Employee Resourcing – LLC 4124

UNIT 2 HUMAN RESOURCE PLANNING

Unit Structure
2.0 Overview
2.1 Learning Outcomes
2.2 Introduction
2.3 Definition of Human Resource Planning
2.4 The Process of Human Resource Planning
2.5 Aims of Human Resource Planning
2.6 Forecasting Human Resource Requirement
2.6.1 Demand Forecasting
2.6.2 Supply Forecasting
2.6.3 Analysis
2.6.4 Action Plan
2.7 Cost
2.8 Human Resource Forecasting Techniques
2.8.1 Zero Based Forecasting
2.8.2 Bottom Up approach
2.8.3 Use of Mathematical Models
2.8.4 Simulation
2.9 Adapting Traditional Human Resource Planning
2.9.1 Contingency Planning
2.9.2 Succession Planning
2.9.3 Skills Planning
2.9.4 Soft Human Resource Planning
2.10 Summary

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2.0 OVERVIEW

This Unit will give you an insight of the concepts of Human Resource Planning. The aims,
process and forecasting techniques will be explained.

2.1 LEARNING OUTCOMES

By the end of this Unit, you should be able to do the following:

1. Explain the concept of Human Resource Planning.

2. Critically discuss the process of Human Resource Planning.

3. State the aims of Human Resource Planning.

4. Explain the forecasting of Human Resource.

5. Describe the Human Resource Forecasting Techniques.

2.2 INTRODUCTION

Organisations are presently operating in a rapidly changing and turbulent environment and
managers have to optimise the use of the available employees in order to be competitive. Human
Resource Planning (HRP) attempts to reconcile an organisation’s need for human resources with
the available supply of labour. HRP also results in matching people to the job, that is, the right
people doing the right thing. HRP can help management in making decisions in areas as
hereunder:

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• Recruitment.

• Avoidance of redundancies.

• Training of staff.

• Management development.

• Estimates of costs.

HRP needs continuous re-adjustment because the goals and objectives of an organisation are not
stable due to uncertainties in the environment. Also, many independent variables are involved
namely, consumer demand, new legislations, population changes, competition from rival firms
and foreign competition.

2.3 DEFINITION OF HUMAN RESOURCE PLANNING

Human Resource Planning refers to an attempt to estimate the numbers and kinds of employees
the organisation will need in the future in order to realise its strategic goals and the extent to
which the demand is likely to be met.

According to Snell and Bohlander (2007:48), Human Resource Planning is “the process of
anticipating and providing for the movement of people into, within and out of an organisation”.

Nel et al (2008:216) maintains that HR Planning “ensures that a predetermined amount of

employees with appropriate skills, knowledge and abilities are available at a specified time in
the future ... HR planning therefore systematically identifies what is needed to be able to
guarantee their availability”.

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2.4 THE PROCESS OF HUMAN RESOURCE PLANNING

Organisations engage in the process of Human Resource Planning (HRP) to determine the
demand and supply of human resources so as to gain or maintain. In short, HRP is the process of
identifying the HR needs and the ways of meeting those needs.

It is important to note that needs are unlimited and scarce, therefore, the planning process is very
much concerned with prioritising the needs.

EXTERNAL ENVIRONMENT

INTERNAL ENVIRONMENT

Strategic Planning

Human Resource Planning

Forecasting Human Comparing Requirements Forecasting

Resource Requirements and Availability Human Resource
Availability

Demand = Supply Surplus of Workers Shortage of

Workers

Recruitment

No Restricted Hiring, Reduced

Hours, Early Retirement,
Action Layoffs, Downsizing Selection

Figure 1: The Human Resource Planning Process

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As we have seen above, the Human Resource Plan will depend on certain factors namely;

 The Strategic Planning

Strategic planning refers to the process of determining the overall organisational purposes and
objectives and how these can be achieved through Human Resource Planning, which is the
process of systematically reviewing human resource requirements to ensure that the required
number of employees, with the required skills are available in the organisation.

 Comparing requirement and availability

This phase of the HR planning process involves matching the forecasted Human Resource (in
terms of future requirements) with the existing HR (the available employees).

 Determining the surplus or shortage of employees

Once the assessment has been made, there is a need to determine whether the organisation has a
shortage or surplus of employees or the demand is just equal to the supply.

