Why capacity planning is important for hiring teams—even if hiring is slow
April 10, 2023
“I have some difficult news to share. We’ve decided to reduce our workforce by approximately 12,000 roles. […] The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here.”
On January 20th, Google CEO Sundar Pichai sent an email to the company’s workforce that included the above lines. The layoffs may not have surprised anyone in the tech world, but it was still a humbling admission from one of the top players in tech. And Google is far from the only company doing an about-face on its headcount strategy right now: While tech may be the leading contributor to the largest wave of layoffs our country has seen since 2009, other sectors are shedding staff as well. From 3M to Johnson & Johnson to Goldman Sachs, big names that have been the underpinning of our economy are preparing for tighter times.
However, the jury is still out on whether the U.S. is actually in a recession. And even if it is, the data suggests that layoffs aren’t a good way for businesses to save money. There’s no changing what’s already happened at companies that have introduced reductions-in-force, but layoffs should be a time for leaders to reflect on what they can do to better protect their workers.
The economy always plays a role in companies’ headcount adjustments, and that’s typically beyond the control of talent acquisition professionals. But you can control how much value your team delivers, no matter the hiring landscape. And this is where capacity planning comes in. A slowdown is a perfect time to create a roadmap toward sustainable hiring practices. When business picks up again, your company will be ready to hire strategically, focusing on roles and talent that have a better chance of sticking around the next time the economy turns.
What is hiring capacity planning? The hiring capacity planning process determines how many positions your talent acquisition team can reasonably fill each quarter. An accurate view of your company’s hiring capacity is essential for efficient hiring practices.
Capacity planning is about your business’ future (not its present)
It’s a mistake to think capacity planning is only important for a company that’s actively hiring. Many teams presume there’s no point in looking at resource allocation when there isn’t work to allocate your resources to. This is right-now thinking, and it’s easy to fall into during times of crisis.
The number of job reqs you have open right now is not indicative of the number you will have in the future—and your team members will have to fill those demands when they arise. Ignoring capacity planning during a hiring freeze or slowdown is like skipping your weekly grocery run because you’re planning to pick up takeout on your way home. You might not feel the consequences right away—in fact, you might have a lovely dinner! But when you don’t have breakfast the next morning, you’ll regret your previous choices.
Capacity planning helps you ramp up faster
A hiring lead who knows how many new employees their team can bring in each month is essential to responsible growth. Big booms (like the one tech companies saw in early 2020) bring too many job openings for even the most efficient and hardworking talent acquisition teams to fill on the requested timeline. Talent ops teams also tend to start the year on the back foot: They don’t receive headcount plans until they’re finalized, which means there’s no time to prepare for the number of hires they’ll need to make. Recruiters struggle to catch up with hiring managers’ requests, and employees are constantly trying to catch up with deadlines set for a much larger workforce.
A forward-thinking company starts its headcount planning by asking talent ops leaders what their hiring capacity is. Leaders who don’t take this step are setting up their organization for a rough few months of scaling.
There are two ways to handle hiring requests that go beyond your team’s capacity. The first is to work overtime and try to move candidates through the funnel as quickly as possible. Your team is guaranteed to burn out, you may end up hiring worse candidates because you’re in a rush, and you’ll still fall behind, leaving team leads without the talent they need to scale.
The second response is to scale your recruiting team. This is a better option for you, because it protects everyone from overwork and gives you the space to hire well instead of hiring quickly. However, you’ll need to start the company’s hiring push by onboarding and ramping up new recruiters, which means you’ll likely end up at least a quarter behind when it comes to hiring for other teams.
These are concerns your company is likely to have when you move to scale unless you let recruiting capacity drive your hiring efforts. The only “solution” to the problem above is to not let it happen—and you’re in a perfect place now to prevent a future headache.
Capacity planning makes downturns less painful
Most leaders will agree that layoffs should be a last resort: they reduce morale (and productivity) and may also cost you loyal customers. Companies with a strong hiring capacity planning process are likely to lay fewer employees off (or avoid layoffs altogether) when the economy slows down. Businesses that aren’t so strategic find themselves with an inefficiently organized workplace full of redundancies. This can happen to recruiting teams that expanded quickly when they needed to hire beyond their capacity, and it can happen to well-meaning managers who find themselves missing a vital skillset when their hiring needs can’t be met right away.
Here’s how that happens: A company that asks its hiring team to deliver beyond its current capacity burns out its recruiting organization and ends up constantly moving workers around to backfill the most vital positions. When things finally settle down, managers no longer need to shift talent between projects based on whatever is most urgent. Everyone gets reassigned to the projects and teams they were initially intended to be on.
However, there are now other new employees on that team—because the initial hires weren’t there to fulfill the managers’ needs. That’s when the layoffs start. Teams are downsized until the next growth period begins, and the cycle repeats itself.
This is likely the reason for the mass layoffs at firms like Google, Morgan Stanley, Dell, McKinley, Ford, and more. It’s a prime example of why capacity planning is important for companies that have plans to scale in the future.
Capacity planning is a good use of resources when you’re not hiring
Your team should take advantage of hiring slowdowns and freezes to rework its capacity planning process so your business can hire at maximum effectiveness when the market changes again. We believe most staffing inefficiencies happen because companies don’t have time to do better. After all, it’s difficult to fit in capacity planning when you already have a full slate of job reqs.
The natural solution is to do your capacity planning when you don’t have too much on your plate. Teams that are spending less time on hiring have more time to dig into their hiring data and learn from it.
Hopefully, you already have a tool like Gem with built-in forecasting tools. If you don’t, you can gather the data manually. Find your passthrough rates (for each department or talent vertical) to determine how many candidates it takes to get a hire. Look at your average time to hire to figure out how long it takes to get a candidate through your hiring funnel. And look at your recruiting team’s historical output to determine how many candidates each person can reasonably add to your pipeline.
Companies that don’t have any of this data can start an approximate recruiting capacity model based on market benchmarks and the individual experience of your recruiters. But if you’re in this boat, it’s smart to set up a tool (like Gem!) that will track and analyze your data for you.
Your talent ops heads can also use this time to work with leadership to create a headcount plan based on your company’s hiring capacity. Spotting a mismatch between hiring capacity and headcount requests ahead of time allows you to reassess internal roadmaps and create a plan for responsible growth.
Good hiring is a resources game
Capacity planning adds structure to your hiring process and helps you understand what responsible goals and benchmarks look like. With these two elements in place, you can make strategic hires. And strategic hires are good hires.
Companies run into trouble when they don’t set guidelines for themselves (and follow them). A company’s hiring needs, if left unchecked, will almost certainly diverge from its talent acquisition team’s capacity. You’ll end up caught in a cycle of underhiring, overcorrecting, and then performing layoffs that will ultimately hurt your ability to retain employees and innovate.
If there’s anything we’ve learned over the last few years, it’s that we don’t know what uncertainty we’ll be facing next. Efficiency has become a major consideration for leaders in light of recent economic changes. Right-now thinking tells you it’s a waste of resources to invest in creating a recruiting capacity model at a time like this.
However, when you’re thrown headfirst into the next ramp-up period, it will be hard to justify why you didn’t make time for capacity planning. So roll up your sleeves, dive into the data, and get ready to make your next round of hires your most successful yet.
Learn how to use your hiring resources effectively. Get The recruiter’s 8-step guide to capacity planning and start creating a hiring capacity model today.
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