Running Header: The impact of Human Resource Planning on Organizational Performance

The impact of Human Resource Planning on Organizational Performance.

Course Name:

Students Name:

Name of the Institution:

Date:
The impact of Human Resource Planning on Organizational Performance

Literature Review

The impact of Human Resource Planning on Organizational Performance.

Introduction

An organization’s main goal is to have excellent performance and achieve set objectives.

Its human resource provides the vehicle for accomplishing this but through proper and sound

management (Byremo, 2015). Human resource management practices affect employees

positively and significantly contribute towards achieving organizational objectives demonstrated

by factors like job satisfaction and motivation, which translate in the operational results by

increasing quantity and quality of the products and service that ultimately causes a positive ripple

effect on the financial and market performance of an organization in terms of improved market

share, assets, and revenue (Paauwe and Richardson, 1997).

The human resource practices create satisfied employees who are motivated, skilled, and

committed, who approach their duties positively and this is, in turn, reflected on improved

organizational performance. These practices consist of training and development, performance

appraisals, adequate communication, compensation, selection and recruitment, grievance

systems, job security, and welfare benefits (Byremo, 2015).

Human resource planning (HRP) is an essential part of an organization. It involves

identifying the human potential, skills, and abilities available in an organization aimed at

realizing growth, productivity, and development (Dalvi, 2017). To achieve desired organizational
The impact of Human Resource Planning on Organizational Performance

performance, effective planning of all the human resources is vital encompassing linking

individuals with the right jobs based on the requirements.

Human resource planning (HRP) is the first step in the human resource management

process and ensures that an organization has an adequate number of people, placed correctly,

timely, and capable of effective and efficient completion of tasks to assist in meeting the overall

objectives of an organization. It ensures that the appropriate number of employees are available

to realize the organizational goals and objectives. It is also referred to as personnel planning,

manpower planning, labour planning, and employment planning and represents a sub-system in

the overall organizational planning (Dalvi, 2017).

Definition of HRP

According to Aslam et al., HRP is defined as “the process that identifies the number of

employees a company requires in terms of high quality and quantity; hence it is seen as an

ongoing process of regular and structured planning.” They further explain that HRP's main

purpose involves making sure that employees have optimum experiences with jobs and are of

sufficient number as required by an organization. They identify the roles of human resource

planning as balancing demand and supply of labour, identifying future labour needs, and

overseeing the ready supply of employees in the market to deal with any demand arising from an

organization.

Additionally, another author, E.W. Vetter, defines HRP as “a process by which an

organization should move from its current manpower position to its desired manpower position.
The impact of Human Resource Planning on Organizational Performance

Through planning, management strives to have the right number and right kind of people at the

right places at the right time, doing things which result in both the organization and the

individual receiving the maximum long-run benefit.”This emphasizes the need for hiring

sufficient qualified personnel to fill an organization’s vacancies in order to achieve desired

returns for the organization and the individual promptly.

Furthermore, Rice (2011) states that “The three key elements of the HR planning process

are forecasting labour demand, analyzing present labour supply, and balancing projected labour

demand and supply”. HRP is seen as a long-lasting process organized to meet the needs of the

human resource of the organization and to create and maintain the best fit between a job and its

employees.

Theories on the Link between Human Resource Management and Organizational Performance

Universal Perspective

Scholars that hold this view argue that it is not a must to adapt HR practices in line with

any particular organizational context to be successful. On the other hand, there are those like

Pfeffer (1998) who believe that there is indeed a link between HRM and performance. He

explains that training, selective hiring, high pay, information sharing, employment security,

decentralized decision-making, self-managed teams, and reduced distinctions based on status,

positively affects organizational performance regardless of other organizational conditions.

The impact of Human Resource Planning on Organizational Performance

Contingency Perspective

The scholars in this view argue that HR practices undertaken must be in line with other

contingent factors in order to achieve optimal organizational performance (Delery and Doty,

1996). This view is in direct contrast to the universalistic perspective and maintains that an

organization's business strategy is one of the most important contingent factors that have to be

considered when implementing HR practices to achieve organizational performance together

with other relevant factors.

Configuration Perspective

According to Byremo (2015), this view is focused on the synergistic effects created when

HR practices are grouped coherently. This causes even greater effects on organizational

performance than when each HR practice is effected independently. Ichniowski et al. (1997),

concurred with this view, demonstrating how HR practices significantly impacted worker's

performance, but individual practices yielded little to no effect.

