What is Headcount?

The word Headcount is a Human Resources term that means “head count”. Therefore, it represents the number of employees in a company, being widely used when creating a business budget.

As curious as it may seem, one of the challenges of the Human Resources area is to align its actions with the strategic planning and translate this into numbers in the institution’s budget.

Therefore, some indicators, such as Headcount, are essential to make HR more strategic. In this post, really know what the term is and understand more about the subject.

As mentioned, in the English translation it means counting heads or counting heads. The term refers to tracking the number of people working in a particular team, area, business unit or company in general.

Headcount is one of the indicators that make the work performed by the HR department more effective. After all, it helps to understand whether the operating force is adequate to market demands.

Also, with this metric, it is possible to align the company’s objectives with the number of employees, as well as apply a more adequate strategic management to this corporate environment.

However, for it to be really effective, it is necessary to analyze it with other metrics related to the HR sector and the company in general. Only then is it possible to see the real benefits of performing Headcount.

How important is the headcount?

The truth is that a company cannot exist without its employees. But the calculation of the number of professionals within a business, as well as their distribution by the most diverse sectors, must be done strategically.

For this reason, the Headcount index in HR is so important. Since it helps to limit the number of employees, in addition to increasing the quality of their work — with the objective of achieving business goals.

Why measure Headcount?

As we have seen, Headcount is measured with a very specific purpose: to reach the company’s objectives and goals. This cannot be done without the action of a strategic HR, right? The one that relates data from this indicator with information from other categories, making the business able to obtain more detailed information about employees.

Thus, it is possible to know which teams have the greatest representation on the payroll, which specific areas of the company have the most expensive professionals, in addition to the business units with the largest teams, comparing this information with productivity and numbers from the market.

What is not considered headcount?

As it is an indicator, headcount can be confused with other indices, generating noise when monitoring metrics. Below are some common notions about the concept, but which are not adequate:

• It is an indicator that only shows the need to hire a new employee: wrong! In short, it calculates the number of workers in the company, closely evaluates the sector’s routine and requests hiring, if necessary.

• It is a difficult item to calculate and interpret: the headcount calculation is done simply, based on data from the employee list itself.

• Only company owners use headcount: wrong. The initiative counts on the active participation of HR managers and leaders, in accordance with employers.

• It is not important for the company’s revenue: if one of the decisions made based on the indicator is to hire a new employee, then yes, it impacts revenue (spending on opening the selection process and hiring the worker).

How does it work?

Headcount works based on the analysis of real-time HR information, generating strategic solutions in the organization. The calculation of this indicator is carried out based on basic data collection regarding how many people work in the company. 

This account also includes outsourced workers and service providers who act as Legal Entities within the organization. 

In the second step, HR delves deeper into this data and closely analyzes the main functions performed by each employee in the organization. Managers consider workers’ performance, their level of satisfaction and whether the team is developing.

The company is also able to measure the actions that culminate in the growth or reduction of the work team. If it didn’t grow, what caused this result? Was there excess work in the sector? Are tasks overflowing and delaying every month?

To answer these questions, guesswork is not valid. It’s better to do your research and make the right calculations.

The results are used to decide, for example, which benefits to provide to employees, considering the company’s revenue and profit.

How to calculate Headcount?

Many may find that the Headcount calculation is complex, but it is very simple and fast. So there’s no excuse for your HR department not to use this metric!

To do so, the number of employees in the organization must be counted. But it should be noted that it is not necessary to talk about the professionals’ working hours, that is, all employees are included in this calculation.

However, even though it is a very simple account, there are other issues that involve strategic and budgetary planning. Therefore, some items must be thought of when calculating and predicting the number of employees, for example, what is the company’s growth strategy?

With this information, it will be much easier, not only to calculate the number of employees that are needed in the company, but it will also be possible to create new distribution and optimization strategies for the employees’ work.

Therefore, it is essential that the Headcount is always aligned with the HR budget and also the business budget, constantly seeking to optimize resources.

