NAME

:
DHINGIA POOJA KISHORKUMAR
COURSE
:
MBA (HR) THIRD SEMESTER
ROLL NO
:
510911272
SUBJECT
:
MUOOO1 (MANPOWER PLANNING AND RESOURCING)
1
Assignment Set- 1 Question.1 Elaborate on the Human Resource cost accounting met
hod along with its merits and limitations Answer 1: Historical Cost Approach Thi
s approach was developed by Brummet, Flamholtz and Pyle. According to this appro
ach, the actual cost incurred on recruiting, selecting, training, placing and de
veloping the human resources of an enterprise are capitalized and written off ov
er the expected useful life of human resources. The procedure followed for human
resource asset is the same as that of other physical assets. Any amount spent o
n training and developing human resource increases its efficiency, hence capital
ized. The amortization of human resource assets is also done in the same way as
that of other physical assets. The asset is written off over its useful life. If
the asset is liquidated prematurely, then it is underwritten and the amount is
charged to revenue account. On the other hand, if it has a longer life than expe
cted, its amortization is rescheduled. Merits This method has the following meri
ts: This method is simple to understand and easy to work out. The traditional ac
counting concept of matching cost with revenue is followed in this method. It ca
n help a firm in finding out a return n human resource investment. Limitations:
This method has the following limitations: It is very difficult to estimate the
number of years an employee will be with the firm. It is difficult to determine
the number of years over which the effect of investment on employees will be rea
lized. The extent to which the employee will utilize knowledge acquired is also
subjectively estimated. It is also difficult to fix a rate of amortization. A nu
mber of methods have been derived to write off depreciation on fixed assets but
in the case of human asset, it will generally be on a constant basis. The value
of an asset decreases with amortization. In case of human resources, the situati
on is just the reverse. With the acquisition of experience and training in the c
ourse of time, the utility of employees increases rather than decreasing. [10]
2
It is easy to find out the total of human factor but it is difficult to see the
contribution of each person. Had there been one person in the organization, then
his contribution to the enterprise could be measured. But this is not the case.
There are large numbers of people working in different positions and their cont
ribution cannot be measured separately. No solution to this problem has been fou
nd so far. Replacement Cost Approach This approach was developed by Rensis Liker
t & Eric G. Flamholtz. The cost of replacing employees is used as the measure of
company s human resources. The human resources of a company are to be valued on
the assumption as to what it will cost the concern if existing human resources
are required to be replaced with other persons of equivalent experience and tale
nt. This approach corresponds to the historical cost approach mentioned earlier
except that it allows for changes in the cost of acquiring and developing employ
ees in place of taking their historical cost. In replacement cost approach, the
costs of recruiting, selecting, training, developing, etc. of new employees to r
each the level of competence of the existing employees are measured. Likert has
suggested determination of value of total human organization on the basis of ass
umption that a similar organization is to be created from scratch. Merits This m
ethod has the following merits: This approach has the advantage of adjusting the
human value of price trends in the economy and thereby provides more realistic
value in inflationary times. It has the advantage of being present-oriented.
Limitations This method has the following limitations: It may not always be poss
ible to obtain such a measure for a particular employee. It is not always possib
le to find out the exact replacement of an employee. This method does not reflec
t the knowledge, competence and loyalties concerning an organization that an ind
ividual can build over time. It is difficult to find out the cost of replacing h
uman resources and different persons may arrive at different estimates.
3
Question 2: Discuss the steps in Manpower Planning. [10] Answer 2: Process of Ma
npower Planning The process of human resource planning is one of the most crucia
l, complex and continuing managerial functions which, according to the Tata Elec
trical Locomotive Company ³embraces organization development, management develo
pment, career planning and succession planning.´ The process has gained importa
nce in India with the increase in the size of business enterprises, complex prod
uction technology and the adoption of professional management technique. It may
be rightly regarded as a multi-step process, including various issues, such as:
a) Deciding goals or objectives b) Estimating future organizational structure an
d manpower requirements c) Auditing human resources d) Planning job requirement
and job descriptions and e) Developing a human resource plan. a) Deciding goals
or objectives: Human resource planning fulfils individual, organizational and na
tional goals; but, according to Sikula, The ultimate mission or purpose is to re
late future human resource to future enterprise needs so as to maximize the futu
re return on investment in human resources. In effect, the main purpose is one o
f matching or fitting employee abilities to enterprise requirements, with an emp
hasis on the future instead of present arrangements. The objectives may be laid
down for a short-term (i,e, for one year). For example, the short-term objective
may be to hire 25 persons from schedule tribes or backward class for the purpos
es of training. The long- term objective may be to start a new industry, to expa
nd the market, to produce a new product, to develop its own sales force rather t
han depend on distributors, or to have minority group members eventually in posi
tion of middle and upper management cadres. b) Estimating the future organizatio
nal structure or forecasting the manpower Requirements: The management must esti
mate the structure of the organization at a given point in time. For this estima
te the number and type of employees needed must be determined. Many environment
factors affect this determination. They include business forecasts expansion and
growth, design and structural changes, management philosophy, government policy
, product and human skills mix and competition.Forecasting provides the basic pr
emises on which the manpower planning is built. Forecasting is necessary for var
ious reasons which have been stated below:
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(a) The eventualities and contingencies of general economic business cycle (such
as inflation, wages, prices, costs and raw materials supplies) have an influenc