Resource-Based View (RBV)

Takeuchi et al. (2007) theorized how competitive advantage is achievable through having

rare and valuable resources that competitors cannot imitate. The RBV theory according to Boxall

Steeneveld (1999), applies this view in an organizational context where employees are

considered as the valuable resources that have to be empowered through stimulating unique

behaviour that cannot be imitated and becomes advantageous for an organization to increase

performance.
The impact of Human Resource Planning on Organizational Performance

AMO theory and KSA theory

The AMO theory is an abbreviation of Abilities, Motivation, and Opportunity and holds

the view that HR practices that affect an employee's AMO are the ones that have an impact on

organizational performance (Byremo, 2015). The KSA theory is an abbreviation that refers to

Knowledge, Skills, and Abilities and advocates for the adoption of HR practices that increases an

employee's KSA resulting in motivating and empowering them for the prosperity and growth of

an organization’s performance.

Categories of Organisational Performance Impacted by HRP

Byremo (2015) provides three categories of organizational performance that are impacted

by HRP, including financial and market performance, operational performance, and employee

attitude and behaviour.

Financial and market performance examples include revenue, assets, market value and

share, and return on equity. It is noted as the most frequent type of performance linked to HRM

and organizational performance. The data obtained is objective and easily obtained regardless of

how big an organization is (Boselie et al., 2005).

Operational performance can be measured through productivity, quality service and

production, innovation, and sales. They can be further identified through the number of goods

produced, customer complaints number, and a number of new products.

The impact of Human Resource Planning on Organizational Performance

Employee attitudes and behaviour that can be measured include commitment,

absenteeism, turnover, motivation, trust in management, and job satisfaction. It is more of a

challenge to measure when compared to financial and operational performance but can be turned

into quantitative data using Likert ratings.

The Impact of HRP on Organizational Performance

The following factors represent the effects of HRP towards achieving excellent

organizational performance as highlighted by Dalvi (2017) and Vineeth (2019);

Assess Future Personnel Requirements- HRP assists in the appropriate selection of

employees in adequate numbers to prevent surplus and avoid shortage when needed. It also

creates ways by which problems can be detected before they become overwhelming.

Recruitment and selection- HRP is used for identifying talented individuals who are well

qualified and skilled to address the ever-changing dynamic business environment through proper

forecasting.

Placement of personnel- This involves matching employees correctly with appropriate

jobs based on their skills and knowledge. HRP assists in this placement and consequently results

in job satisfaction and enhanced employee efficiency.

Performance appraisal- HRP identifies the strengths and weaknesses of employees

through appraising performance in tasks and initiate applicable training to address the oversight.
The impact of Human Resource Planning on Organizational Performance

This contributes to improved organizational performance because employees are trained on their

weaknesses and how to successfully improve.

Promotions- HRP keeps track of employees and their achievements, ensuring that the

right people are promoted when the time comes. Through rightly deserved promotions,

employees are assured of professional growth and are more loyal and work harder to improve

organizational performance.

Training- HRP ensures that the correct employee training gaps are identified, and

appropriate measures are put in place to address them.

Transfer- By timely forecasting, HRP ensures that there is no shortage or surplus of

employees doing duplicate tasks, affirmed through timely transfers. This ensures that there is no

wastage of resources and streamlines organizational performance.

Career development- HRP takes into account the career development of its employees

based on performance experience and qualifications to encourage them to become devoted to

achieving the organizational long term and short term goals.

Organizational development- Through HRP and sufficient organization, conflict issues,

resistance to change, low productivity, and absenteeism are overcome. By addressing these

problems, an organization can focus its employees towards developing the organization and

achieving set goals.

The impact of Human Resource Planning on Organizational Performance

The motivation of personnel- HRP ensures that an organization's employees are well

motivated to drive its agenda. Motivation can be achieved by giving rewards for performing

well, bonuses, and other fringe benefits that encourage employees to be efficient and effective.

Consequences on Organizations that Lack/Have Poor HRP Systems

Unmotivated Personnel- This can cause conflicts at the workplace and affect teamwork,

making employees become disenfranchised by the work they are doing and the surrounding

environment and consequently reflect on the poor output of work assigned. The lack of HRP

practices that usually assure excellent performance causes poor performance, poor motivation,

and subsequently, poor service delivery

Mismatched personnel requirements- HRP ensures that personnel match correctly in the

right jobs that fit the experience, skills, and education required, guaranteeing efficiency and

effectiveness. The lack of HRP can cause mismatching of personnel in the wrong jobs, thereby

causing poor performance because of a lack of appropriate skills needed.

