Workforce Norm Analysis: Establishing Headcount Requirements with Data

Workforce norm analysis is the HR practice that establishes with data how many people an organization needs in each position to carry its current volume of work. In organizations where headcount requests rest on the declarations of department heads, HR teams have no independent reference against which to assess the justification for a request. A norm analysis produces that reference: workload is measured for each position, measurement results are converted into a capacity calculation, and the gap between current headcount and requirement is shown numerically.

The perception that the exercise is carried out solely to reduce headcount is the principal factor complicating participation in practice. In fact the output of a norm analysis runs in two directions: excess capacity becomes visible in some areas, and unmet need in others. In a significant proportion of organizations the picture emerging after the exercise is one in which total headcount is largely preserved but its distribution changes. Framing the purpose of the exercise correctly at the outset is therefore as decisive as the method itself.

The relationship between workforce norm analysis and workforce planning also needs to be distinguished. The norm shows the headcount level corresponding to today's volume of work; workforce planning covers forward-looking variables such as growth targets, technology investments and retirement projections. The norm analysis forms the starting point of workforce planning; projections made without that starting point rest on an unverified current state. Combining the outputs of the two exercises in the same table allows both today's gap and the following period's requirement to be seen together.

This article addresses the implementation steps of a workforce norm analysis, from preparation through calculation method to converting results into headcount decisions.

Preparation and Establishing the Preconditions

A norm analysis does not produce reliable results when it is launched before the ground it rests on is ready. The first component of that ground is current job descriptions. Workload cannot be measured without knowing which duties the position carries out; if descriptions are out of date, the measurement reflects an old structure rather than actual work. For this reason a norm analysis is often planned as the continuation of a job analysis and job description exercise.

The second component is process maps. Without knowing in how many steps a piece of work is completed, which steps are carried out in which position and whether waiting times exist between steps, it is not possible to separate how much of the measured time is actual work and how much is process-related loss. In areas without process maps, a simple flow-mapping step is added to the scope of the exercise.

The third component is work volume data. Measurement gives the time spent per unit of work; the headcount requirement is calculated by multiplying that time by periodic work volume. Volume data such as transaction counts, order quantities, application numbers or maintenance orders needs to be accessible for a period of at least twelve months. Short-period data conceals seasonal fluctuation and leads to the headcount requirement being calculated lower or higher than it is.

The fourth component is communicating the scope and purpose of the exercise internally. Because there are steps resting on the declarations of employees and managers, how the exercise is perceived directly affects data quality. Sharing the purpose, scope, method to be used and the decisions in which results will be used in writing reduces the reservations arising during measurement. The announcement being made by senior management, with HR positioned as the owner of the method, allows the exercise to be perceived as an organizational agenda item.

Setting up the structure that will run the exercise also belongs to the preparation stage. A norm analysis is not work HR can complete alone; liaison people need to be designated in the units to be measured, a technical participant with process knowledge on the production or operations side needs to be included, and a decision body to which results will be presented needs to be defined. Failing to establish this structure at the outset leaves method disputes arising during measurement unresolved and extends the exercise.

Another topic addressed in preparation is verification of current headcount data. Differences may exist between the position distribution in payroll records and the actual working arrangement of units: temporary assignments, personnel working in one unit but appearing in another's headcount, and extended leave are sources of these differences. A norm calculation compared against an unverified current headcount table produces a misleading gap.

The final decision at the preparation stage is which units the scope will cover. In units with countable output such as production, operations and customer services, measurement is comparatively straightforward. In support units and project-based teams the definition of output becomes more difficult and different methods are required. It is not compulsory for the scope to cover the whole organization at once; starting with units whose output is measurable and moving to support units once the method is settled is the sequence more often preferred in practice.

Workforce Norm Analysis: Measurement Methods and Selection Criteria

The methods used to measure workload differ according to the nature of the position. Direct time measurement can be applied to work made up of repetitive and standard steps, while variable and decision-intensive work requires different approaches.

