic lives in separate files. When a planner leaves, the logic goes with them. Formula errors compound quietly over time. Version control is informal, and there is no access management, so anyone can make changes without this being recorded.
Stand-alone capacity planning software tools are available, and these do eliminate some of the downsides of spreadsheets. They are not cheap, and they introduce an extra silo of data that must be maintained and ideally integrated with other systems.
There is a better way. By upgrading to a professional WFM capacity planning tool such as Peopleware Capacity Planning, you have 'one version of the truth'. All the relevant data is version-controlled and maintained in one place with permission-based access. The same validated calculation logic runs every time. New staff can pick up an existing plan without a lengthy handover. Unlike spreadsheets and standalone strategic planners that compare alternatives by opening separate files, Peopleware Capacity Planning compares up to three plans in graph and table views with live difference highlighting and deep links into each plan. Result: less manual work, fewer errors, and no dependency on individual knowledge.
This problem is magnified for BPOs, who are constantly bidding for new contracts, often responding to competitive RFPs (requests for proposal). Each prospective new client or new campaign requires a new staffing estimate and associated cost calculation. The bid team typically builds a new spreadsheet every time, which is time-consuming, prone to errors, and can result in estimates that are too high or too low. High estimates are unlikely to win the business. Low estimates are unlikely to be sufficiently profitable.
With a dedicated and integrated tool, BPOs can produce staffing and cost estimates faster and with greater accuracy. They can run capacity calculations for proposed campaigns directly, using existing logic and templates rather than building from scratch each time. Higher data quality and faster turnaround reduce the risk of errors in cost estimates. Result: more successful, profitable bids, fewer lost or unprofitable bids.