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Human Resource Planning

Definition: The ongoing process of systematic planning to achieve optimum use of an organization's most valuable asset - its human resources. The objective of human resource (HR) planning is to ensure the best fit between employees and jobs, while avoiding manpower shortages or surpluses. The three key elements of the HR planning process are 1. Forecasting labor demand 2. Analyzing present labor supply 3. Balancing projected labor demand and supply. Objectives and Importance of Human Resource Planning: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Assessing manpower needs for future and making plans for recruitment and selection. Assessing skill requirement in the future. Determining training and development needs for the organization. Determining surplus and shortage of the staff and avoiding unnecessary detention or dismissal. Controlling wages and salary costs. Ensuring optimum use of HR. Helping organization to cope up with Technological advancements. Ensuring high labor productivity. Focus on Career planning of every employee. Taking care of succession planning. Ensure promotion of employees in systematic manner. It involves hiring, development and retention of HR.

Human Resource Planning Process: 1. The mission & vision of the organization: The organization should be clear about its mission & objectives. The manpower planning must be integrated with other business policies such as profitability, production, sales &development. Any change in the business objectives would certainly affect the manpower planning. The ultimate aim of manpower planning should be to relate future human resource to future enterprise need so as to maximize the future ROI. 2. SWOT Analysis: After organization has fixed the goals & objectives, the next step is the corporate assessment. The company now begins to analyze its goals, current strategies, external environment, strengths & weaknesses, opportunities &threat, to know whether they can be able to achieve with the current human resource. The SWOT ( Strengths, weakness, opportunities, & threats). The SWOT analysis will give the clear picture about the organization resources such as capital& worker it will also indicate departmental abilities such as training & development, marketing, accounting, research

and development & management information system. This SWOT analysis serves as the link between the organization goals & the way or direction in which the organization should go to meet its objectives.

3. Man power Forecasting: Forecasting of future manpower requirement is the most important part of manpower planning. It is done on the basis of production & sales budgets, workloads analysis, work force analysis, estimated absenteeism & turnover. The future manpower requirements should be forecasted quantitatively& qualitatively. There are several factors which need to be looked upon before forecasting. (a) Employment Trend: The manpower planning committee should compare & analyze the trend of last five year to forecast the manpower requirements. (b) Productivity: Manpower requirements are also influenced by improvement in productivity. The important three aspects are . Better utilization of existing manpower. . Improvement in technology. . Matching of skills with job requirement. (c) Absenteeism: Absenteeism is a situation when a person fails to come for work when he is scheduled to work. While estimating demand for manpower the prevailing rate of absenteeism in the organization should be considered. (d) Expansion & Growth: Expansion & growth plans of the organization should be carefully analyzed to judge their impact on manpower requirement in future. Forecasting Techniques: (a) Expert Forecasts: Demand is modified by retirements, terminations, resignations, deaths and leaves of absence. Past experiences make these occurrences quite predictable. (b) Trend analysis: HR needs can be estimated by examining past trends. Eg: 2001-02 Production of units: 5000 2002-03 No of workers : 100 2003-04 Ratios : 100: 5000 2003-04 Estimated Production: 8000 Number of workers required : 8000*100/5000=160 To proceed systematically HR generally follow three steps: a) Work Force Analysis: The average loss of manpower due to leave, retirement, death, transfer, discharge etc. during the last 5 years may be taken into account.

IN OUT Transfers in---------------------------------------------------------->Job Hopping Transfers out Retirement Recruits in------------------------------------------------------------>VRS Scheme Discharge or dismissal Terminations Promotions in--------------------------------------------------------->Resignations Retrenchment Attractions in other companies etc. Fig: Manpower flows in a company b) Work Load Analysis: The need for manpower is also determined on the basis of work-load analysis, wherein the company tries to calculate the number of persons required for various jobs with reference to a planned output-after giving weight age to factors such as absenteeism, idle time etc. E.g.: Planned output for the year Standard hours per piece Planned hours required Productive hours per person Number of workers required 10000 pieces 3 hours 30000 hours 1000 hours 30

c) Job Analysis: Job analysis helps finding out the abilities or skills required to do the job efficiently. It means a detailed study of jobs to identify the qualifications and experience required for them. 4. Manpower Plan: After forecasting about the right type & number of people required the next phase is to plan, how the organization can obtain these people. Programs & strategies need to developed for recruitment, selection, training, internal transfers, promotions &appraisal so that the future manpower requirement can be met. Development plans are designed to ensure a continuing supply of trained people to take over jobs as they fall vacant either by promotion or recruitment or through training. In this way, shortages or redundancies can be avoided in the long run. Preparing Manpower Inventory is a very important step for the plan to be implemented successfully.

