The most costly part of operating a business is paying for labor in terms of wages, offering benefits and bonuses and developing training programs, which is why calculating manpower levels is so important. Many companies use a demand forecasting program that takes into consideration the past number of employees, the number of employees laid off and pending retirements. While the software can make a projection for current demand, it may not be applicable given the overall strategy of the company. To be sure, consider seasonal spikes, hourly needs, scheduled vacation times and market trends when calculating manpower levels. Strategic human resource management is important for a company that wants to minimize costs and improve its profitability.

Things You Will Need
  • Future order projections

  • Job descriptions

  • Processing times

Step 1.

Examine the macro and micro levels of your business to begin understanding the manpower levels needed to operate efficiently. The macro levels of a business are broken down into functional group categories such as executive leadership, customer service, sales, operations, finance, supply chain management and human relations.

The micro levels of a business are broken down into job descriptions and job skills needed to perform a particular job. Define what the customer expectation is for your lead time, and study whether you are on time, late or early. If you are not meeting customer expectations, you may be losing sales, which means you need to examine your operating methods and find a way to meet the customers' needs. Right-sizing the human intellect aspects of a company is not easy to do and can change periodically based upon the life cycle of a business and market trends. But you should be able to successfully calculate manpower levels using these steps.

Step 2.

Smaller businesses tend to employ people who can perform several job functions, whereas larger companies tend to employee people who are capable of performing a specific set of tasks over and over again on massive amounts of work. Determine your operation’s strategy regarding staffing needs in general.

Step 3.

Look at the anticipated order stream of the business and review bottleneck areas that tend to back up and affect the overall process. Examine the backlog of the business and determine if customer satisfaction or operating profits are being affected because the business is too slow to meet customer needs. If there are employees who are idle more than 50 percent of the time, review job descriptions and see if there is a way that other employees or a contractor can do this work. Or determine if there is another job that needs to be done that the employee can handle for the other 50 percent of his work time and avoid hiring someone else.

Step 4.

Review company objectives for supporting core and non-core work activities. Some companies choose to hire temporary workers for seasonal spikes. Others opt to outsource such things as payroll, benefits administration and even customer service to alleviate the need to hire permanent full-time workers and provide them health benefits, retirement plans and overtime.

Some companies consider themselves to be training companies where they expect higher turnover, lower wages and less-skilled workers. Other companies may invest heavily in their employees through education and training because they are in a highly technical field. Strategic human resources management starts with the company vision and trickles down into how employees are hired, trained, retained and utilized.

Union environments may be restrictive in terms of how employees are categorized, paid and managed. Negotiate a labor contract that allows flexibility to keep your business operating efficiently.

Step 5.

Employee utilization rates are one way a company can assess the effectiveness of its staffing, but be aware of pitfalls such as downed equipment or peak times that can interfere with this projection. For example, if you have a fast-food business and you serve 200 customers a day, you might project that it takes a half-hour to service each customer from beginning to end. That might include taking a customer order, processing the order, getting paid for the order and cleaning up or maintaining a public area after the customer has gone.

Step 6.

At the aggregate level, you might project that with 200 customers each taking a half-hour to serve, you will need manpower to cover 60 hours' worth of business during an eight-hour span. By dividing eight hours into the total time required (60 hours), you find you need 7.5 people to handle this work. However, using a straight utilization rate such as this may fail to give you all the details you need to plan appropriately. You may find that between 11 a.m. and 2 p.m. your business peaks, while at other times during the day your are less busy.

Instead of using an eight-hour window, consider using a four-hour window for your peak times with the same calculation. Processing 200 customers in four hours at a half-hour per transaction still yields a total of 60 man-hours, but when 60 is divided by four hours, you find that 15 people are needed.

Step 7.

Keep in mind that perfecting the upfront process without adjusting the middle or the end of the process won't give you what you need. You want to minimize waste. During peak times, have workers stand in one place and do one task before passing the order off to the next person, who also does one task and passes it on. This will eliminate people tripping over each other.

It is best to detail processing time at each step (taking the order, providing change and a receipt, cooking the order, serving the order, cleaning up), and include in the calculation the queue time (wait time), setup time and downtime of people or machines. This way, you can better understand where your staff needs to be during the process. You want the customer orders to flow evenly across the processes so one station or area doesn't get jammed up.


Not having enough of the right employees can mean problems with meeting quality and production demands. Having too many employees can increase overhead costs. Having some employees that are overworked and others that have too much idle time can cause problems with morale and employee turnover.

Over-production and keeping employees "busy" for the sake of keeping them employed can be costly. Some companies use employee downtime for education or cross-training opportunities. Others provide flexible work schedules that allow employees to take work time when it is available and still be on call when they are needed.

For highly skilled workers, fine-tune training, hiring and bonus structures to retain the best employees and minimize costs associated with turnover.