How to use Headcount intelligently?

Knowing how to do Headcount is just the first step towards your company’s success. Here, the secret is to analyze if it meets the demands of your business. For this, it is necessary to verify whether the number of employees is sufficient for the organization to function.

So, if it is insufficient, see if it is in excess, generating the need for cuts or reductions. Otherwise, it may be appropriate to carry out a recruitment and selection process . In summary, it’s important to use this index wisely to achieve established goals within budgets. Here are some tips to make this easier.

1-Create an organization chart for your company

To know exactly how many employees you need in your company, it’s important to have an organizational chart at hand. This will help you understand not only the quantity, but the positions to be filled within your business.

For this, it will be necessary to conduct interviews with several managers, in addition to mapping positions. Thus, you will have a good overview of your company and an even more accurate Headcount calculation.

However, to have a very detailed organization chart, remember to specify the number of contributors in each role.

2-Review job descriptions

Now that you have the numbers in hand, you need to pay attention to the functions performed by each position. This is an important step as it ensures that the role’s workload is adequate.

So, at this time, it is necessary to carefully analyze and see if your employees are not overloaded or performing functions that are too simple and not productive. So, do this part very carefully.

Also, remember that job descriptions are useful for new hires, as this makes it easier to find suitable professionals for the position, in addition to reducing costs for your business.

3-Assess the demand for each position

With this information in hand, it is easier to perform the Headcount calculation. However, one piece of data can make your analysis even more intelligent and precise: the demand for each job position.

By knowing the routine of tasks, you will not only be able to improve job descriptions, but also analyze whether the current number of employees is really satisfying for that sector — which is essential.

So, if demand is higher than the number of employees, it’s time to hire more people or train your current ones to improve the company’s processes. Otherwise, it may be time to relocate or disconnect professionals .

4-Define next steps

After all this work, it’s time to meet with the company’s leadership to define the actions that should be taken to optimize Headcount control.

It is worth remembering that optimizing Headcount and making provision for the coming years is not the end of the process, but something necessary to create effective strategies and monitor the efficiency of your work.

Therefore, when putting your projects into practice for the company’s Headcount, also create results evaluation processes, which can even be carried out through the evaluation of other indexes.

What to consider when designing the Headcount?

The headcount control is, without a doubt, one of the most useful tools for the business organization, especially for the HR sector. But that you’ve already noticed, haven’t you?

For this reason, it is necessary to be very careful and careful when planning this metric in the corporate budget. Especially when there are ambitious medium and long-term goals. To help you in this complex task, we have separated some fundamental tips. Check out!

1-Company objectives and challenges

To calculate the HR Headcount effectively, it is necessary to ask yourself two things: where does your company want to be in the next few years and what are the challenges that keep it away from that goal?

With these questions in mind, it’s much easier to understand the risks and opportunities of the business you’re in. It also becomes simpler to measure what must be done to grow quickly and how many employees are needed for that.

Key Metrics Needed to Assess the Workforce

After defining the objectives, it is interesting to focus on identifying key metrics or Key Performance Indicators (KPI), in English. That’s because they are able to indicate the progress of your goals.

Among the main metrics, we can highlight some that relate to Headcount:

• absenteeism;
• turnover index ;
• Profitability per employee;
• Talent retention index ;
• Average length of time with the company;
• Investment in training;
• Employee satisfaction index;
• overtime x hours worked ratio;
• Payroll expenses.

With these indexes, it is possible to analyze not only the number of employees needed to suppress negative results, as well as the quality of employees who are already hired.

Thus, it is simpler to find your company’s difficulties, and it is even possible to see which sectors need more or less employees, in a very specific way, in addition to those that need training.

current workforce

It’s almost impossible to make a proper Headcount projection if you don’t know your company’s workforce in depth.

For this reason, it is extremely important that, first of all, you know your company’s employee plan and also the functions that are performed in it, at the most diverse levels.