The principal measurement methods used in practice are as follows:

•     Direct time measurement: The steps of the work are observed on site and the time taken for each step is recorded. It gives the most reliable result in production, warehouse and standard-transaction operational positions; on the other hand it requires time and resources.

•     Employee log form: The position holder records the duties they carry out and their durations over a defined period. It is a workable method in broad-scope exercises; because it depends on record-keeping discipline, it needs to be supported by sampling checks.

•     Random observation: Instantaneous observations at defined intervals record which activity employees are engaged in, and the time distribution is estimated statistically. It is used in office and support units to establish the proportional distribution of work types.

•     Expert estimation: In structured sessions with experienced position holders and managers, a standard time is determined jointly for each task. It is preferred in positions that are few in number and variable in content.

•     System data analysis: Average transaction times are calculated from time stamps obtained from the systems in which transaction records are held. Where the data infrastructure is suitable, it produces results that are both fast and independent of declaration.

The decisive criterion in method selection is the degree to which the position's work content is standardised. In positions with a high degree of standardisation, direct measurement and system data give more suitable results; in those with a low degree, log forms and expert estimation do. It is normal for different methods to be used for different units within the same exercise; what matters is that the times obtained are calculated against the same definition.

Measurement in support units is a separate topic. In units such as accounting, HR, information technology and administrative affairs, even where output is countable, the complexity of duties differs. In these units a simple calculation based on transaction counts equalises different difficulty levels falling under the same transaction heading. The workable approach is to group transactions by complexity level and determine a separate standard time for each group.

A matter to attend to in measurement is separating the components of the concept of time. The total time recorded for a task includes the actual execution time of the work, preparation and changeover times, and waiting times together. The standard time to be used in the headcount calculation is the sum of actual execution and preparation times; waiting times are transferred to the process improvement heading. Where this separation is not made, losses arising from the process are calculated as headcount requirement and the exercise reaches the wrong conclusion.

Which performance level the measurement will take as its basis is also decided in advance. Differences in time arising from experience and method exist among employees carrying out the same task. Taking the fastest employee's time as the basis creates a standard that cannot be reached; taking the slowest employee's time calculates the headcount requirement higher than it is. The approach accepted in practice is to take the average of the times of employees who have passed the experience threshold. Recording this choice together with its rationale increases the defensibility of the results.

The length of the measurement period also determines the representativeness of the result. Measurement carried out on a single day reflects that day's distribution of work and leaves out duties with weekly or monthly cycles. Where the log form method is used, a period of two to four weeks is sufficient for most positions to capture the variety of duties. Duties with monthly and annual cycles are recorded separately and added directly to the annual load calculation.

Verifying measurement results is also part of the method. Where more than one position carries out the same work, the closeness of the times obtained is checked. Marked deviations indicate either measurement error or a difference in practice; in both cases they should not be included in the calculation without the cause being investigated.

Calculating the Headcount Requirement

Once measurement is complete, the headcount requirement is calculated. The basis of the calculation is simple: the total annual workload of a position is divided by the annual net working capacity of one person in that position. The reliability of the result depends on two variables being determined correctly.

The first variable is total annual workload. The standard time determined for each task is multiplied by that task's annual repetition count, and the values obtained for all the position's duties are summed. The item not to be omitted in this calculation is duties arising at irregular intervals. Period closings, audit preparations, annual reporting and project participation are invisible in the daily flow but can form a significant proportion of the annual load.

The second variable is net working capacity. Weekends, public holidays, annual leave and average absence are deducted from the annual calendar time. From the remainder, the share of time falling outside direct work is also deducted; meetings, training, breaks and information sharing fall within this scope. Determining this share realistically directly affects the accuracy of the calculation. A calculation made on the assumption of one hundred per cent utilisation produces a headcount result that cannot be delivered in practice.

It should also be taken into account that the calculation differs in units working shifts. In a shift arrangement the headcount requirement depends not only on workload but also on the requirement for uninterrupted operation. If a station needs to be kept open twenty-four hours, a minimum headcount is compulsory even where workload is low. In such units the norm calculation is determined by comparing the workload-based result with the minimum headcount required by the shift arrangement, and the higher value is taken.

