Human Resource

Planning

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 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

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 Introduction
If effective utilization of human resources is not a
significant goal for the organization:
Employment planning is likely to be informal and slipshod

If top management values stable growth:

HR planning will be less important than if the goals include
rapid expansion or diversification

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 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

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 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

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 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”

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 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

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 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

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 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

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 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

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 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

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 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

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 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

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 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

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 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

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 The Skills Inventory

Skills inventories vary greatly in their sophistication

Some are as simple as a file drawer of index cards
Others involve expensive and complex computer databases

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 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

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 Contents of the Skills Inventory
Often omitted, but increasingly important, are:
Employees’ stated career goals
Geographical preferences
Intended retirement date

The main categories within a skills inventory:

Data summarizing the employee’s past
Data summarizing present skills
Data that focus on the future

Today, many skills inventories are more complex

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 Maintaining the Skills Inventory
The two principal methods for gathering data:
the interview and the questionnaire
The questionnaire is faster and cheaper, but can be
inaccurate
Some contend that a trained interviewer can complete
questionnaires more quickly and accurately
Plans for keeping files updated must be made
The more often changes are made and the data is used, the
more often updates should be performed

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 Maintaining the Skills Inventory
Should data be stored in a manual system or
on a computer?
How much does the computer system cost?
How frequently the data will be used?
A computer allows comparative analysis over time

Skills inventories are useful only if management

uses the data to make significant decisions
Before accessing the data, managers must be trained to avoid
abuse of the system

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 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

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 Action Decisions in HR Planning
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

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 Action Decisions in HR Planning
Organizations are using more:
Part-time workers
Subcontractors
Independent professionals

 This is in response to:

Intense global competition
Rapid technological change
Fears caused by recent workforce reductions

Over 5 million U.S. citizens are contingent workers

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 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

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 Action Decisions in HR Planning
Most organizations avoid layoffs by using attrition,
early retirement, creation of work, and so on
Attrition can be accelerated by encouraging employees to
leave early
Drawbacks to losing workers over the age of 50:
They tend to be healthier than younger workers
They have fewer work-related injuries
They are less likely to change jobs
They take critical skills and experience with them

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 Action Decisions in HR Planning
By 2010, the median age of the
U.S. workforce will be 40.6 years
Over half the workforce will be
protected by the Age Discrimination
in Employment Act
Promises should not be made that can’t be kept
Once promised, it may be illegal to change them

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 Action Decisions in HR Planning
If voluntary reductions don’t eliminate the gap
between supply and demand, layoffs may be necessary
Corporations too frequently and quickly turn to layoffs
They fail to consider the consequences
About one-third lay off too many workers
Poorly designed workforce reductions can kill morale

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 Human Resource Information Systems
Information is the key to successful HR planning
A human resource information system (HRIS) is an
integrated way to acquire, store, analyze,
and control information flow through an organization
A highly developed HRIS can increase the efficiency
and response times of:
Tracking applicants
Skills inventory
Career planning
Employee service programs

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 Human Resource Information Systems
Computer technology makes it possible to integrate
multiple HR needs into a single system:
Enrolling in benefits programs
Processing employee transactions (pay increases)
Using learning modules

An HRIS developed for use by upper-level executives

is called an executive information system (EISs)
Computerized HRISs have allowed organizations to broaden
their view of succession planning

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 Human Resource Information Systems
Factors that make succession planning for executive
level positions more important than ever:
Large numbers of aging executives
Increasingly popular early retirement
 Fortune 500 companies anticipate 33 percent turnover among their
executives over the next five years

Many companies now realize the critical need for

a comprehensive retention plan
This plan may include consulting and part-time assignments

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