Human Resource Planning

“The process that links the human resource needs of an organization to its strategic plan to ensure that
staffing is sufficient, qualified, and competent enough to achieve the organization's objectives. HR planning
is becoming a vital organizational element for maintaining a competitive advantage and reducing employee
turnover.”

Need for Human Resource Planning

1. Replacement of Persons: A good number of employees are to be replaced in the undertaking
because of retirement, old age, death etc. So, there will be a need to prepare and train persons for
taking up vacant jobs in an enterprise.
2. Labour Turnover: Labour turnover takes place in all enterprises. However, the degree of labour
turnover may vary from company to company but it cannot be eliminated altogether. There is
always a need to recruit new employees to take up the jobs of those who have left the undertaking.
If the undertaking is able to foresee turnover rate properly then efforts in advance are made to
recruit and train employees so that work does not suffer for want of employees.
3. Expansion Plans: Whenever there is a proposal to expand or diversify the enterprise, more
employees will be needed to occupy new jobs. In such situations the human resource planning is
necessary.
4. Technological Changes: With research and new inventions, technological changes are coming
rapidly. There may be need to give fresh training to personnel. In addition, there may also be a
need to infuse fresh blood into the enterprise. Human resource planning will be helpful in coping to
the new demands of the enterprise.
5. Assessing Future Requirements: Human resource planning is also needed to assess whether there is
any shortage or surplus employees in the undertaking. If there is less number of employees than
needed, it will badly affect the work. On the other hand, if more persons are working than needed
then it will increase labour costs, etc. Human resource planning ensures the employment of right
employees.

Significance of HR Planning
1. Competitive business environment
2. Manufacturing economy to service economy
3. Technological advancements
4. Knowledge economy and knowledge workers
5. Increased productivity
6. Labour market changes
7. Government legislations and regulations

Importance of HR Planning
1. Takes care of HR needs
2. Part of strategic vision
3. Creating highly talented human resources
4. International Strategies
5. Foundation of the other HR functions
6. Unites the perspective of line and staff managers
7. Other benefits
Process of HRP

Environment Analysis.
First step of HRP process is to analysis the environment both internal and external. PESTAL, FIVE FORCES,
Johari Window etc Analysis are used.
Organisational objective and Policies
Next step, is based on Analysis the organisation's strategies are changed. The objectives and the policies of
the organisation are altered to achieve those strategies.
HR demand Forecast
Next Step in HRP is the Forecast the demand of the manpower needed in the organisation for the
upcoming year.
HR Supply Forecast
Fourth step is to determine from where I which sources the organisation will recruit the manpower.
Whether it would be from internal supply": employee of the organisation. getting promoted or transfer, or
External Supply: hiring from outside of the organisation
HR Programming
The Demand forecast and Supply forecast are matched and analysis.
HR Plan Implementation
After analysing there will be two outputs Excess manpower or Shortage of Manpower and then the
Measures are taken & Decision or Design identifying which places / Job titles are headed to fill. The plans
are made and implemented at this stage. Hiring People if there is a deficit and termination or putting
employee on part time in there is excess.
Control & Evaluation
Assessing if the right people are used, was the process error proof. Assessing if people need Training. In
this step we monitor & check for errors
Strategy is the formulation of organizational objectives, competitive Scopes and action plans for gaining
advantage
o Competitive Scope: Available Capabilities, in present condition what is it that organisation do
o Action plan Narrowing down what to do, how to do

The top Management determines strategy through a process of environmental analysis and discussions
Strategic Planning takes into account the unpredictability of trigger events
Emergent strategy: The plan that changes incrementally due to environmental changes. Rather than calling
for a straight path to the goal, this strategy calls for a series of actions to react to changes in competitor
actions or new legislation. Another name for this reactive process is emergent strategy
Intended strategy: The formulated plan
Realized strategy: The implemented plan
The intended strategy is the one that was formulated at the beginning of the period. The realized strategy
is, of course, what actually happened.