e on the short- range and long-run plans of all organizations. (b) An expansion
following enlargement and growth in business involves the use of additional mach
inery and personnel, and a re-allocation of facilities, all of which call for ad
vance planning of human resources. (c) Changes in management philosophies and le
adership styles. (d) The use of mechanical technology (such as the introduction
of automatic controls, or the mechanization of materials handling functions) nec
essitate changes in the skills of workers, as well as a change in the number of
employees needed. (e) Very often, changes in the quantity or quality of products
or services require changes in the organization structure. Plans have to be mad
e for this purpose as well. After estimating what the future organization struct
ure should be, the next step is to draw up the requirements of human resources,
both for the existing department and for new vacancies. For this purpose, a fore
cast of labour force is needed, and requisition should be obtained from differen
t departments, i,e., forecast has to be made in returns of functional category;
the members needed; and the levels at which they are required. Vacancies, occurr
ing in any department, should be notified in writing by different department hea
ds to the personnel department, stating clearly the number of vacancies to be fi
lled, job or category-wise types of personnel needed, their technical qualificat
ion and experience and the reasons for acquisition (I.e., whether for replacemen
t or addition); a statement of duties, type of jobs pay scales, age, and previou
s experience should also be made. Requisitions should be based on accurate job s
pecifications by first line supervisor. They should, as for as possible, state t
he exact demands of a job. In determining the requirements of human resources, t
he expected losses which are likely to occur through labour turnover- quits, ret
irements, death, transfers, promotions, demotions, dismissals, disability, resig
nations, lay-off and other separations- should be taken into account. Changes in
the human quality resulting from the experience gained in the jobs during the p
eriod and the training achieved also need to be considered. The addition of new
lines of production and new projects also influence the demand estimates of huma
n resources. The basic fact to remember is that the human resource in an organiz
ation constantly changes in terms of its present and future size. Additional hum
an resources are gained through new employment of personnel, promotions, through
transfers and demotions; but personnel is lost through voluntary quits, death d
ismissals, termination and retirements. After making adjustments for wastage, an
ticipated and expected losses and separations, the real shortage or surplus may
be found out. If a shortage is there, efforts are made to meet it either by new
recruitments or promotion from within, or by developing the existing staff. If t
here is a surplus, it is to 5
be decided how it will be dealt with, i.e., whether there should be transfers, l
ay-offs, retrenchment or reduction in the hours of work of all. Underestimation
of the quality and number of the employees required would lead to shortfalls in
performance, while overestimation would result in avoidable cost to the organiza
tion. According to Dr. Ram Tarneja, ³Management can ensure control of labour co
sts by avoiding both shortages and surpluses of manpower through proper manpower
planning.´ It may be noted that for purposes of manpower planning, the main di
mensions to be taken into consideration are: (i) The total number of personnel a
vailable: This could be obtained from the pay-rolls and other personnel records,
such as the applications for employment. The total number has to be classified
on some basis, such as manual workers (i.e., daily-rated, weekly-rated or monthl
y-rated); clerical employees, ministerial staff, managers and other executives;
specialists and skilled and unskilled workers; sex-wise distribution, etc. (ii)
The job-family: A detailed job-description for each position such as stenographe
rs who may belong to various departments, e.g. finance, marketing, personnel, pu
blic relation, general administration, etc. (iii) Age distribution of the employ
ees, available in the present departments, say in the age-group 20-29 years; 30-
45 years, 46 years and above. (iv) Qualification and experience desire, such as
a person with 5 years or 10 years experience in a particular branch/ job; and wh
ether under-graduate, post- graduate or MBAs or gradates in Science, Commerce, A
rts, Engineering, Professional Diploma- holders, etc; or with specialized knowle
dge in the field of marketing, finance, computer programming or engineering work
. (v) The salary range etc c) Auditing Human Resources: Once the future human re
source needs are estimated, the next step is to determine the present supply of
manpower resources. This is done through what is called Skills inventory. A skil
ls inventory contains data about each employee s skill abilities, work preferenc
e and other items of information which indicate his overall value to the company
. A sample skill inventory proforma is been below:
6
Skill Inventory Performa Personnel factors Name Age Sex Dependants Marital statu
s .. Birth Place .. Occupation of parents .. Present address Permanent address .
Telephone number (if any) .. . .
Education and Training School Degrees/Diplomas obtained Training undergone ..
Experience and Skills Job areas Special skill (such as ability to speak write fo
reign languages) Job titles Supervisory responsibility Job dates Additional Info
rmation Salary Grade Absenteeism record Disciplinary record Career plans . Test
results .. Performance ratings Location of relatives .. Appraisal data .. Any ot
her information . . . .. Reasons for leaving . ..
7
The above facts are usably recorded by an employee in some forms from which the
information is fed into a computer. Other data pertaining to his performance rat
ings and his superiors¶ evaluation of his potential for promotion may also be f
ed into the computer. The result may either be kept in a file (on tape or otherw
ise stored) containing information as to the number of employees in the organiza
tion, and other data about each employee, and an indication of his fitness for p
romotion. A specimen employee information card is given below:
Employee Information Card Employee No Dept. Position Exp. Date Employee status S
hift : 1/2/3 : Married/Single/Widowed/ Separated/Divorced . : Regular/ Part-time
/Co-operative ` Code. . . Address . Town .
Marital status
No. of dependent children : 1/2/3/4/5 Relatives in company : Yes/No. If yes, who
? Union membership : (which one) Experience of skill : Clerical/mechanical/sales
/supervisory/ others Special training Accidents : Departmental/on-the /vestibule
: Loss time
Hospitalization : Yes/No Member of the credit union : Yes/No Absenteeism Date Op
erator Days .. . .
