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HUMAN RESOURCE PLANNING

Definition of the Terms:


‘Armed with information about jobs and their design, human resource (HR) planning systematically forecasts
an organization’s future demand for and supply of employees (Werther and Davis, 1996:155).
Human resource planning is the process of assessing the organization’s human resources needs in the light of
organizational goals and making plans to ensure that a competent, stable workforce is employed. – Wendell
French (1997:129)
Human resource planning is the process of analyzing an organization’s human resource needs under-changing
conditions and developing the activities necessary to satisfy these needs. – J.W. Walker (1980:177).
Human resource planning (HRP) is an effort to anticipate future business and environmental demands on an
organization and to provide personnel to fulfill that demand. - Cascio (1982:145).
Human resource planning (HRP) is the process by which an organization ensures that it has the right member
and kinds of people, at the right places at the right time, capable of effectively and efficiently completing those
tasks that will help the organization achieve its overall objectives. - David A. DeCenzo and Stephen P. Robbins
(1988:79)
Human resource planning is the process of formulating plans to fill future openings based on an analysis of
the positions that are expected to be opened and whether these will be filled by inside or outside candidates.-
Gary Dessler (1997:119)

Reasons for manpower Planning


The importance of HR or staffing planning lies with the contribution it could make to reducing
uncertainties within the employment patterns of large organisations. Staffing planning is a critical
managerial function because it provides management with information on resource flows that is used
to calculate, amongst other things, recruitment needs and succession and development plans. All
organisations perform HR or employment planning, informally or formally. The formal employment
techniques are described here because the informal methods are increasingly unsatisfactory for
organisations requiring skilled labour in a fast-changing labour market. It is important to point out
that most enterprises do more talking about formal employment planning than performing it.
The major reasons for formal HR planning are to achieve:
• More effective and efficient use of human resources.
• More satisfied and more developed employees.
• More effective equal employment opportunity planning.

1. More effective and efficient use of people at work: Employment planning should precede all
other personnel activities. How could you schedule recruiting if you did not know how many
people you needed? How could you select effectively if you do not know the kinds of persons
needed for job openings? How large an orientation program should you schedule? When?
How large a training program should you schedule, and when and on what topics? Careful
analysis of all personnel activities shows that their effectiveness and efficiency depend on
employment planning.

2. More effective employee development and greater employee satisfaction: Employees who
work for enterprises that use good employment planning systems have a better chance to
participate in planning their own careers and to share in training and development
experiences. Thus they are likely to feel their talents are important to the employer, and they
have a better chance to use their talents in the kinds of job that use these talents. This often
leads to greater employee satisfaction and its consequences, such as lower absenteeism, lower
turnover, fewer accidents, and higher quality of work.
3. More effective Equal Employment Opportunity (EEO) planning: All governments have
increased their demands for equal employment opportunity. To complete the government
reports and satisfactorily respond to EEO demands, enterprises must develop personnel
information systems and use them to formally plan their employment distribution. Effective
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employment planning assures that other personnel processes will be built on a good
foundation, one that averts shortages of skills by producing:
• Recruitment plans.
• The identification of training needs.
• Management development: in order to avoid bottlenecks of trained but disgruntled
management who see no future position in the hierarchy.
• Industrial relations plans: often seeking to change the quantity and quality of
employees will require careful IR planning if an organization is to avoid
industrial unrest.
Importance / Benefits of Human Resource Planning
Human resource planning is both a process and a plan (Ivancevich, 2001). It is how organization
assesses the future supply of and demand for human resources. Human resource planning allows the
organization to get the following benefits:
1. Gap elimination: Human resource planning is a mechanism to eliminate any gap that may exist
between supply and demand for manpower. It estimates the need for human resources in different
positions within the organisation and the existing position of human resources available within the
organisation from whom needs can be met up. Then, plan is made to fill up the gap from external
sources.
2. Integration with organizational strategies: Human resource planning has to be integrated with
the organizational strategies as human resource must ‘fit’ strategically with the mission of the
organization. It must also be integrated with human resource strategies of the organisation. This
integration is done by the human resource planning with systematic thinking and arrangements.
3. Matching with future: Planning is made for future work. Human resource planning is made to
match human resource activities and future organizational objectives efficiently. This matching will
align the human resource management with the future situations to generate the best performance
and to sustain in the competitive environment.
4. Economy hiring: Hiring of human resources is costly. If we know future needs of different types
of human resource well ahead of time, then we could hire them at low cost and hazards. We know
that anything is hurried, that is buried. So, we can achieve economy in hiring new workers/employees
through planning.
5. Expands the HR information base: Human resource planning collects internal and external
information to project future demands for and supply of human resources. A well founded data base
is developed through the process of human resource planning. This will assist other human resource
activities and other organizational units to make their plans and to take actions.
6. Coordination of programs: Human resource planning coordinates different departmental needs
of human resources and compliance with various legal and voluntary action programs such as
affirmative action plans and hiring needs. It keeps contact with different sections/departments of the
organisation, gets their requisition for workforce, gives them feedback, and maintains organisation-
wide coordination network to ensue uninterrupted supply of required human resources on time.
7. Ensures more effective and efficient use of human resource (HR): Human resource planning
ensures on-time supply of required workforce to the various sections/departments of the organisaiton.
It makes sure that right persons with right qualifications and talents are sent to the right positions.
This optimizes the use of human resources efficiently and effectively.
8. Satisfaction of workforce: Human resource planning ensures getting right persons on time and
placing them in their appropriate positions where they would get maximum possible satisfaction in
jobs. Thus, it brings about more satisfied and better developed employees.
9. Ensure equal opportunity: Human resource planning takes into account all factors, internal and
external, to make plan for resourcing organizational positions with qualified workforce. It maintains
legal and voluntary requirements to ensure equal opportunity to all prospective candidates without
any discrimination to anybody on the count of caste, colour, religion, ethnicity, nationality, language
and other unrelated criteria.