In case of a surplus in the number of employees, appropriate action should be taken, namely;
restricted hiring/recruitment, reduced hours, early retirement, layoffs.

In case of a shortage of employees, there is need to go for a proper recruitment and selection
process, obtain the right quantity and quality of new employees.

 The Internal and External Environment

Conditions in the internal and external environment can change quickly and, hence, the human
resource planning process must be continuous. Changing conditions may affect the entire
organisation thereby requiring extensive modification of forecasts. HR planning enables
managers to anticipate and prepare for changing conditions and also allows flexibility in the area
of human resource management.

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Activity 1

(i) Explain your understanding of Human Resource Planning.

(ii) What factors would you like to take into consideration while devising the HR plan in your
organisation?

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2.5 AIMS OF HUMAN RESOURCE PLANNING

Planning of Human Resources is very important as it enables the optimum use of the most
valuable asset of an organisation in the attainment of its objectives and goals. The aims of HR
planning has been summarised below:-

• Attract and retain the right quantity and quality of employees (in term of qualification,
knowledge, skills, expertise and attitude).

• Optimising the use of the available HR (matching people with the job and adopting
flexible systems of work).

• Anticipation of potential problems of surpluses or deficits of employees (e.g., the world

economic recession).

• Develop a well trained and flexible workforce, making employees become multi-skilled
and multifunctional. Thus, the organisation has a greater ability to adapt to the fast and
constantly changing environment. It enhances the use of key skills within the
organisation thus reducing the dependence on external recruitment and formulating
retention HR development strategies.

2.6 FORECASTING HUMAN RESOURCE REQUIREMENTS

2.6.1 Demand Forecasting

Demand forecasting is an estimate of the numbers and kinds of employees the organisation will
at future dates in order to realise its stated objectives.

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2.6.2 Supply Forecasting

The determination of whether a firm will be able to secure employees with the necessary skills,
and from what sources.

Before starting a new business, management study the demand side of human resources. It is
equally important to study the supply side of HR as well, specially when very skilled workers are
needed for the job.

Supply forecasting measures the quantity and quality of employees likely to be available inside
and outside the organisation after allowing for labour wastage, retirement, absenteeism,
promotion and internal transfer.

2.6.3 Analysis
The demand and supply forecasts are analysed to identify and surpluses or deficits. This analysis
which provides the basis for recruitment, retention and, if unavoidable, downsizing plans, may
be done by using specialised software.

2.6.4 Action Plan

Plans are prepared to deal with forecasts so as to improve productivity and performance whilst at
the same time staying within the HR budget set. Plans often have to be short term and flexible
because of the difficulty in making firm prediction about human resource requirements in a
rapidly changing environment.

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Activity 2

(i) Describe how Human Resource Planning is carried out in your organisation.

(ii) You are the HR Manager of your organisation. Explain why you think HRP is important and
describe its applicability.

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2.7 COST
When recruiting people, several costs need to be borne by the organisation, specially in the event
of large group intake (e.g. in the health sector, police and prison department). Such costs have to
be considered when planning for Human Resources and are summarised hereunder:

1 Recruitment Costs

 Advertisement cost(press/radio/Tv)

 Recruitment Agency

 Administrative cost

 Selection

2. Remuneration Costs

 Pay package(salary)

 Allowances

 Transportation cost

3. Training Costs

 Induction of new employees(familiarisation with new environment)

 Expenses for trainers(food, allowances, training aids)

 Expenses for trainees(food, training materials)

 Infrastructure

 Administrative cost

4 Learning Costs

 Loss of production level

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 Loss of HR(if employee is not replaced)

5 Uniforms & other specialised kits

 Set of complete uniforms(military, police, prison department.....)

 Specialised kits

6 Support Costs

 Sports infrastructure

 Medical and health care

 Canteen facilities

 Library facilities

Activity 3

(i) Explain the costs which have to be borne by your organisation when recruiting new
employees.

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(ii) What are the strategies for:

(a) Reducing an expected labour surplus.

(b) Avoiding an expected labour shortage.

2.8 HUMAN RESOURCE FORECASTING TECHNIQUES

HR planning is based on forecasting the needs of the organisation in terms of Human Resource
requirements. Several forecasting techniques are currently used by HR professionals and are
listed below;

a. Zero Based Forecasting

b. Bottom up Approach

c. Use of Mathematical models

d. Simulation

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Let’s now explain each of the above techniques.