8
Some organizations do not compile a skills inventory but prepare organization ch
arts to determine how many people, at what level, in what position and what kind
of experience and training would be required to meet the objectives. These char
ts show a person s age, the number of years he has been in a particular position
, and his fitness for promotion. These charts or skill inventories help in deter
mining and evaluating the quantity and quality of the present human resources of
an organization. They tell us what exist in stock and what is needed to be adde
d to that stock, taking into account the capability qualification, experience a
Manning table which into account the employees. Some companies maintain a mannin
g table which lists all the jobs in the unit and the number of workers holding e
ach job. Other companies also use Replacement charts, which show the present per
formance of each position holder and the promotional potential of possible repla
cements. d) Planning job requirement and job descriptions Once the present manpo
wer resources are determined, the personnel department can estimate what changes
will occur in the present labour force in the next few years, say 5 years. Job
Analysis: After having decided how many persons would be needed, it is necessary
to prepare a job analysis, which records details of training, skills, qualifica
tion, abilities, experience and responsibility, etc. which are needed for a job.
Job analysis includes the preparation of job descriptions and job specification
s. e) Developing a Human Resource Plan: This step refers to the development and
implementation of the human resource plan which consists in finding out the sour
ces of labour supply with a view to making an effective use of these sources. Th
e first thing, therefore, to decide on the policy is- whether the personnel shou
ld be hired from within through promotional channels or should it be obtained fr
om an outside source. The best policy which is followed by most organizations is
to fill up higher vacancies by promotion and lower level position by recruitmen
t from the labour market. The labour market is a geographic area from which empl
oyers recruit their work force and labour seeks employment. Here the force of de
mand and supply interact. A labour market generally has the following characteri
stics: (a) It highly unstructured and unorganized, for a majority of workers are
illiterate and ignorant and do not have any information about available job opp
ortunities. (b) The procedures by which companies recruit workers and the method
s by which workers go about getting jobs are highly variable. (c) A great range
of wage rates for the same occupation exits in the labour market depending upon
the attitude of the management towards wage levels, the employer s ability to pa
y and the productivity of labour. (d) Labour is mostly not mobile either because
it has incomplete or inaccurate knowledge of job opportunities and available wa
ges or because of lack of job security.
9
(e) The supply of labour fluctuates and is influenced by the population in the l
abour market the attractiveness of job (benefits, service wage, rates, and the r
eputation of a company), the extent of unemployment and the particular skills th
at are in demand. (f) Manual labour for unskilled jobs has been replaced by acti
vities that require skills, scientific knowledge, technical acumen and professio
nal training.
Various external factors influence the outflow and inflow of manpower resources.
A few such factors that operate at local level are: (i) Population density at v
arious distances from the factory or work place: (ii) Local unemployment level,
particularly of the categories which are relevant for the operation of the organ
izations (iii) Availability of part time labour (iv) Current competition for sim
ilar categories of manpower from other organizations: (v) Output from the educat
ional system (general as well as technical); (vi) Pattern of in-migration and ou
t-migration within the area and between it and (vii) Transport facilities and co
mmunication pattern. At the corporate level, other factors operate, viz., (i) Tr
ends in the growth of the working population; (ii) Government training schemes a
nd system of technical, vocational, professional, and general education, and the
ir out-turn; (iii) Impact of social security measures on manpower supply; (iv)Mo
bility of the products of the technical, professional and vocational institution
s; (v) Cultural factors and customs, social norms, affecting school leaving age,
labour force participation of women, children and young persons. The personnel
manager should have a thorough knowledge of the labour market. Which particular
source in the labour market will be tapped depends upon the policy of a firm, th
e position of labour supply, the arrangement with labour unions, and Government
regulations. However, it is always safe for the personnel manager to be in close
liaison with these different sources and use them as and when the need arises.
10
Question: 3 Healwell Pharma Company has been functioning for the last 15 years.
The company decided to computerize the office 7 years ago. Now it has decided to
use the application of information system in HRM. Suggest how and in what activ
ities they could use the information system. Answer 3: Information System Applic
ations in Human Resource Management A unified data model provides a single, accu
rate view of HR activities ranging from recruitment, employment, training, perfo
rmance management, compensation management and real time management. Oracle huma
n resource leverage workflow and internet-based processes optimize various HRM a
ctivities. The system maintains global HR data in case of Trans-national compani
es and total organizational human resource data in case of national companies in
a single location for accurate and easy availability. The system of application
s of Information Technology (IT) in HRM is referred to as Human Resource Module.
HRIS merges some of HRM functions with the IT field, wherein the planning and p
rogramming of data processing systems have evolved into standardized routines an
d packages of Enterprise Resource Planning (ERP) software. ERP integrates the hu
man resource module with finance, production, and sales and administration modul
es. Generally, traditional HRM functions are common to all organizations. They c
onsist of tracking data regarding personal histories, family details, skills, ca
pabilities, experiences, pay, benefits and grievances. Performance of these func
tions are increasingly complex, must be performed at the lowest possible cost an
d also at a fast rate, which pose increased challenges for HR professionals. Org
anizations have started to automate these functions by introducing HRIS technolo
gy. Development of client -server HRIS enables HR executives to assume responsib
ility and ownership of their systems compared to client-server architecture, whi
ch came largely in the form of mainframe computers and necessitated heavy capita
l investment to purchase program proprietary software. HRIS is developed around
six main areas of human resource management viz., e-recruitment/applicant tracki
ng, e-training, e- payroll, e-benefits, e-self service and e-time and labour man
agement. E-recruitment / Applicant Tracking E-recruitment manages job descriptio
ns and job vacancies, search for candidates and the interview process. It is als
o referred to as an applicant-tracking system; this is a web-based application t
hat enables the electronic handling of organizational employment needs. These ac
tivities include posting job advertisement on web sites to stimulate and attract
candidates, known as job boards. Job boards allow candidates to apply on-line a
nd the candidates¶ data are stored on a database that allows searching, screeni
ng and filtering of applications. The application tracking system shortlists the
candidates and arranges for interview and recruitment-related activities.