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Factors Affecting Manpower Planning:
HRP is influenced by several considerations. The more important of them are:
(a) Type and strategy of organization
(b) Environmental uncertainties
(c) Time horizons
(d) Type and quality of forecasting information
(e) Nature of jobs being filled and

(a) Type and Strategy of Organization:

The type of organization is an important consideration because it determines the


production processes involved, number and type of staff needed and the supervisory
and managerial personnel required. Manufacturing organizations are more complex
than those that render services in this respect.

The strategic plan of the organization defines the organization’s human resource
needs. For example, a strategy of internal growth means that additional employees
must be hired. Acquisitions or layoffs, since mergers tend to create duplicate or
overlapping positions that can be handled more efficiently with fewer employees.

(b) Environmental Uncertainties:

HR managers rarely have the privilege of operating in a stable and predictable


environment. Political, social and economic changes affect all organizations.
Personnel planners deal with environmental uncertainties by carefully formulating
recruitment, selection, training and development policies and programmes. Balancing
mechanisms are built into the HRM programme through succession planning,
promotion channels, layoff, flexi time, job sharing, retirement and other personnel
related arrangements.

(c) Time Horizons:


Yet another major factor affecting personnel planning is the time horizon. On the one
hand there are short-term plans spanning six months to one year. On the other, there
are long-term plans spread over three to twenty years. The exact time span, however,
depends on the degree of uncertainty prevailing in an organization’s environment. For
companies operating in an unstable environment, computers for example, plans must
be for a short period. For others where environment is fairly stable, for example a
university plan may be. In general, the greater the uncertainty, the shorter the plan’s
time horizon and vice versa.

(d) Type and Quality of Information:

The information used to forecast personnel needs originates from a multitude of


sources. A major issue in personnel planning is the type of information, which should
be used in making forecasts.

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(e) Nature of Jobs being Filled:
Personnel planners must consider the nature of jobs being filled in the organization.
Job vacancies arise because of separations, promotions and expansion strategies.

It is easy to employ shop-floor workers but a lot of sourcing is necessary for hiring
managerial personnel. It is, therefore, necessary for the personnel department to
anticipate vacancies, as far in advance as possible, to provide sufficient lead time to
ensure that suitable candidates are recruited.

HR Planning Method:
The four methods generally used to determine the requirements of personnel are:
(i) annual estimate of vacancies;
(ii) long-range estimates of vacancies;
(iii) fixed minimum man specification requirements,
(iv) specific position estimations.
Annually the top management team and the directors must examine their organization
structure and its adequacy for the assigned functions as well as its adaptability for changes
anticipated in the near future. This analysis or audit includes a review of the current vacancies
and probable future changes in the organization’s personnel.

Steps of HR Planning:

The need to anticipate and provide for future manpower requirements has made manpower
planning a vital function today in the area of staffing or the personnel function. In large
organizations, where a personnel department exists, this function is naturally performed by
such department as a staff function. Systematic manpower planning has not yet become really
popular even in advanced countries such as USA and UK, being practised there only by a few
huge companies in large-scale industries such as petroleum and chemicals.

Manpower planning can basically be done by observing the following three steps:

(a) Setp-1: Determine the Forecasting Period & Manpower Required:

Determine the period for forecasting requirements of manpower in the future (i.e.,
requirements at the end of the first year, second year, third year, fourth year, fifth year,
etc.) and forecast the manpower required at the end of such period.