Decreased productivity- The lack of a proper HRP structure in place can contribute to

decreased productivity caused by lack of motivation, lack of change, and management strategies
The impact of Human Resource Planning on Organizational Performance

10

that lack vision. HRP ensures that employees are well motivated and have sufficient training

which enables them to perform their jobs efficiently and effectively.

High Turnover and Loss of Business- Not having a proper HRP system in place causes

employees to quit their jobs due to job dissatisfaction that does not address their needs. This, in

turn, affects the organizational culture, and once the word gets out, can cause loss of business.

Dissatisfied customers- Proper HRP ensures that employees are satisfied while

interacting with an organization’s customers. Poor HRP causes employees to be dissatisfied and

pass this on to the customers in the process of carrying out their duties. Dissatisfied employees

lead to dissatisfied customers because of the level of quality of service given will below.

Solutions for Resolving Poor HRP

According to Cho et al. (2005), some solutions for resolving poor HR planning consists of the

following;

Motivation- When employees are taken care of through HRP that is well designed, this

can translate to improved productivity per employee, lower rates of absenteeism because workers

are satisfied with their jobs and lower employee turnover because workers are motivated.

Job satisfaction- Proper HRP also translates to employees being satisfied with their jobs

causing improved productivity, increased earnings due to improved productivity, lower staff

turnover because employees are satisfied with their jobs resulting in reduced costs for
The impact of Human Resource Planning on Organizational Performance

11

recruitment, and offers employees who sell the goodness of an organization because of job

satisfaction.

Financial Stability- HRP ensures financial stability for employees because they feel

secure within their jobs, increases savings when rewarded for outstanding performance, provides

the freedom to spend on what one wants, and offers relief from anxiety caused by lack of money.

Builds Trust- HRP helps to build trust amongst employees and management and causes

improved morale because processes are open, consequently increasing productivity and instils

the value of teamwork in the workforce.

High Productivity- Appropriate HRP translates into high productivity, causing low

production costs, ensures maximized use of resources, and results in increased and efficient

production.

Increased Efficiency and Effectiveness- HRP guarantees efficiency and effectiveness at

the workplace and ensures employees are motivated to complete tasks quickly, wittingly, and

produce more using minimum resources.

Conclusion

Human Resource Planning is referred to as the first step in the human resource

management process which ensures that an organization has an adequate number of people,

placed correctly, timely, and capable of effective and efficient completion of tasks to assist in

meeting the overall objectives of an organization. It encompasses an analysis of three critical

The impact of Human Resource Planning on Organizational Performance

12

elements of forecasting, analyzing, and balancing labour to ensure an organization only hires the

correct number of staff to avoid shortage or surplus number of employees.

A background analysis of HRP reveals several theories that link Human Resource

Management to Organizational Performance. The universal perspective states that HR practices

instituted independently of any particular organizational context can realize increased

organizational performance in contrast with the universal perspective, the contingent perspective

claim that HR practices that are undertaken must consider other contingent factors to achieve

increased organizational performance. The configuration perspective school encourages that a

synergy of well grouped and coherent HR practices produce increased organizational

performance as opposed to a single implementation of the HR practices. The RBV theory views

employees as valuable resources who have to be motivated in a unique manner to achieve

increased organizational performance. Finally, the AMO and KSA theories advocates for the

adoption of HR practices that results in motivating and empowering employees towards the

prosperity and growth of the organization’s performance.

A deeper analysis of organization performance identifies three categories which are

impacted by HRP. Financial and market performance can be measured objectively and presents

the most frequent type of performance that links HRM to organizational performance. Operation

performance is measured by productivity, quality service and production, innovation, and sales.

Employee attitudes and behaviour performance is more challenging to measure but are made

easier to measure by turning them into quantitative data using Likert ratings.
The impact of Human Resource Planning on Organizational Performance

13

The impact of HRP on organizational performance consists of HR practices that have to

be encouraged to ensure increased performance and include personnel requirements, recruitment

and selection, job placement, performance appraisal, promotions, training, transfer, career

development, organizational development, and motivation.

Poor HR planning causes employees to be unmotivated, leads to a mismatch of

personnel, causes reduced productivity, high employee turnover, loss of business, and

dissatisfied customers, among other consequences. This translates into poor organizational

performance.

In conclusion, to properly address the problem of poor HR planning, organizations should

initiate the appropriate HR practices that serve as a catalyst for ensuring increased organizational

performance. These HR practices include employee motivation, ensuring job satisfaction,

maintaining high levels of trust, providing financial stability which causes increased

effectiveness and efficiency, and high productivity by the employees.