11
E-recruitment maintains profiles, searches for and refers jobs to colleagues and
follows the recruitment process. It integrates resume extraction capabilities u
sing the Magnaware / Mohomine extraction engine to search for potential candidat
es. It uses event-driven applicant tracking and manages positions on multiple ex
ternal websites. E-recruitment/applicant tracking system reduce administrative t
asks, cost and time required to perform recruitment activities. E-training E-tra
ining provides a complete, scalable and open infrastructure that allows organiza
tions to manage, deliver, and track employee training participation in on-line o
r classroom-based environments. Trainees interact with content and/or trainers a
t their own pace. Managers set the business flow from order processing to delive
ry and performance management to training output automatically. E-training syste
ms deploy content to global learners; make use of mixed media and multiple discr
ete sites on a single instance of the application, define competencies attained
by trainees, and update the trainees competency profiles. It aims to ensure that
HRM provides the right resources, competent and experienced trainers, and conso
lidate training initiatives on a scalable and cost effective basis. In addition,
it aims to measure training effectiveness. E-training, provides learning opport
unities not only to employees, but to customer and all other stakeholders by pro
viding one-stop administration, automated catalogue distribution and enrollment
and collaborative sites with other strategic partners. E-payroll E-payroll model
s automatically collect data regarding employee attendance and work record for t
he purpose of evaluating work performance, they calculate various deductions inc
luding tax, and generate periodic pay cheques and tax reports. Payroll modules i
n turn send data and accounting information to the general ledger for posting an
d subsequent operations and they frequently integrate e-payroll with efinance ma
nagement. Payroll systems can define standard rules for automatically assigning
and changing employee salary by using simple formulae. They are able to control
processing rules and calculations using fast formula and use logic for complex c
ases. They can manage global compensation with one application by implementing a
core payroll engine and installing local extensions to add the necessary functi
onality, reporting and process for individual countries. E-payroll is able to pr
ocess from data, simultaneously, fully reconciled results and multiple employee
groups. By preparing paperless online pay slips, the system is able to reduce ad
ministrative costs and time for the total operations. Employees too can view the
ir exclusive data and get personalized reports.
12
E-benefits E-benefits administration models enable HR professionals to track and
administer diverse and complex benefit plans, employee benefit programs which m
ay involve transpiration medical and health care, insurance, pension, profit-sha
ring, and stock option benefits. Such modules, through internet-based automation
, can enable HR to improve benefits support and analysis whilst reducing time an
d costs involved in the administration, while increasing the consistency decisio
ns on compliance issues at various levels across the organization. E-self servic
e human resource E-self service HR modules collect process and manage all other
kinds of data and information. For example, employees demography profiles and ad
dresses recruitment, selection training, development, promotions, capabilities,
skill mapping and compensation planning. Such a module would allow individual em
ployees to update and use employee-specific information, personalized to an indi
vidual s role, experience, work content, language and information needs. Thus, i
ndividual employee and managers are empowered to update information in order to
streamline business processes, reduce costs and errors, increase speed, and enha
nce service. This module helps employees in managing everything from profiles in
cluding skills, resumes, contact details, self-appraisal data, bank data, learni
ng, benefits and payroll. It empowers managers to operate transfers, employee tr
aining enrollment, performance appraisals, competency mapping, career planning a
nd development and terminations. E-time and labour E-time and labour automates e
ntire time and attendance records keeping process and operations through an auto
matically generated virtual time card. It provides an intuitive, web-based inter
face. The time and labour management module, by interacting with information tec
hnology, collects and evaluates time and work information. This module provides
broad flexibility in data collection methods, human resource distribution capabi
lities and data analysis, and helps in establishing organizational cost accounti
ng capabilities. This module allows entering time via web browser, mobile device
and time card. It defines rotation plans based on shifts and work plans and emp
loyee mobility among departments or units. It supports policies for holidays, ov
er-time, and rounding. It improves reporting, extracting, and processing with a
single database of employee time-related information. This module is integrated
automatically with other modules of human resource management like payroll and b
enefits.