Man Power Inventory: It is the records of staff in a commercial organization. It helps to find out the size and the quality of the employees presently in the organization at various positions. Every organization will have two major sources of supply of manpower: External and Internal. a) Internal Labor Supply: 1. Staffing Table: It shows the number of employees in each job. It tries to classify employees on the basis of age, sex, position, category, experience, qualification, skills etc. A study of the table indicates if the current employees are properly utilized or not.

2. Markov Analysis: It uses the historical data of promotions, transfers, and turnover to estimate the future availabilities in the workforce. Based on the past probabilities one can estimate the number of employees who will be in various positions with the organization in future.

2003-2004 Store Managers (n=15)

Store Managers
80%

Asst. Store manager

Section Head

Dept. Heds

Sales Executive

Exit

20%

12 Asst. Store Manager (n=36)


11% 83% 6%

4 Section Heads (n=94)

30

11%

66%

8%

15%

11

63

14

Departmental Heads (n=288)

10%

72 %

2%

16%

29

207

46

Sales Executives (n=1440)

6%

74%

20%

86

1066

288

Forecasted Supply

16

41

92

301

1072

353

3. Skills Inventory: It is anss assessment of the knowledge, skills, abilities, experiences and career aspirations of each of the current employees. It should be updated atleast every two years.

4. Replacement Chart: It shows the profile job holders department wise and offers a snapshot of who will replace whom if there is a job opening.

b) External Labor Supply: When the organization grows rapidly and diversifies into newer areas of operations (merchant banking, capital market operations, mutual funds etc. in the case of a bank) or when it is not able to find the people internally to fill the vacancies it has to look into outside sources. To the extent an organization is able to anticipate its outside recruitment needs and looks into the possible sources of supply keeping the market trends in mind, its problems in finding the right personnel with appropriate skills at the required time would become easier. Important Barometers of Labor 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. Determining Manpower gaps: The existing number of personnel and their skills (from human resources inventory) are compared with the forecasted manpower needs ( demand forecasting) to determine the quantitative and qualitative gaps in the workforce. A reconciliation of demand and supply forecasts will give us the number of people to be recruited or made redundant as the case may be. This forms the basis for preparing the HR plan . Below Exhibit shows how demand and supply forecasts can be related over a period of three years. 5. Determining Human Resources Requirements:

1) Number required at the beginning of the year 2) Changes to requirements forecast during the year DEMAND

3) Total requirements at the end of the year (1+2) 4) Number available at the beginning of the year 5) Additions (transfers, promotion) SUPPLY 6) Separations (retirement, wastage, promotions out and other losses). 7) Total available at the end of years ( 4+ 5+ 6) 8) Deficit or surplus ( 3 -7) 9) Losses of those recruited during the year-Reconciliation of the above manpower needed. 10) Additional numbers needed during the year (8+9) 6. Formulating HR plans: Organizations operate in a changing environment. Consequently Human resources requirements also change continually. Changes in product mix, union agreements, competitive actions are some of the important things that need special attention. The human resource requirements identified along the procedure outlined in the above box need to be translated into concrete HR plans backed up by detailed policies programs and strategies (for recruitment, selection., training, promotion, retirement, replacement etc) 1. Recruitment plans: Will indicate the number and type of people required and whom they are needed for, special plans to recruit right people and how they are to be dealt with via the recruitment program. 2. Redeployment plan: Will indicate the programs for transferring or retraining existing employees for new jobs. 3.Redundancy plan: Will indicate who is redundant when and where the plans for retraining where this is possible and plans for golden handshake retrenchment lay off etc. 4. Training plan: Will indicate the number of trainees or apprentices required and the programs for recruiting; of training them, existing staff requiring training or refraining new courses to be developed or changes to be effected in existing courses 5. Productivity plan: Will indicate reasons for employees productivity or reducing employee costs through work simplification studies, mechanization productivity, bargaining incentives and profit sharing schemes , job redesign etc. 6. Retention plan: will indicate reasons for employee turnover and show strategies to avoid wastage through compensation policies , changes in work requirements and improvement in working conditions. 7. Control points: The entire manpower plan to be subjected to close monitoring from time to time . Control points be set up to find out deficiencies periodic updating of manpower inventory in the light of changing circumstances be undertaken to remove deficiencies and develop future plans.

Effectiveness of Human resource Planning: 1. Objectives: The Hr plan should fit with the overall objectives of the organisation. 2. Top Management support: To meet the changing needs of the organisation, there should be support of the Top Management. 3. Employee skills Inventory: Upto date employee skill inventory should be maintained by the org. Tis can be done with in the form of Markov Analysis, skill inventory table etc. 4. HRIS: Implement computer technology to maintain Human skill inventory. 5. Coordination: Procurement, promotion and retention plans must be integrated properly.