2.8.1 Zero Based Forecasting

- This technique uses the organisation’s current level of employment as the starting point
to determine future staffing needs. For example, if an employee retires, is fired or leaves
the firm for any reason, the position is not automatically filled. An analysis is done to see
if the job needs to be filled.

- The same procedure is used for human resource planning as for zero-based budgeting
whereby each budget must be justified each year.

- Equal concern is shown for creating new positions when they appear to be needed.

- The key to this technique is a thorough analysis of the needs.

2.8.2 Bottom Up Approach

- In this approach, each successive level in the organisation, starting at the bottom,
forecasts its requirements.

- It provides an aggregate forecast of employees needed.

- It is based on the reasoning that head of each unit/level is more aware of HR requirement.

Managers should periodically review their HR needs thus allowing the HR department to
consider all available options.

2.8.3 Use of Mathematical Models

This model uses mathematical models (i.e, past employment levels) to predict future
employment levels. For example, one of the most useful predictors of employment levels is sales
volume.

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Using this approach, managers can approximate the number of employees required at different
sales level.

2.8.4 Simulation
- The simulation is a technique for experimenting with a real world simulation with a
mathematical model that represents the actual situation.

- It uses a mathematical logic to predict what will occur.

- It allows HR managers to gain a considerable knowledge of a particular problem before

making a decision.

- It permits managers ask many “what if” questions.

Activity 4

(i) What are the factors you would consider when forecasting the future HR needs of your
organisation.

(ii) Which forecasting techniques is more appropriate for your organisation? Give reasons.

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2.9 ADAPTING TRADITIONAL HUMAN RESOURCE PLANNING

The traditional approach to HR planning has a great deal less relevance for employers that are
small players in their industries, operating in a fast changing technological field.

An adaptation of the principles underlying HR planning together with developments of newer

techniques and approaches is needed. Many of these are also relevant for larger and more stable
organisations, where they can be used in addition to the longer established HR planning
techniques.

Four adaptations will be described as hereunder:

(i) Contingency planning

(ii) Succession planning

(iii) Skills planning

(iv) Soft human resource planning

The first two adaptations (Contingency and Succession planning) aim to focus on specific
organisational developments or groups of employees. In the last two , the nature of the
forecasting operation moves from focusing simply on “the right people in the right jobs, at the
right time’.

2.9.1 Contingency Planning

Contingency planning involves planning possible responses to a variety of potential
environmental developments as opposed to HR planning process in which a single plan is
developed and adapted to the environment changes. The purpose of contingency planning in the
HR field is thus the provision of information on which decisions are made about the future
direction the organisation will take.

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2.9.2 Succession Planning

Another adaptation of the principles of traditional HR planning is the development, mostly in

large organisations, of a succession planning function. Succession planners are mainly interested
in ensuring that their employer has enough individuals with the right abilities, skills and
experience to promote into key senior jobs as they become vacant. According to Jackson and
Schuler(1990: 171) succession planning differs from traditional HR planning in that “the
prediction task changes from one of estimating the percentage of a pool of employees who are
likely to be with the company X years into the future, to one of estimating the probability that a
few particular individuals will be in the company X years into the future”. In other words, the
planning process covers a selected group of high calibre employees. Succession planning is most
common in organisations with a huge hierarchical structure (as in the military or police) in which
individuals develop careers by moving upwards and sideways over a number of years as they
acquire the necessary knowledge of the job, skills and experience.

2.9.3 Skills Planning

Skills planning involves predicting what competences will be required for the next one to five
years. This approach acknowledges as products markets have become increasingly turbulent,
new form of employment have developed to meet the need for labour flexibility on the part of
employers. Skill-based plans thus incorporate the possibility that skill needs will be met either
wholly or partially by employing short term employees, outside contractors and consultants and
permanent members of staff.

2.9.4 Soft Human Resource Planning

Like skills planning, soft HR planning accepts that in the current environment, organisations
need more that the right people in the right place and at the right time in order to be successful.
These people need to have the right set of attitude in order to create a successful organisational
culture.

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Activity 5

(i) Discuss the applicability of Contingency and Succession planning in your organisation.

(ii) Explain the relevance of skill planning in your organisation.

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2.10 SUMMARY
This Unit has described how the human resource planning is an important process in determining
the demand and supply of employees of an organisation. The aim, forecasting requirement and
techniques have also been explained.

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