13
Assignment Set- 2 Question.1 What is scenario planning? Explain [10] Answer.1 Sc
enario Planning Scenario planning is sometimes described as a formal strategic p
lanning technique, but it can also be regarded as an informal approach to thinki
ng about the future in broad terms, based upon an analysis of likely changes in
the internal and external environment. A scenario can be defined as an imagined
sequence of future events (Oxford English Dictionary). Scenario planning is a si
mple, more or less formalized process for establishing a view about any changes
that can be foreseen to the scale and type of activities in the organization and
to its structure, and for identifying any external environment changes that are
likely to affect it. The aim is to obtain a better understanding of the possibl
e situations that may have to be dealt with in the future. It is described by Re
illy (1999) as follows: Scenario planning tries to open minds to a range of poss
ibilities that organizations may have to confront. These possibilities are then
ordered to produce a series of internally consistent postures of alternative fut
ures it is an intellectual process that seeks to identify issues and examine the
possible consequences of events. The creation of a scenario involves making bro
ad assessments of likely internal developments in the direction in which the org
anization is going and the implications this has on people requirements. The ass
essments may have to be made in the absence of any articulated business plan, an
d thus involve questioning top management and key line managers on how they see
the future, and asking them to interpret what this means in terms of their human
resource needs. Assessments also have to be made on likely changes in the exter
nal environment as it may affect the labour market. Estimating Future Human Reso
urce Requirements Scenario planning is in some situations as far as it is possib
le to go in estimating future people requirements, but where it is feasible and
appropriate, attempts can be made to produce demand and supply forecasts, and to
determine what action needs to be taken if the forecasts indicate the possibili
ty of a human resource deficit or surplus. Demand forecasting Demand forecasting
is the process of estimating the future numbers of people required and the like
ly skills and competences they will need. The ideal basis of the forecast is an
annual budget and longer term business plan, translated into activity levels for
each function and department, or decisions on downsizing . In a manufacturing c
ompany the sales budget would be translated into a manufacturing plan giving the
numbers and types of products to be made in each period. From this information
the number of hours to be worked by each skill category to make the quota for ea
ch period would be computed. Details are required of any plans or projects that
would result in demands for additional employees or different skills: For exampl
e, setting up a new regional organization creating a new sales department, 14
carrying out a major project or developing new products or services. As far as p
ossible, plans should also be reviewed that could result in rationalization, and
possibly downsizing, as a result of a cost reduction drive, a business process
re-engineering exercise, new technology leading to increased productivity , or m
erger or acquisition. The demand forecasting techniques that can be used to prod
uce quantitative estimates of future requirements are described below. Manageria
l or expert judgment This is the most typical method of forecasting and may be l
inked to some form of scenario planning. It simply requires managers or speciali
sts to sit down, think about future workloads, and decide how many people are ne
eded. This can be no more than guesswork unless there is reliable evidence avail
able of forecast increases in activity levels or new demands for skills. Ratio t
rend analysis This is carried out by studying past ratios between, say, the numb
er of direct (production) workers and indirect (support) workers in a manufactur
ing plant, and forecasting future ratios, having made some allowance for changes
in organization or methods. Activity level forecasts are then used to determine
(in this example) direct labour requirements, and the forecasts ratio of indire
ct to direct would be used to calculate the number of indirect workers needed. W
ork study techniques Work study techniques can be used when it is possible to ap
ply work measurement to calculate how long operations should take and the number
of people required. Work study techniques for direct workers can be combined wi
th ratio trend analysis to calculate the number of indirect workers needed. Fore
casting skill and competence requirements Forecasting skill requirements is larg
ely a matter of managerial judgment. This judgment should, however, be exercised
on the basis of a careful analysis of the impact of projected product market de
velopment and the introduction of new technology either information technology o
r computerized manufacturing. Supply forecasting Supply forecasting measures the
number of people likely to be available from within and outside the organizatio
n having allowed for attrition (labour wastages and retirements) absenteeism, in
ternal movements and promotions, and changes in hours and other conditions of wo
rk. The forecast will be based on: An analysis of existing human resource in ter
ms of numbers in each occupation, skills and potential; Forecast losses to exist
ing resource through attrition; Forecasts changing to existing resources through
internal promotions; Effect of changing conditions of work and absenteeism; Sou
rces of supply from
15
within the organization; Sources of supply from outside the organization in the
national and local labour markets. Mathematical modeling techniques aided by com
puters can help in the preparation of supply forecasts in situations where compr
ehensive and reliable data on stocks can be provided. As this is rarely the case
, they are seldom used. Analyzing demand and supply forecasts: The demand and su
pply forecasts can then be analyzed to determine whether there are any deficits
or surpluses. This provides the basis for recruitment, retention, and if unavoid
able, downsizing plans. Computerized planning models can be used for this purpos
e. It is, however, not essential to rely on software planning package. The basic
forecasting calculations can be carried out on a spreadsheet that sets out and
calculates the number required for each occupation where plans need to be made,
as in the following example: Number currently employed 70
Annual wastage rate based on past records 10 per cent Expected losses during the
year 7 Balance at the end of the year 63 Number required at the end of the year
75 Number to be obtained during the year(5-4) 12 Labour Turnover The analysis o
f the number of people leaving the organization (labour turnover or wastage) pro
vides data for use in supply forecasting, so that calculations can be made on th
e number of people lost who may to be replaced. More importantly, however, the a
nalysis of the number of leavers and the reasons why they leave provides informa
tion that will indicate whether any action is required to improve retention rate
s. It can prompt further investigations to establish underlying causes and ident
ify remedies. In this section, consideration is given to the following aspects o
f labour turnover: Its significance; Methods of measurement: The reasons for tur
nover; What it costs; Its incidence; How to benchmark rates of turnover. The sig
nificance of labour turnover The point was made by IRS (2000) that rates of labo
ur turnover provide a graphic illustration of the turbulence within an organizat
ion. High rates of attrition can destabilize a business and demotivate those who
attempt to maintain levels of service and output against a background of vacant
posts, inexperienced staff and general discontent. Obviously, recruitment induc
tion and training costs all raise with an increase in labour turnover. As the CI
PD (2000) has commented, turnover may be a function of 16
negative job attitudes, low job satisfaction, combined with an ability to secure
employment elsewhere, i.e. the state of the labour market. On the other hand, t
urnover is a normal part of organization functioning. While excessively high tur
nover may be dysfunctional, a certain level of turnover is to be expected and ca
n be beneficial to an organization . Methods of Measurement There are a number o
f ways of measuring labour turnover, as described below: The Labour Turnover Ind
ex The labour turnover index (sometimes referred to as the employee or labour wa
stage index) is the traditional formula for measuring wastage. It has been descr
ibed by the CIPD (2000) as the crude wastage method . It is calculated as follow
s:
This method is commonly used because it is easy to calculate and to understand.