Due to the dynamic nature of organizational goals and strategies, HRP should become an

integral part and be done regularly for increased performance.

The impact of Human Resource Planning on Organizational Performance

14

Works Cited

Aslam, H., Aslam, M., Ali, N., Habib, B., & Jabeen, M. (2014). Human Resource

Planning Practice in Managing Human Resource: A Literature Review. International Journal of

Human Resource Studies, 3(1), Pages 200-217. doi:http://dx.doi.org/10.5296/ijhrs.v3i1.6253

Boselie, P., Brewster, C., & Paauwe, J. (2009). In search of balance-managing the

dualities of HRM: an overview of the issues. Personnel Review, 38(5), 461-471.

Boselie, P., Dietz, G. & Boon, C. (2005). Commonalities and contradictions in HRM and

performance research. Human Resource Management Journal, 15, 67-94

The impact of Human Resource Planning on Organizational Performance

15

Boxall, P., Guthrie, J. P., & Paauwe, J. (2016). Editorial introduction: progressing our

understanding of the mediating variables linking HRM, employee well-being, and organizational

performance. Human Resource Management Journal, 26(2), 103–111.

https://doi.org/10.1111/1748-8583.12104

Boxall, P., and Macky, K. (2007). High-performance work systems and organizational

performance: Bridging theory and practice. Asia Pacific Journal of Human Resources, 45(3),

261-270.

Butler, J. E. Ferris. G. R. and Napier, N. K. (1991). Strategy and Human Resource

Management, Cincinnati: South-Western Publishing Co.

Combs, J., Liu, Y., Hall, A. & Ketchen, D. (2006). How much do high-performance work

practices matter? A meta-analysis of their effects on organizational performance. Personnel

Psychology, 59, 501-528.

Huselid, M. A. (1996). The impact of human resource management practices on

perceptions of organizational performance. Academy of Management 35 journal, 39(4), 949-969.

Fernando Martin-Alcazar, Pedro M. Romero-Fernandez, and Gonzalo Sanchez-Gardey,

(2005), “Strategic Human Resource Management: Integrating the universalistic, contingent,

configurational and contextual perspectives”, International Journal of Human Resource

Management, 16(5), 633-659

The impact of Human Resource Planning on Organizational Performance

16

Ichniowski, C., & Shaw, K. (1999). The effects of human resource management systems

on economic performance: An international comparison of US and Japanese plants. Management

Science, 45(5), 704-721.

Harter, J. K., Schmidt, F. L., & Hayes, T. L. (2002). Business-unit-level relationship

between employee satisfaction, employee engagement, and business outcomes: a meta-analysis.

Journal of applied psychology, 87(2), 268.

Huselid, M. A. (1995), “The impact of human resource management practices on

turnover, productivity, and corporate financial performance”. Academy of Management Journal,

38, 635–670.

Huselid, M. A., Jackson, S. E. & Schuler, R. S. (1997). Technical and strategic human

resource management effectiveness as a determinant of firm performance. Academy of

Management Journal, 40, 171-188.

James Wallace, Nelarine E. Cornelius, (2007), “The use and impact of Human Resource

Information Systems On Human Resource Management professionals”, Information and

Management, 44, 74-89.Pfeffer, J. (1998). The human equation: Building profits by putting

people first. Boston, MA: Harvard Business Scholl Press.

Seonghee Cho, Robert H. Woods, (2005), “Examining the Impact of Human Resource

Management on organizational performances”, Academy of Management.

Steven J. Mayer, Ph.D., (2008), “Strategic Human Resource Management practices of

high-performance organizations”, Innovative Human Dynamics.

The impact of Human Resource Planning on Organizational Performance

17

Vandenberg, R. J., Richardson, H. A. & Eastman, L. J. (1999). The impact of high

involvement work processes on organizational effectiveness: a second-order latent variable

approach. Grou & Organization Management, 24, 300-339.

Wagen, L. V. D. (2007). Human resource planning. Human Resource Management for

Events, 19–36. https://doi.org/10.1016/b978-0-7506-6998-6.50009-3

Way, S. A. (2002). High-performance work systems and intermediate indicators of firm

performance within the US small business sector. Journal of Management, 28, 765- 785.

Wright, P. M. and Gardner, T. (2003), “The human resource-firm performance

relationship: Methodological and theoretical challenges”. The new workplace: A guide to the

human impact of modern working practices, (eds) D. Holman, T. D. Wall, C. W. Clegg, P.

Sparrow, and A. Howard. John Wiley & Sons, London