(b) Step-2: Find out the Surplus or Shortage in Manpower Requirements:

From the number available at the commencement of the period, deduct the expected
wastage through deaths, resignations, retirements and discharges. This would give the
manpower available from existing staff at the end of the period concerned. A
comparison of the figures arrived at the in steps first and second, would indicate
shortages or surpluses in manpower requirements.

(c) Step-3: Decide the action on surplus or shortage:

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(a) In case of shortages, decide how such shortages are to be met (i.e., whether
through fresh recruitment and/or promotions from within) and whether any
training or developmental facilities would be required for this purpose.
(b) If surpluses are anticipated, decide how these surpluses will be dealt with like
through early retirements, discharges, or lay offs.

Who Does HR Planning?


Traditionally in large organizations, either the personnel department or a specialist planner of
staffing/HR within the personnel department carries out the function of staffing/HR planning.
However, in many smaller organisations, this staffing process would be conducted by the manager
of the organisation. In family-owned enterprises, for example, there is no specialized department to
handle personnel, so the HR/staffing planner may well also be the wages clerk, the financial manager,
the marketing and distribution manager. In the days of full employment and an expanding dynamic
international economy, staffing planning became crucial to profitability and the emphasis within
staffing planning was one of recruitment and retention.

HR FORECASTING
What is certain is the uncertainty of the future. As time passes, the working environment changes
internally as well as externally. Internal changes in the organizational environment include product
mix and capacity utilization, acquisition and mergers, and union-management relations among many
other areas. Changes in the external environment include government regulations, consumerism, and
literacy and competence levels of employees, among a host of other factors. HR plans depend heavily
on forecasts, expectations, and anticipation of future events, to which the requirements of staffing in
terms of quality and quantity are directly linked.
Considerable elements of forecasting Demand for Employees
The first element of a HR planning system is an effective employee forecasting system that takes into
account the following factors:
• Time Horizon: The longer the period, the greater the uncertainty. On the contrary, too short a
period is not sufficient for preparation of the people to be recruited. In addition, the techniques for
forecasting events in the longer period are different from those for a shorter duration. Some
organisations have separate plans for different periods (short-range plans, medium-range plans and
long-range plans).
• Economic factors: As business is an economic activity, forecasts must consider economic aspects
like per capita income, employees’ expectations of wages and salaries, cost and price of raw
materials, inflation rate, etc. Fiscal policies and liberalisation of trade will also influence future
requirements.
• Social factors: Here, we consider the expectations of existing and potential employees on wages,
working condition and government regulations and future trends in political influences and public
opinions.
• Demographic factors: Decisively influential uponn future requirements, these include availability
of youth, training facilities, women in the active labour force, sex ratio, facilities for professional
education, income level, education/ literacy, etc.
• Competition: Competitors’ strategies including advertising, quality of product, pricing, and
distribution. Influence future staffing in a variety of ways. For example, if we can only preserve our
market share by improving the quality of our product, we may have to employ competent R & D
engineers to tackle the product design.
• Technological factors: Technology has to be state of the art if a company is to survive the
competition. Technology, both in terms of quality and extent to which it is used, will determine the
capital and labour force requirements. Given that our future staffing needs obviously depend on
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expected trends in technology, ‘technology forecasting’ has become a specialist field in modern
management.
• Growth and expansion of business: Future growth and expansion plans will affect future staffing
requirements. Growth is possible through: Product diversification. Increased capacity of production.
• Expansion plans are executed through: Merger, Acquisition, Joint venture participation,
Formation of horizontal and vertical integration, Establishment of national and international value
chains. All these activities require additional staffing with right qualities in the right numbers at the
right times.
• Management philosophy/Leadership: Top management ultimately decides what levels of staffing
are required. The philosophy of the top management will largely determine the policies that inform
decisions on future staffing needs.
• Innovative management: As competition increases with globalisation and liberalisation of trade,
management needs to be innovative to stay afloat and sustain competitive advantage.
Factors to Consider in Forecasting the Demand and Supply of Human Resources
Forecast  Expected growth of the organisation
Demand
 Budget constraints
 Turnover due to resignations, termination, transfers, retirement, and death
 Introduction of new technology
 Minority-hiring goals
Forecast  Number of employees willing and able to be trained
Supply
 Promotable employees
 Availability of required talent in local, regional, and national labor
markets.
 Competition for talent within the industry and in general
 Demographic trends (such as movement of families from one part of the
country to another)
 Enrolment trends in government training programs, trade schools, colleges
and universities.