Event triggering change in strategy

1. changing market condition: Depression, change in customer needs, inflation. How one provides the
product. {Economic crisis}
2. New technology: Zomato→ Rating → delivery → earlier Restaurants used to have their own delivery
but now it uses Zomato → changes in HR employees
3. Emerging Market: New market opportunities. Ex- Staycation, could quarantine [ Hotel Industry J
4. New moves of competitors: Jio - cheap internet.
competitors come up with new strategies which may cause a change in strategies
5. Threat to change of leadership: Hostile takeover, when leadership feel pressured and threaten and
try to do thing differently
6. New CEO: New leader→ New expectations → New thought process → changes in Processes
7. External intervention: changes due to something detach from company. Like: Government, Society,
Environment war Ex: Covid
8. Performance Gap: Gap between Expected performance and Actual Performance

Types of strategies
Corporate Strategy
Companywide – focus on overall strategy for the company and all of its businesses. Long-time survival and
growth are key factor.

Business Strategy
Focuses on one line of business. Focus on building strong competitive position.
Strategic HR Model

Types of strategies:
HRM Making Strategic Contributions:
o Started out as an administrative function
o 1980’s research showed that adoption of good practises led to increased performance
o Personnel Management recoined as Human Resources Management

Resource-based view:
o Highly skilled, committed employees are VALUABLE

o Human Resources are DIFFICULT TO IMITATE

o Best Human Resources are RARE

o Value of Human Resources can be HARD TO SUBSTITUTE

The Contingency Perspective:
1. More cost effective to a Differentiation strategy than Low-cost strategy
2. Human Capital Theory:
o Collective sum of attributes, experience, knowledge and commitment
o Increased competitiveness in terms of innovation, adaptability, speed and efficiency
o Human Resources are looked on as a CAPITAL RESOURCE that requires investment
o Cost incurred in training, motivating, compensating and monitoring employees can be viewed as
an investment
3. Behavioural Theory:
o Different strategies require different Human Capital and a different behaviour of employees.
o Accurate identification of behaviour needed for that strategy is identified.
o e.g.: Risk taking/ Rule following; Competition/ teamwork
o Two good practises bundles:
 A. Performance appraisals, Pay for performance, incentives,
 advancement, benefits that enhance employee motivation
 B. Employee involvement, participation in decision making, voice and grievance, performance
feedback, teamwork, job enrichment

Strategies and HR Process

Corporate Strategy Leads to HR Strategy:
Effect of Strategy on HR:
o The Employee
o HR Planning
o Selection
o Compensation
o Performance Evaluation
o Labour Relations

Business Strategy (Porter)

Cost Leadership

 Competitive edge by manipulating production costs. It does this in two important ways:
o Charging lower prices to increase market share
o Reducing costs to increase profits
o Example :- Lakme
Differentiation

 Differentiation method looks to develop product uniqueness and attractiveness to engage

customers. To properly implement the Differentiation strategy, a company needs the following:
o Marketing and promotions teams
o Delivering high-quality products
o Ongoing research and innovation.
o Example:- Body Soap

Focus/ Niche

 The Focus approach avoids mass appeal, instead layering efforts toward one niche market. There
are two distinct variants:
o Cost Focus {Elle 18}
o Differentiation Focus {Sugar Sweat}

Business Strategy (Miles and Snow)

Defender
o Protect their market from new competitors
 o No adjustments in technology, structure, or operation methods
o Primary attention to improving the efficiency of their existing operations
o Example: Mac Donald’s
Prospector
o Innovative, seek out new opportunities, take risks and grow
o Regularly experiment with potential responses to emerging environmental
trends
o Often are the creators of change and uncertainty to which their competitors must
respond
o Encourage creativity and flexibility
o Creativity is more important than efficiency
o Example: 3M
Analyser
o Maintain their current businesses and to be somewhat innovative in new
businesses.
o Some products are targeted toward stable environments
o An efficiency strategy designed to retain current customers is employed
o Others are targeted toward new, more dynamic environments
o Balance efficient production for current lines along with the creative development of
new product lines
o Tight accounting & efficient financial controls and high flexibility, efficient production
and customized products, creativity and low cost
o Example: P&G
Reactor
o No, a consistent strategy-structure relationship
o Respond to environmental threats and opportunities in ad hoc fashion
o Sometimes these organisations are innovative, sometimes they attempt to reduce
costs, and sometimes they do both
o Top management frequently perceive change and uncertainty
o But are unable to respond effectively
o Example: Nokia
Human Resources Forecasting
Ascertaining the total or net requirement for personnel by determining the demand for and supply of
Human Resources now and in the future.