For human resource planning purposes, it is a simple matter to work out. If a co
mpany wants to increase its workforce by 50 people from 150 to 200, and the labo
ur turnover rate is 20 per cent (leading to a loss of 30 people), then if this t
rend continues, the company would have to recruit 90 employees during the follow
ing year in order to increase and to hold the workforce at 200 in that year (50
extra employees, plus 40 to replace the 20 per cent wastage of the average 200 e
mployees employed). It can also be used to make comparisons with other organizat
ions which will typically adopt this method. This wastage formula may be simple
to use but it can be misleading. The main objection to the measurement of turnov
er in terms of the proportion of those who leave in a given period is that the f
igure may be inflated by the high turnover of a relatively small proportion of t
he workforce, especially in times of heavy recruitment. Thus, a company employin
g 150 people might have had an annual wastage rate of 20 per cent, meaning that
30 jobs had become vacant during the year, but this could have been spread throu
gh the company, covering all occupations and long as well as short service emplo
yees. Alternatively, it could have been restricted to a small sector of the work
force only 20 jobs might have been affected, although each of these had to be fi
lled 10 times during the year. These are totally different situations and unless
they are understood, inaccurate forecasts would be made of future requirements
and inappropriate actions would be taken to deal with the problem. The turnover
index is also suspect if the average number of employees upon which the percenta
ge is based is unrepresentative of recent trends because of considerable increas
es or decreases during the period in the numbers employed. When assembling and a
nalysis labour turnover figures, it is important to obtain information on the in
cidence for different categories of employee, especially those who are most diff
icult to attract and retain, such as knowledge or highly skilled workers. Surviv
al rate Method of analyzing turnover that is particularly useful for human resou
rce planners is the survival rate: the proportion of employees engaged within a
certain period who remain with the organization after so many months or years of
service. Thus, an analysis of trainees who have completed their training might
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show that after two years, 10 of the original cohort of 20 trainees are still wi
th the company- a survival rate of 50 per cent. The distribution of losses for e
ach entry group, or cohort, can be plotted in the form of a survival curve. The
basic shape of this curve has been found to be similar in many situations, altho
ugh it has been observed that the peaks of the curve may occur further along the
time scale and /or may be lower when it relates to more highly skilled or train
ed entry cohorts. Thus to ensure 50 trained staff in five years time, 100 people
would have to be engaged this year. Start figures like this can permit action,
especially when the costs of recruitment and induction are taken into account. H
alf-life index A simpler concept derived from survival rate analysis is the half
-life index which is defined as the time taken for a group or cohort of starters
to reduce to half its original size through wastage (five years in the above ex
ample). Comparisons can then be made for successive entry years or between diffe
rent groups of employees in order to show where action may have to be taken to c
ounter undesirable wastage trends. Stability index The stability index is consid
ered by many to be an improvement on the turnover index. The formula is: Number
with 1 year service or more x100 Number employed 1 year ago This index provides
an indication of the tendency for longer service employees to remain with the co
mpany and therefore shows the degree to which there is continuity of employment.
But this too can be misleading because the index will not reveal vastly differe
nt situations that exist in a company or department with high proportion of long
serving employees in comparison with one where the majority of employees are re
ndering short service. Length of service analysis This disadvantage of the stabi
lity index can be partly overcome if an analysis is also made of the average len
gth of service of people who leave. This analysis is still fairly crude, because
it deals only with those who leave- a more refined analysis that compares, for
each service category, the numbers leaving with the numbers employed. Choice of
measurement It is difficult to avoid using the conventional employee (labour) tu
rnover index as the easiest and most familiar of all methods of measurement, but
it needs to be supplemented with some measure of stability. An analysis of turn
over or wastage as part of human resource planning exercise requires detailed in
formation on the length of service of leavers, to identify problem areas and to
provide a foundation for supply forecasts.
