Strategic Human Resource

Planning
Dr. Farhana Ferdousi
Chapter outline:
• Overview of Human Resource Planning
• Steps of Human Resource Planning
• Objectives of Human Resource Planning
• Forecasting the supply of human resources
• Forecasting the demand of human resources
Overview of Human Resource Planning
• Human resource planning is a process that identifies current and
future human resources needs for an organization to achieve its
goals. Human resource planning should serve as a link
between human resource management and the overall strategic plan
of an organization.
• Robbins (1998) defines HRP as “The process by which an organization
ensures that it has the right number and kind of people at the right
places, at the right time, capable of effectively and efficiently
completing these tasks that will help the organization achieve its
overall objectives”.
Steps of Human Resource Planning
• Human Resource Planning encompasses the following steps:
• Interfacing strategic planning and scanning the environment
• Taking an inventory of the company’s current human resources.
• Forecasting the demand for human resources
• Forecasting the supply of human resources both from within the organization
and from the external labor market
• Comparing the forecast of demand and supply
• Planning the actions needed to deal with anticipated shortages or overages
• Feeding back such information into the strategic management process
Strategies for Managing Employee Shortages
and Surpluses
Strategies for managing shortages Strategies for managing surpluses
• Recruit new permanent employees • Hiring freezes
• Do not replace those who leaves
• Offer incentives to postpone
retirement • Offer early retirement incentives
• Reduce work hours
• Rehire retirees part-time
• Voluntary severance, leaves of absence
• Attempt to reduce turnover • Across-the-board pay cuts
• Work current staff overtime • Layoffs
• Subcontract work out • Reduced outsourced work
• Hire temporary employees • Employee training
• Switch to variable pay plan
• Redesign job processes so that fewer
employees are needed • Expand operations
Objectives of Human Resource Planning
There are five major objectives of HR planning.
• Preventing overstaffing and understaffing
• Ensure the organization has the right employees with the right skills
in the right places at the right times
• Ensure the organizations is responsive to changes in its environment.
• Provide direction and coherence to all HR activities and systems
• Unite the perspectives of line and staff managers
The HR forecasting
• HR forecasting is the heart of the HR planning process; can be defined
as ascertaining the net requirement for personnel by determining the
demand for and supply of human resources now and in the future.
Determining HR Demand Determining HR Supply

1. Index/trend analysis 1. Skills and management

inventories
2. Experts forecasts
2. Succession/ replacement
3. Delphi technique analysis
4. Nominal group technique 3. Markov models
5. HR budgets 4. Linear programming
6. Envelop / scenario forecasting 5. Movement analysis
7. Regression analysis 6. Vacancy/ renewal models
HR demand forecasting techniques

Trend analysis Ratio Analysis

• Trend analysis is a quantitative • Ratio analysis is a quantitative
approach that attempts to forecast
future personnel needs by method of projecting HR
extrapolating from historical demand by analyzing the
changes in one or more relationship between an
organizational indices.
operational index and the
number of employees required.
• Trend analysis involves collecting
and evaluating data to identify
patterns of information that might
affect the future.
HR demand forecasting techniques

Regression Analysis Simple regression prediction model

• Regression analysis presupposes • Y= A+ BX
that a linear relationship exists • Y= the dependent variable (HR
demand, i.e., number of personnel
between one or more required)
independent (casual) variables, • A= Constant (intercept)
which are predicted to affect the • B= the slope of the linear
dependent (target) variable-in relationship between X and Y
this instance, future HR demand • X= the independent/ casual
for personnel (i.e., the number variable (e.g., level of sales,
of personnel). production output)
Simple regression prediction model

For $ 8 million of sales (x=8) For $ 10 million sales (X=10)

• Y= A+ BX= 0.82+9.17 (8)=74.18 • Y= A+ BX= 0.82+ 9.17 (10)= 92.52
• Or 74 marketing staffs are • Or 93 marketing staffs are
required required

For every 1 million increase in sales, our marketing staff increased by

approximately 9 (9.17) personnel., indicating the linear relationship between two
variables.
Delphi Techniques
Delphi technique is a process in which the forecasts and judgments of
a selected group of experts are solicited and summarized in an
attempt to determine the future HR demand.
Nominal Group Technique
• Fist, unlike in the Delphi technique, the group
• Nominal Group Technique (NGT) does, in fact, meet face to face and interact, but
only after individual written, preparatory work has
is a long-run forecasting been done and all the demand estimates (idea
generation) have been publicly tabled, or written
technique utilizing expert on a flip chart, without discussion.
assessments. It differs from • Second, each demand estimate is considered to
be the property of the entire group and to be
Delphi technique in several impersonal in nature, which minimizes the
potentials for dominance, personal attacks and
important respects. defensive behavior in support of estimates
presented in the group forum.
• Finally, the expert forecast is determined by a
secret vote of all group members on their choice
of the tabled forecast. The estimate receiving the
highest ranking or rating during the voting process
is deemed to be the group’s forecast.
HR Supply forecast
• Skill inventories and • Typically, a skills inventory contains information for
each individual on the following areas:
management inventories • Personal information (e.g., name, employee
number, job classification, compensation band,
contain information on the emergency notification and telephone number);
capabilities of organization’s • Education, training and skill competencies (e.g.,
certificates, licenses, and diplomas or degrees
employees. completed, including the area of specialization )’
• Work history (e.g., date of hire, seniority, current
job and supervisor, and previous job held in the
• A skills inventory is an organization and the dates associated with them);
individualized personnel • Performance ratings (i.e., a numerical score of the
employee’s history of performance in jobs in the
record held on each employee organization)
• Career information ( e.g., future jobs desired by
except those currently in employee and those recommended by supervisors);
• Hobbies and interests (including community and
management or professional volunteer associations), and willingness to relocate.
positions.
HR Supply forecast
• Management inventory is an individualized personnel record for
managerial, professional, or technical personnel that includes all elements
in the skills inventory with the addition of information on specialized
duties, responsibilities and accountabilities. Such as:
• A history of management or professional jobs held
• A record of management or professional training courses and their dates of
completion
• Key accountabilities for the current job
• Assessment center and appraisal data
• Professional and industry association memberships.
•
Succession planning

• Succession planning is a process for identifying and developing new

leaders who can replace old leaders when they leave, retire or die.
Replacement charts
• Replacement charts are a forecasting technique used in succession
planning to help companies visualize key job roles, current employees
and existing and future vacancies. Positions are mapped alongside
information such as potential replacements, gender and promotion
potential.
Markov analysis

• A Markov model, also referred to • When considering employee

as a probabilistic (using movement patterns in the
probabilities of various movement organization, an employee has five
options) or stochastic model, possible options:
determines the pattern of • Remaining in the current job
employee movement throughout • Promotion to a higher classified jobs
an organization’s system of jobs. • A lateral transfer to a job with a
similar classification level
• Markov analysis produces a series • Exit from the job (e.g., termination,
of metrics that detail the various layoff, voluntary leaving, by the
patterns of movement to and from employee)
the wide variety of jobs in the • Demotion (which is relatively rare)
organization.
Markov analysis
• The following figure presents a very
simple Markov/ transition matrix.
For a line worker, for example,
there is a 20% probability of being
gone in 12 months, a 0%
probability of promotion to
manager, a 15% probability of
promotion to supervisor, and a 65%
probability of being a line worker
this time next year. Such transition
matrices form the bases for
computer simulations of the
internal flow of people through a
large organization over time.