In units showing seasonal fluctuation, a calculation based on the annual average produces a headcount picture that is insufficient in peak periods and excessive in low periods. In these units the calculation is separated by period, and meeting peak-period requirements through temporary employment, flexible working arrangements or inter-unit support is assessed. The norm in this case defines the fixed core headcount; the additional requirement linked to fluctuation is managed as a separate planning item.

The figure emerging from the calculation is often not a whole number. How fractional results are interpreted is a decision resting on the organization's preference. Where a requirement of 2.3 people is calculated for a position, the options of full-time employment of a third person, transferring the remaining load to another position, part-time working or outsourcing are assessed. Making this assessment together with the department head increases the workability of the decision.

A frequently encountered situation at the calculation stage is a marked difference between current headcount and the calculated requirement. The cause of this difference is not always headcount surplus or shortage. Repetitions in the process, work that could be handled through systems being done manually, the same data being entered at several points, and an excess of approval steps are structural factors that raise measured times. Covering these factors in the gap analysis allows the exercise to produce not only a headcount figure but also a process improvement output.

Converting Results into Decisions and Sustaining the System

The output of a norm analysis is not a headcount decision in itself. The calculated requirement turns into a decision when assessed together with the organization's growth plan, budget constraints and labour market conditions. HR's role at this stage is to present the numerical result and its assumptions transparently, and to form the rationale for the decision together with management.

Presenting three pieces of information together allows the decision to be taken soundly: current headcount by position, the calculated requirement, and an explanation of the source of the gap. Where only the figure is presented, discussion shifts to the reliability of the method; where the explanation is added, discussion focuses on the action to be taken.

The level of detail the presentation will contain is also taken into account. In a presentation to senior management, unit-level total gaps and the prominent headings are sufficient; position-level detail is left to second-stage discussions with department heads. Sharing all the detail in a single session causes discussion to disperse across individual positions and leaves the overall picture unseen.

Not making dismissal the first option in areas where excess headcount is identified directly affects how the exercise is received internally. Options such as internal transfer, filling newly opened positions from existing headcount as a priority, task enlargement, and not filling gaps arising through natural attrition both make the exercise easier to accept and preserve internal knowledge. In areas where a headcount requirement is identified, linking the recruitment plan to the output of the exercise makes requests easier to justify.

For the exercise to be sustainable, results need to be converted into a headcount planning table. This table contains, for each position, the norm figure, the current number, open positions and planned changes. New headcount requests are assessed against this table; requests above the norm are submitted together with the justification of an increase in work volume or a new area of duty.

Linking the output of the exercise to the budget process brings results onto the decision ground. Once the norm table becomes one of the inputs to annual budget preparation, the justification for personnel costs becomes visible at position level. Exercises completed at times unconnected to the budget period may miss the decision moment that would carry results into practice; the timetable of the exercise is therefore aligned with the budget preparation period at the planning stage.

How results are shared with unit managers also affects implementation. Rather than announcing the table collectively in one go, addressing each unit's own results with its manager first allows objections regarding assumptions to surface before the decision. Showing the measurement data and calculation steps openly in these discussions makes the result debatable but traceable.

Norm figures have a limited validity period. Changes in work volume, process improvements, new system implementations and changes in organizational structure alter the assumptions of the calculation. An annual review is an appropriate frequency for most organizations; however, where volume change exceeds a defined threshold, the norm calculation for the relevant unit needs to be renewed in the interim. Targeting the review at the areas where change has occurred rather than the whole organization keeps the exercise at a sustainable level of effort. Addressing headcount planning alongside structural change programmes within corporate transformation solutions allows the two exercises to produce outputs that feed each other.

At Kaan Böke Management Consulting, we run workforce norm analyses from the selection of the measurement method through the design of the capacity calculation to converting results into a headcount planning structure. With 35+ years of corporate experience and a 25+ year C-level leadership perspective, we deliver strategic and actionable solutions. To establish your organization's workforce requirement with data, you can get in touch with us.

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