18
Reasons for Turnover An analysis of the reasons for leaving derived from exit in
terviews will provide useful information on which to base retention plans. Exit
interviews aim to establish why people are leaving and why they cannot be persua
ded to stay back. The reasons for leaving can be classified under the following
headings: More pay; Better prospects (career move); More security; More opportun
ity to develop skills; Better working conditions; Poor relationship with manager
/team leader; Poor relationship with colleagues; Bullying or harassment ; Perso
nal-pregnancy, illness moving away from area etc. Exit interviews should aim to
opinions on any specific reasons for dissatisfaction under any of the above non-
personal headings. Some leavers will be forthcoming, others will not. It is up t
o the interviewer to probe skillfully and sensitively to establish reasons for d
issatisfaction or unhappiness; so that where those feelings are justified, somet
hing can be done about them. Judgment is required to sort out genuine complaints
from unjustified or exaggerated ones. An analysis of reasons should take place
and trends be noted. General issues can be addressed by reviewing employment and
reward policies and practices. Issues affecting particular managers should also
be tackled. This may be difficult if tie is a behavioral matter, such as bullyi
ng. However, the problem cannot be ignored. Exit interviews are not completely r
eliable, and it is desirable to gain a more comprehensive picture of the views o
f existing employees through attitude surveys. The Cost of Labour Turnover Labou
r turnover can be costly. The following factors should be considered: Leaving co
sts payroll costs and personnel administration of leaver: Direct cost of recruit
ing replacements (advertising, interviewing, testing etc); Opportunity cost of t
ime spent by HR and line managers in recruitment; Direct cost of introducing rep
lacements (induction course, cost of induction manuals etc); Opportunity cost of
time spent by HR and managers in introducing new starters; Direct cost of train
ing replacements in the necessary skills; Opportunity cost of time spent by line
managers and other staff in providing training; Loss of the input from those le
aving before they are replaced in terms of contribution output, sales, customer
satisfaction and support etc; Loss arising from reduced input from new starters
until they are fully trained. The incidence of labour turnover: The labour turno
ver rate for all employees as revealed by the CIPD 2005 UK survey was 15.7 per c
ent. The turnovers of different categories of employees were: staff 31.1 per cen
t, manual workers 16.7 per cent, secretarial and administrative staff 16.7 per c
ent and professional staff and managers 9.1 per cent. Benchmarking labour turnov
er: Labour turnover rates provide a valuable means of benchmarking the effective
ness of HR policies and practices in an organization. They do not tell the whole
story, but if turnover is significantly higher in
19
comparable organizations, this should stimulate action to investigate why this i
s the case and something must be done about it. Benchmarking can be carried out
by networking with other organizations possibly forming a club to exchange infor
mation regularly. There are also a number of benchmarking agencies as listed by
the IRS (2000), and the European Foundation for Quality Management (EFQM ) surve
y which uses the internet. National sources of data include the government s lab
our force and learning and training at work surveys, and the annual survey of la
bour turnover conducted by the CIPD.
20
Question.2 Discuss the different elements of Talent Management [10] Answer.2 Def
inition of Talent Management Talent management is the use of an integrated set o
f activities to ensure that the organization attracts, retains, motivates and de
velops the talented people it needs now and in the future. The aim is to secure
the flow of talent, bearing in mind that talent is a major corporate resource. I
t is sometimes assumed that talent management is only concerned with key people
the high flyers. For example, Smilansky (2005) stated that it is aimed at improv
ing the caliber, availability and flexible utilization of exceptionally capable
(high potential) employees who can have a disproportionate impact on business pe
rformance. But everyone in an organization has talent, even if some have more ta
lent than others. Talent management process should not be limited to the favoure
d few. This point was made by Delong and Vijayaraghavan (2003) when they suggest
ed that the unsung heroes of corporate performance are the capable, steady perfo
rmers. The Elements of Talent Management: Talent management starts with the busi
ness strategy and what it signifies in terms of the talented people required by
the organization. Ultimately, its aim is to develop and maintain a talent pool c
onsisting of a skilled, engaged and committed workforce. Its elements are descri
bed below: The resourcing strategy: The business plan provides the basis for hum
an resource planning, which defines human capital requirements and leads to attr
action and retention policies and programmes for internal resourcing (identifyin
g talent within the organization and developing and promoting it). Attraction an
d retention policies and programmes: These policies and programs describe the ap
proach to ensure that the organization both gets and keeps the talent it needs.
Attraction policies lead to programmes for external resourcing (recruitment and
selection of people from outside the organization). Retention policies are desig
ned to ensure that people remain as committed members of the organization. The o
utcome of these policies is a talent flow that creates and maintains the talent
pool. Talent audit: A talent audit identifies those with potential and provides
the basis for career planning and development, ensuring that talented people hav
e the sequence of experience supplemented by coaching and learning programmes th
at will fit them to carry out more demanding roles in the future. Talent audits
can also be used to indicate the possible dangers of talented people leaving (ri
sk analysis) and what action may need to be taken to retain them.
21
Role development: Talent management is concerned with the roles people carry out
. This involves role developmentensuring that roles provide the responsibility,
challenge an autonomy required to create role engagement and motivation. It also
involves taking steps to ensure that people have the opportunity and are given
the encouragement to learn and develop in their roles. Talent management policie
s also focus on role flexibility- giving people the chance to develop their role
s by making better and extended use of their talents. Talent relationship manage
ment: Talent relationship management is the process of building effective relati
onships with people in their roles. It is concerned generally with creating a gr
eat place to work but giving them a voice and providing opportunities for growth
. The aim is to achieve talent engagement ensuring that people are committed to
their work and the organization. As Sears (2003) points out, It is better to bui
ld an existing relationship rather than try to create a new one when someone lea
ves. Performance management: Performance management processes provide a means of
building relationships with people, identifying talent and potential, planning,
learning and development activities and making the most of the talent possessed
by the organization. Line managers can be asked to carry out separate risk anal
ysis for any key staff to assess the likely hood of their leaving. Properly carr
ied out performance management is a means of increasing the engagement and motiv
ation of people by providing positive feedback and recognition. This is part of
a total reward system.
