Headcount vs FTE: What’s the best resource management model for you?

headcount vs fte

Have you ever found yourself in an ice cream shop, standing in front of your two favorite flavors and not knowing how to choose? You’ve already tried the samples, and now it comes down to the final decision: fudge chips or candied pecans, caramel or a strawberry swirl? You know both will deliver on flavor, but which one will make you most satisfied in the end?

While making resource management decisionheadcounts may not be as much fun as eating a scoop of vanilla fudge swirl (my personal favorite), there are still choices to be made.

One such choice is headcount vs Full-Time Equivalent (FTE), two flavors of how to allocate your company’s resources. The goal is to select a model that is cost-effective for the company and will deliver the best results for capacity planning and project management planning.

What’s the difference between these two models and how do you determine the best fit for you?

Whichever resource management model you choose, Resource Guru can help you manage your team’s time and skills more efficiently. Try it for free for 30 days.


Headcount vs FTE

When you are selecting and allocating resources for a project, you are thinking about the product you have to deliver, your budget, and how to get the greatest ROI while making the best use of time. Headcount and FTE are two different ways of managing the time and cost of project resources.


Headcount calculates each person, in one role, working the full amount of time allotted for a role, (presumably 40 hours per week). It is an ideal model for HR-level planning and scaling an organization. Companies that use headcount are focused on ensuring they have people in place to execute an overall organizational strategy. It looks at filling roles in general but doesn’t drill down to aligning people with specific skills to project tasks.

Ultimately, headcount is more challenging for project planning, because having a person in a role does not guarantee they can or should be the only resource for a set of tasks.

How to do headcount planning

Planning headcount is a highly strategic exercise that seeks to address the goals, objectives, and developments the business experiences. There are several steps included in planning the workforce, in this recommended order:

  • Define your business strategy.
  • Outline business objectives and changes within the industry – customer needs, technology innovations, regulatory changes and areas targeted for growth that have a potential impact on how you will need to design and grow your workforce.
  • Define performance metrics to determine if you are staffing teams with people who have skills that can meet current goals and advance with enterprise objectives.
  • Evaluate your current workforce and identify gaps.
  • Use gap analysis findings to develop a recruitment strategy.
  • Create a living headcount system that can remain fluid in order to adjust to business changes.

The benefits of using headcount planning

  • HR can align their workforce talent with organizational strategies and goals.
  • Gaps in the workforce can be identified, helping focus recruitment efforts.
  • Informs long-term workforce planning.
  • Creates performance goals against company metrics.

Problems with headcount planning

Headcount planning can help an organization build and scale its workforce, but there are risks.

  • The possibility of not identifying high priority skills may force a team to bring on additional resources, negatively impacting the budget.
  • It is almost impossible to plan for the ebbs and flows of business needs, which results in overstaffing and understaffing during the year.
  • There is a possible disconnect in why and how headcount is used. The business (HR) is focused on the model as a strategic tool, while project teams and process owners have to take a sharper eye to what is needed on the ground.


Full-Time Equivalent (FTE)

Where headcount considers bodies in seats and managing/scaling the workforce, Full-Time Equivalent (FTE) is a measuring stick of hours to be worked.

In project planning, it focuses on the scope of the overall project and then breaks it down to the tasks involved, how many hours it will take to get the job done, and the skills – not the individuals — needed. One role filled by one person just won’t work in FTE, because that one person may not have the skills to perform every task. So that one role is broken into parts, and the appropriate resources are allocated for the amount of time it should take to complete the activity.

You can forecast the hours needed for an entire project and diversify your resource allocation based on your needs. If you look at all milestones, tasks and deliverables for the entire project, you may determine that there are 300 hours of effort needed to get every job done. You can then break the tasks down to the hours that you want to allocate for each, and appoint FTE hours to each.

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How to calculate FTE

An FTE is the number of hours worked to equal one full-time resource. The model is used to convert the hours worked by part-timers or contractors into the equivalent of a full-timer.

There are many methods for calculating your FTE needs, but it’s ultimately a matter of simple division that is based on your structure. If your company’s workweek is 40 hours, and you need a Technical Writer on your project team for 20 hours per week, divide 20/40. The answer, 0.5, is the FTE for that technical writer role. If your full-time workweek is 35 hours, 20/35 = .57. Round that up, and the tech writer is a 0.6 FTE.

This formula can be applied using your total number of project hours, or you can really lighten your burden by using a capacity management tool.

Benefits of using the FTE model

  • If you find project priorities shifting, you can adjust your resources as needed without pulling a full-time person away from larger commitments. FTE provides visibility into the consequences of responding to those shifting priorities, like whether or not you need to hire someone new because the number of FTE doesn’t match the number of hours needed to work each week.
  • You can engage resources that specialize in specific areas; you don’t want to waste a full-time person because you end up needing to overlap resources by hiring a temporary person with a specific set of skills.
  • FTE gives transparency for when you need to hire part-time resources for short-term projects.
  • You make the best use of your budget by using resources for the tasks they’re needed for, and only for as long as it takes to get the job done.

Problems with FTE planning

While FTE does take a more realistic view of resource needs, there are project management issues that can derail the effort:

  • Senior leadership, who typically takes the strategic perspective, may not see the value of FTE vs headcount.
  • Your resource budget may be underfunded, limiting your ability to bring on the FTEs needed
  • The overall project hours may be under or overestimated

The good news is that these are all manageable issues, especially when you’re helped by a resource management tool like Resource Guru, which can help you with capacity planning and project forecasting.

Headcount vs FTE in a real world example

Let’s say you have reached a training development stage of a project. Training often consists of writing user manuals, creating modules, and scheduling employees and their workloads.

Do you need to use a full-time headcount as the resource that will focus entirely on training and all its components, or is it better to assign a few members of your team to divide and conquer?

In the headcount model, you can use one Training Coordinator to manage this whole piece. They can work a full-time role for 40 hours per week and manage all the moving pieces of a training initiative. That person represents one (1) headcount for the project.

Why this works: With one person, you can assign the entire responsibility to that resource and have them break their work into successive tasks, get all task updates from a single source , and resolve issues between individuals rather than by committee.

In the FTE model, you may use a part-time instructional designer, and engage another resource for communications and coordination of the training schedule.

Why this works: Two or more resources working simultaneously on tasks related to one area allows for more to be done at once. But be sure you take the long view and allocate people accordingly so that you manage dependencies and avoid wasting time.

Both models have their merits, but only you can decide which is right for you. Whichever you choose, resource management software can help take the hard work out of determining headcount and calculating your FTE.

Check out Resource Guru for yourself by starting a free, 30-day trial today!