HUMAN RESOURCE

PLANNING
 Introduction
 Success in business is dependent on:
 Reacting quickly to opportunities
 Rapid access to accurate information

 Human resource planning (HR planning):

 How organizations assess the future supply of,
and demand for, human resources
 Provides mechanisms to eliminate gaps that may
exist between supply and demand
 Requires readjustment as labor market conditions
change
 Introduction
 The types of people employed and the
tasks they perform determine the kind of
planning necessary
 HR planning is critical for implementation of the
organization’s strategic plan
 HR policies have direct effects on profitability

 Strategic human resource management

(SHRM) means acknowledging that HR
policies/practices have critical links to an
organization’s overall strategy
 Definitions of HR Planning
“…strategy for the acquisition, utilisation,
improvement and preservation of an
organisation’s human resources”
(Department of Employment 1974)
(cited by Bratton and Gold, 2003, p194)
“…the process for identifying an organisation’s
current and future human resource requirements,
developing and implementing plans to meet these
requirements and monitoring their overall
effectiveness”
(Beardwell and Claydon, 2007, p159)
 Objectives of human resource planning
Forecast personnel requirements
Cope with changes
Use existing manpower productively
Promote employees in a systematic way

Importance of human resource planning

Create a talent pool

Prepare people for future
Cope with organizational changes
Cut costs
Help succession planning
 EFFECTIVE HR PLANNING

Effective HR Planning ensures that:

 the available talent is correctly allocated

 labour costs are controlled

 employee numbers are appropriate

 productivity is improved

 talented employees are retained

ORGANISATIONAL STRATEGY
AND HRP
 The HR Planning Process
 The four phases or stages of HR
planning:
 Situation analysis or
environmental scanning
 Forecasting demand
 Analysis of the supply
 Development of action plans
 Strategic Planning H R Demand HR Supply
Annual Employment Existing employment
Technological forecasts Requirements Inventory after
Compared
Economic forecasts Numbers application of
Market forecasts Skills Expected loss
with
Organizational Planning Occupation And attrition rate
Annual operating plans categories

Variances If
End
none

If surplus If shortage

Decisions Decisions
•Layoffs •Overtime
•Retirements •Recruitment

Human Resource Planning Process End End

 Situation Analysis & Environmental
Scanning
 The first stage of HR planning is the point at which HRM and
strategic planning first interact
 The strategic plan must adapt to environmental
circumstances
 HRM is one of the primary mechanisms an organization
can use during the adaptation process
 Without a plan to support recruitment and selection, it is
impossible to stay competitive
 The problems associated with changing environments are
greater today than ever before
 Success now depends on being a “global scanner”
 Forecasting Demand for Employees
 This phase of the process involves estimating:
 How many employees will be needed
 What kinds of employees will be needed
 Quantitative tools can help with forecasting, but it involves a
great deal of human judgment
 The demand for employees is closely tied to the strategic
direction that the organization has chosen
 Growth
 Reengineering
 Reorganization
 Forecasting Demand for Employees
 Techniques to help reduce the uncertainty
inherent in HR planning:
 Expert estimates
 Trend projections
 Statistical modeling
 Unit-demand forecasting
 Key to effective planning is accurately and
freely sharing information
 The Expert Estimate
 One or more “experts” provide the organization with demand
estimates based on:
 Experience
 Guesses
 Intuition
 Subjective assessments of
available economic and
labor force indicators
 This is the least mathematically sophisticated
approach
 The Expert Estimate
 The Delphi technique elicits expert estimates from a
number of individuals in an iterative manner
 Developed by the Rand Corporation
 Estimates are revised by each individual based on
knowledge of the other individuals’ estimates
 With the nominal group technique (NGT), individual
estimates are followed by group brainstorming
 The goal is to generate a group decision that is preferred
over any individual decision
Trend Projection

 This top-down technique:

 Develops a forecast based on a
past relationship between a factor
related to employment and
employment itself
 Example: Sales levels are related
to employment needs
Modeling & Multiple-Predictive Techniques
 This top-down approach uses the most
sophisticated forecasting and modeling
techniques
 Trend projections relate a single factor, such as
sales, to employment
 Environmental factors could be gross national
product or discretionary income
 Or, the organization may be mathematically
modeled so that simulations can be run
Modeling & Multiple-Predictive Techniques
 Markov chain analysis involves:
 Developing a matrix to show the probability of an
employee’s moving from one position to another
or leaving the organization
 The process begins with an analysis of staffing
levels from one period to another
 Markov analysis can identify the probability of
lower employee retention
 It does not suggest a solution to the problem
 Modeling & Multiple-Predictive
Techniques
 Regression analysis is a mathematical
procedure:
 It predicts the dependent variable on the basis of
factors (independent variables)
 With simple linear regression, one dependent
and one independent variable are studied
 With multiple regression, more than one
independent variable is studied
 Unit Demand Forecasting
 This is a bottom-up approach
 Unit managers analyze current and
future needs person-by-person
and job-by-job
 Headquarters totals the unit forecasts
 The sum is the corporate employment forecast
 If both bottom-up and top-down approaches are used,
the forecasts may conflict
 This can be resolved by averaging the variances
 The Delphi technique or NGT could also be used
Analyzing the Current Supply of Employees
 This phase of HR planning should answer the
question:
“How many and what kinds of employees do I
currently have, in terms of the skills and training
necessary for the future?”
 This involves more than simply counting current
employees
 The smaller and more centralized the
organization, the easier it is to conduct a skills
inventory
Important barometers of labour supply
1. Net migration into and out of the area
2. Education levels of workforce
3. Demographic changes in population
4. Technological developments and shifts
5. Population Mobility
6. Demand for specific skills
7. National, regional unemployment rates
8. Actions of competing employers
9. Government policies, regulations, pressures
10. Economic Forecasts for the next few years
11. The attractiveness of an area
12. The attractiveness of an industry in a particular place
 The Skills Inventory
 Both a skills inventory and a management
inventory:
 Identify the skills, abilities, experiences, and
training employees currently have
 Are useful for career planning, management
development, and related activities
 In its simplest form, a skills inventory is a list of:
 Names
 Characteristics
 Skills
 Contents of the Skills Inventory
 The only data available to the organization for
later use is what was designed into the system

Name Employee number

Present location Date of birth
Date of employment Job classification
Skills, knowledge, education Foreign language skill

Professional qualifications Publications

Licenses and patents Hobbies

Supervisory evaluations Salary range
 Action Decisions in HR Planning
 After the supply of and demand for workers has been
analyzed, the two forecasts must be compared
 Whenever there is a gap between the two estimates, a
course of action must be chosen
 If the supply of workers is less than the demand:
 It can be filled with present employees who are willing to
work overtime
 If there is a shortage of skilled employees:
 Train and/or promote present employees
 Recruit less-skilled employees
 Recall employees who were previously laid off
 Action Decisions in HR Planning
 Possible solutions to an employee surplus:
 Attrition
 Early retirements
 Demotions
 Layoffs
 Terminations
 Employees who are considered surplus are
seldom responsible for the conditions leading to
the surplus
Action Decisions in HR Planning
Formulating HR Plans
Once supply and demand for labour is known adjustments can be
made formulating requisite HR plans

A variety of HR plans
 Recruitment plan
 Redeployment plan
 Redundancy plan
 Training plan
 Productivity plan
 Retention plan
 Effective Human Resource Planning

HR plans must fit in with overall objectives of a firm. They

must get consistent support from top management.
Computerized human resource information systems must
be used for applicant tracking, succession planning,
building skills inventories etc. The whole exercise must be
carried out in coordination with operating managers.