Forecasting Future Needs


The next step involved in human resource planning cycle is to compare projected demand and
projected supply. It is often helpful for managers to visualise human resources as flowing into,
through and out of the organisation. Employees tend to leave the organisation for a variety of
reasons, and they must be replaced. Both internal and external sources of supply should be
explored. One important element is prevailing trends in education. For instance, if enough people
are studying computer programming in schools and colleges, data-processing firms may not need
to train so many of their own computer programmers in the future.

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Formulation of a Staffing Strategy
To satisfy future requirements, two sets of options are open to management. First, management can
rely on current employees or hire new ones. Second, employees can be trained or not trained. When
these two sets of options are combined, four staffing strategies emerge:
(1) do not train current employees,
(2) train current employees,
(3) hire but do not train outsiders, and
(4) hire and train outsiders.
Most often in today's larger organisations, all four staffing strategies are used simultaneously
according to circumstances.

Employment Forecasting Techniques


The techniques now available for making HR forecasts can be subdivided into following techniques:
1. Expert-Estimate Technique
This is the least sophisticated approach to HR planning. An expert or a group of experts
forecasts employment or HR needs based on experience. It may be that a personnel manager will do
this by examining past employment levels and questioning future needs, which is a quite informal
system.
Summarizes the most crucial shortcomings of the technique as follows:
The major groups of part-time workers are
‘Role of the intermediary: Standard feedback takes the form of answers to an expert’s inquiry for data,
summaries of all inquiries and inter-quartile ranges of the estimates. The summaries of all inquiries are brief
and do not include the richness of interpretation each expert brings to bear on the problem. This is the price
paid for not allowing the experts to directly interact.
‘Independent expert responses: Experts are initially instructed not to discuss the experiment with others;
however, in practice, it is difficult to isolate managers’ discussion of these issues.
‘Number of minds: Five rounds seemed to be the typical number used in reported experiments. However,
most of the convergence and most of the data requests occurred in the early rounds, leaving the usefulness of
latter rounds open to question.
‘Changes in estimates: Five out of the seven experts changed their estimate only once, while one didn’t
change his initial estimate at all. From the reports of experiments in non-laboratory settings, this is a low
frequency of change. It may be attributed to the short range (one year) of the forecast, and more changes in
successively approximating the “true” answer would occur in a long-range problem with greater uncertainty.’

2. Trend-Projection Technique
This is a top-down technique that may be more familiar to you, as it involves developing a forecast
based on a past relationship between a factor related to employment and employment itself. For
example, in many businesses, employment needs are related to sales levels. The personnel planner
then can develop a table or graph showing past relationships between these two factors and estimate
required staffing levels based on sales forecasts.