Total reward: Total reward strategies provide for both financial and non-financi
al rewards, can contribute to the engagement and commitment of talented people b
y demonstrating that they are devalued for their contribution and by operating f
airly and consistently. Paying competitive rates will affect the ability of orga
nizations to attract and retain people but there is a limit to the extent to whi
ch companies can compete with the pull of the market as Cappelin (2000) points o
ut. Retention or loyalty bonuses (golden handcuffs) are used by some companies b
ut again, as stressed by Cappelin, there is limit to their effectiveness as brib
es. If talented people want to go they will go. Learning and development policie
s and programmers are essential components in the process of developing talent e
nsuring that people acquire and enhance the skills and competencies they need. P
olicies should be formulated by reference to employees success profiles which ar
e described in terms of competencies and define the qualities that need to be de
veloped. Employee success profiles can be incorporated in role profiles. Learnin
g and development activates are also important means of developing managers and
gaining the engagement and commitment of talented staff by giving them opportuni
ties to grow in their present roles and to progress to higher level roles.
22
Career management: Career management consists of the processes of career plannin
g and management succession. Career planning shapes the progression of individua
ls within an organization in accordance with assessments of organization needs,
defined employee success profiles and the performance, potential and preferences
of individual members of the enterprises. Management succession planning takes
place to ensure that, as far as possible, the organization has the managers it r
equires to meet future business needs. Creating Best Place to Work Ensuring that
the organization is perceived as being a great place to work means that it beco
mes an employer of choice i.e. one for whom people want to work. There is desire
to join the organization and once that is fulfilled, a desire to stay. Employee
s are committed to the organization and engaged in the work they do. To acquire
a national, even a local reputation as a good employer, it takes time. But it is
worth the effort. On the basis of their longitudinal research in 12 companies,
Purcell et al (2003) concluded that: What seems to be happening is that successf
ul firms are able to meet people s needs both for a good job and to work in a gr
eat place. They create good work and a conducive working environment. In this wa
y, they become an employer of choice. People will want to work there because the
ir individual needs are met- for a good job with prospects linked to training ap
praisal, and working with a good boss who listens and gives some autonomy but he
lps with coaching and guidance. The criteria used by the Sunday Times in identif
ying the 100 Best Companies to work for in 2005 were: Leadership at senior manag
ement level; My manager local management on a day-to-day basis; Personal growth
opportunities to learn, grow and be challenged; Well-being-balanced work-life is
sues; My team immediate colleagues; Giving something back to society and the loc
al community; My company the way it treats staff; Fair deal- pay and benefits. T
he factors used in the Financial Times 2005 Best Workplaces Report were: Have a
range of management practices that helps staff to feel valued, productive an lis
tened to; Support at home-step in when people are suffering from personal proble
ms; Maintenance of a balance between work and family. Effective employee develop
ment program. Staff trusted to do their jobs properly. Creating a great place to
work starts with developing the image of the organization so that it is recogni
zed as one that achieves results, delivers quality products and services, behave
s ethically and provides good conditions of employment. Organizations with a cle
ar vision and a set of integrate and enacted values are likely to project themse
lves as being well worth working for.
23
Question.3 Due to the recent recession, FinPlus Finance company has to downsize
the current employees. In this scenario what are the responsibility of an HR pro
fessional?. What kind of plan can they prepare?. [10] Answer: The downsizing pla
n If everything fails, it may be necessary to deal with unacceptable employment
costs or surplus numbers of employees by what has euphemistically come to be kno
wn as downsizing . The downsizing plan should be based on the timing of reductio
ns and forecasts of the extent to which these can be achieved by natural wastage
or voluntary redundancy. The plan should set out: The total number of people wh
o have to go, and when and where this needs to take place; Arrangements for info
rming and consulting with employees and their trade unions; A forecast of the nu
mber of losses that can be taken up by natural wastage; Any financial or other i
nducements to encourage voluntary redundancy; A forecast of the likely numbers w
ho will wander to leave. A forecast of the balance of employees, if any, who wil
l have to be made redundant (the plan should of course, aim to avoid this throug
h natural wastage and voluntary redundancy); The redundancy terms; Any arrangeme
nts for retraining employees and finding them work elsewhere in the organization
; The steps to be taken to help redundant employees find new jobs by counseling,
contacting other employers or offering the services of outplacement consultants
; The arrangements for telling individual employees about the redundancies and h
ow they are affected, and for keeping the trade unions informed. The Contributio
n of HR to Develop the Resource Capability Human resource planning, in the broad
er meaning of the term, is one of the fundamental strategic roles of the HR func
tion. HR can make a major contribution to developing the resource capability of
the firm and therefore its strategic capability by systematically reviewing the
firm s strategic objectives and by ensuring that plans are made that will ensure
that the human resources are available to meet those objectives. Thus HR is foc
using on the acquisition and development of the human capability needed to : Ens
ure that they are aware of the strategic plans of the business, and can provide
advice on the human resource implications of those plans;
24
Point out to management the strengths and weaknesses of the human resource of th
e organization, and the opportunities and threats they present so that these can
be considered when developing business plans; Be capable of scenario planning i
n the sense that they can identify future issues concerning the acquisition, ret
ention and employment of people, and advise on methods of addressing those issue
s; Understand the extent to which quantitative assessments of the future demands
for and supply of people may be feasible and useful, and know the methods that
can be used to prepare such forecasts; Be aware of the scope to deal with future
requirements by introducing various forms of flexibility; Be capable of prepari
ng relevant and practical resourcing plans and strategies for retaining people,
based upon an understanding of the internal and external environment of the orga
nization, and the implications of analyses of labour turnover.
25