Forecasting Activity Categories

HR Forecasting Time Horizons

 Current Forecast:
o Immediate Operational Needs  Predictions: what can ideally
o Current Operating Cycle to maximum of 1 yr. happen in future.
 Projection: what would the
 Short-term Forecast organisation require in future.
o 1 to 2 yrs. beyond current operating requirements  Scenarios: Create different
situations based on predictions and
 Medium-term Forecast projections.
o 2 to 5 years into the future  Contingency Plans: Making plans
for different scenarios
 Long-term Forecast

o 5+ years into the future.

o Extremely flexible. Gives only probable requirement.

Determining Net HR Requirements

1. Determine HR Demand:
Demand provided by sub-units: given by the heads of departments
Planned future changed: strategic changes plans
Replace non productive paid time: breaks, paid holiday, maternity leaves54

Prioritising Requirements: what would be loss to the company if the position remains empty. ( based on
type of industry)

2. Ascertain HR Supply

INTERNAL SUPPLY EXTERNAL SUPPLY

 Rewarding loyal employees  Expand operations w/o increasing efficiency.

 Size and capabilities of current Force
 In absence of requisite KSAs
 Retrain current employees
 Recruit from external sources
 Bring in competitive insights and creative
techniques.
 Internal candidates are more expensive.
 Lure in experts from competitors.
[Headhunting]
 In cases where the objective is to shift culture/
past practises etc.

3. Determine Net HR Requirements

o External Supply Requirements = Replacement + Change supply components
 o Replacement hiring to replace all normal losses
o Change supply increase (or decrease) in overall staffing level
o External Supply = Current Workforce Size x (replacement % per year + change % per year)

4. Institute HR Programs: HR Shortage and HR Surplus

o HR Shortage = HR Demand > HR Internal Supply
 Hire part-time employees
 Full time employees,
 Contract or Freelance workers
 Recall employees who were laid off
 Hire retired personnel on part-time basis
 Internships, etc.
5. Institute HR Programs: HR Shortage and HR Surplus
o HR Surplus = HR Demand < HR Internal Supply
 Lay-off
 Terminations
 Job sharing
 Work-sharing
 Reduced timings
 Educational leaves/ trainings etc.
 Attrition and Hiring Freeze
 Early retirement packages

Strategic Importance of HR Forecasting

Key Personnel Analyses Conducted by HR Forecaster

o Specialists/ Technical/ Professional Personnel
o Employment Equity-Designated Group Membership
o Managerial and Executive Personnel
o Recruits
Methods of Forecasting
Qualitative Methods:
Managerial Judgement
o Direct inputs from Managers
o Most commonly used method
o Uses managerial judgement to calculate the requirement of personnel
o Provides more flexibility as compared to Quantitative models
o More suitable for small businesses as against Quantitative Methods
o Large business use a combination of Qualitative and Quantitative methods

Envelope/ Scenario Planning

o Look into all plausible scenarios in absence of concrete data.
o Link between cause-and-effect relationship
o Brainstorming sessions with line managers and HR managers.
o Discuss linkages and course of action for each scenario.
o More useful in incorporating effects of uncertainty and thereby change strategy

▣ Steps:
 Identify 3 business scenarios. (Opportunities and Threats/ Challenges)
 Assess organisations HR readiness viz. the 3 scenarios. Identify the Strengths and
Weaknesses for HR dept. with respect to the Challenges.
 Analyse the trends for competitors (Threats), employees (Motivations) and candidates
(Changes in quality and quantity of labour pool).
 Identify initiatives and programmes to deal with the Threats and Opportunities.

Impact Analysis
o Analysis of past trends by panel of experts.
o Panel attempts to identify future demand and study their effects.
o This differs from Trend Analysis as there the basis is numerical data which is objective whereas in
Impact analysis the basis subjective (but expert) judgement.