3. Modeling and Multiple-Predictive Techniques


The third top-down approach to prediction of demand uses the most sophisticated forecasting and
modeling techniques. As you saw above, trend projections are based on relating a single factor (such
as sales) to employment. By contrast, modeling techniques use many factors and hence are more
advanced and refined. These techniques relate many factors to employment: sales, gross national
product, discretionary income, etc. In some approaches, they mathematically model the enterprise
and simulate their behaviour, using such methods as Markov models and analytical formulations.
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Markov models are often used by HR planners in connection with internal factors that need to be
considered in the development of a HR plan. Discussion of this technique will go to greater depth
later in this block. The modelling and multiple-predictive technique is used only in enterprises with
corporate staff capacities.
4. Unit Demand Forecasting Technique
Each unit makes a forecast of its staffing needs. The head office or the corporate headquarters sums
these unit forecasts, and the result becomes the HR forecast of the organization. The manager of each
unit analyses the unit’s needs on a person-by-person, job-by-job basis in the present as well as the
future. By analyzing present and future requirements on the job, and the skills of the incumbents, this
method focuses on quality of workers.
The Management of Change: HR Planning and Future Directions
During the recent past, HR planners have been confronted with two major issues: the implications of
demographic changes and the need for flexibility.
1. Demographic Change
There is concern among HR planners about the changing composition of populations. Some countries
like the UK have projected that the number of young people coming to the labour market is on the
decline. With the decline of birth rates and death rates, the age composition of the populations are
changing quite significantly. In countries where there are high rates of unemployment among the
youth, innovative schemes need to be thought of in terms of HR planning.
2. Flexibility
HR plans need to be flexible given the competitive nature of the business world. Three forms of
flexibility have been recommended when preparing staffing plans. These are:
• Numerical
• Financial
• Functional.
Numerical flexibility: Organizations such as banks and retail stores that have predictable and stable
patterns in the fluctuation of business activity could have a numerically flexible labour force. For
instance, banks experience busy periods in the day, say during the lunch hour. By having pools of
labour resources that can be called at short notice when their services are needed, organisations can
cut waste by not having idle labour. Banks call such labour pools ‘keytime labour’. HR or staffing
planning uses its employees like a tap which can be turned on and off at will in response to demand
cycles, customer arrival patterns, servicing peaks and troughs, etc.
Financial flexibility: Companies are seeking to pay individuals a more flexible wage in keeping with
their performance and productivity. This is quite different from the practice of paying the ‘going rate’
or a collectively negotiated wage. By doing this, HR planning keeps the costs under control and
avoids the rigidity in staffing plans that arise because of a fixed wage. You would have experienced
in your organisations that financial flexibility allows HR planners to vary employment levels and
number of employees in individual departments.
Functional flexibility: This aspect of flexibility attempts to remove rigidities and demarcations in
the organization. Often organizational rules, regulations and employment practices prevent
employees from performing a range of tasks and exercising multiple skills. Today, organisations
increasingly seek shifting of employees throughout the workplace, thereby encouraging employees
to develop a multiple range of skills and aptitudes.
A result of flexibility and flexible staffing planning is a de-layering of managerial hierarchies and a
breakdown of the typical pyramid structure of organisations. Therefore, promotions and traditional
hierarchical development may not be feasible. Rigidity in hierarchies and functional structures of
responsibility, seniority and status will have to give way to fluid and rapid change at the operational
level. In view of the above, this form of flexibility is considered to be the most important development
in staffing planning and justifies the title HR planning.
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Labour Market Survey
1. Labour Market – a Definition
The term labour market refers to the large number of changing influences and activities involving
labour demand and supply, which themselves greatly depend on economic conditions. From the
organisation’s point of view, the numbers and types of employees needed during a given period
reflect the relative demand for labour. From the individual’s point of view, a part-time job as a
cafeteria helper or a 30-year progression from a personnel assistant position to vice president of
personnel/HR are both instances of supplying labour.

Labour Force Quality


Examine the labour statistics of your country. You will notice that over a span of twenty years,
participation rates of different age groups in the labour market have changed considerably.
1. Level of Education
With increased educational opportunities, there have been great strides in the educational attainments
of those entering the labour market. More high school and university graduates are entering the labour
market. This has an impact on those who are holding certain jobs. As the educational attainments of
those who enter the labour market increase, those having lower levels of education and already
holding jobs in the labour market will be vulnerable.
2. Women in the Labour Force
In recent years, there has been a substantial increase in the participation rates of women in the labour
market. If you examine your country’s labour force statistics for the past two decades (1980s and
‘90s) this will be evident. In general, the number of married women in the labour force also has
increased. Equal employment opportunities and more access to education have been two reasons
adduced for increased participation of women in the labour force.
3. The Older Employee
In order to protect the older worker, countries like the United States have adopted age discrimination
legislation that defines an older employee as one between the ages of 40 and 65. In the US,
approximately about 23 percent of the labour force currently is in this category. This portion of the
labour force is protected because some employers hold negative stereotypes about older workers
Part-Time and Full-Time Work
Part-time work has increased during the 1980s. Usually, a part-time worker is a person who works
less than the normal rate of 40 hours a week (or whatever the country’s norm is). To understand well
the notion of part-time work, you have to draw a distinction between voluntary and involuntary part-
time employees. A person who is working parttime because he/she cannot get full-time employment
is involuntarily a part-time employee for whom the position means something different than to a co-
worker who wished for a part-time assignment.
The major groups of part-time workers are:
• Women: Traditionally, with the responsibilities of running homes and child rearing, more women
have preferred to work part-time. Furthermore, some experts have found that more husbands would
rather have their wives work parttime than full-time.
• Students: In developed countries such as the US and UK, a large number of students between the
ages 18-24 enrolled in higher education institutions work part-time. In the US, on the average
students work 20 hours a week.
• Retired and older persons: In order to keep active and to supplement any retirement income or
social security payments, a number of older citizens work part-time. Most of these persons are highly
skilled and could serve as training resources to new recruits.

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• Persons with a physical or mental disability: Part-time work is often more suited for handicapped
and disabled persons. In some specific disabilities, only part-time work enables individuals to work
without aggravating their disabilities. While most part-time work is in the service industries, there
are also numerous opportunities in the retail and wholesale trades and in manufacturing.
In a great number of circumstances, there are many advantages in part-time work for employees,
such as flexibility in scheduling, ability to spend more time with their families, additional
compensation and stabilisation of employment.
However, for employers, there are also certain disadvantages, such as part-time work requiring.

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