Delphi Technique
o Definition: A process in which the forecasts and judgements of a selected group of experts are
solicited and summarized in an attempt to determine the future HR Demand.
o Steps:
 Define and refine the issue or question
 Identify the experts, Terms and Time Horizons
 Orient the Experts
 Issue the first-round questionnaire
 Issue first-round questionnaire summary & second round questionnaire
 Continue issuing questionnaires
o Advantages
  Avoids problems associated with face-to-face groups such as reluctance on the part of the
individual expert.
 These include: shyness, perceived lower status or authority, communication deficiencies,
issues of individual dominance etc.
 Serves as a great equalizer and can elicit valid feedback
o Disadvantages

 Time and cost incurred can be higher

 Greatlydependant on individual know how as it can’t be statistically validated

 If the experts are drawn from one field, then professional training may guide them along single line
of enquiry

 If insufficient attention is given to identification and selection of experts the forecast may lack
sufficient expertise
Nominative Group Technique
o Also, a long-run qualitative technique.
o Differs from Delphi technique as follows:
 Group meets face-to-face; but only post-preparatory work
 Each estimate considered to be property of entire group and to be impersonal in nature
 Expert forecast is determined by secret vote
o Steps:
 Define and refine the issue/ question and relevant time horizon
 Select experts
 Issue the HR demand statement to experts
 Apply expert knowledge, state assumptions and prepare estimate
 Meet face-to-face
 Discuss the demand estimates & assumptions
 Vote secretly to determine the assessment

Quantitative Method
Trend/Ratio Analysis:

Regression Analysis:
Succession/ Replacement Analysis
o Shortage of skilled workforce is making Succession Planning crucial.
o Focus has broadened to include identification and development of competencies required.
o Two Aspects: Long term and short term

 Why is Succession planning crucial?

o Enables Organisations to respond to environmental changes.
o The development leading to Succession Planning will improve current performance.
o Positive motivation for the Employee.
o Provides back-up for various positions thereby making way for New Organisational Structure and
Flexibility.
 o Saves time and money.

Concept of Succession Management

o Ensures recruitment and development of employees to fill each key role within the company
o Recruiting superior employees, develop their knowledge, skills, and abilities, and prepare them for
advancement or promotion
o Ensures that employees are constantly developed to fill each needed role
o Ensures availability of well-equipped employees as the organization expands, loses key employees,
provides promotional opportunities, and increases sales
o Successful succession planning builds bench strength
o Pipeline of talent for critical roles: CEO, Senior Management, Specialists

Importance of Succession Management

o Improve internal candidate pool
o Assure business continuity
o Reduce skill gaps
o Retain Employees
o Help individuals realize their career plans within the organization
o Develop leaders more quickly
o Improve employees’ ability to respond to changing environmental demands

Formal and methodical REPLACEMENT PLANNING (RP) has existed for over 30 years. It has now evolved
into SUCCESSION MANAGEMENT (SM).
Succession Management has the following features:
o BROADER FOCUS:
 Shifting of focus from JOB to STRATEGY.
  RP assumes a single career whereas SM gives multiple options (E.g. Ginni Rometti at IBM)
 Selections on the basis of long-term goals.
 Development aligned with strategy.

o EXPANDED TIME HORIZON

 RP answers the question “Who is our backup for the position that will be vacant after 6 to
12 months?”
 SM focuses on a long term future of 2 or more years.

o TALENT POOLS
 Only 30% of the backup personnel fill the open positions they were slotted for.
 Key is to develop multiple successors and not just 1 starting with positions that are difficult
to fill.

o EVALUATION SYSTEM
 RP relied on a single rater for the identification of the replacement personnel. (Immediate
Superior)
 Information could be out of date or unreliable as the manager may not have been bought
into the process.
 In SM several raters give current evaluation. I.e. a 360 feedback is taken.
 The feedback sheds light on various aspects of candidate’s style and performance.

Process of Succession Management

Management Development Methods
Promotion
o Actually, working in the Position
o Difficult as the person is actually working in the position and they face difficulties and need to work
extra to adjust
Job Rotation
o More used in Technical Areas
o In Recruitment - Different Areas
o other than Rec. the other function in HR can be used
o Gives understanding of Job
o Can happen on Geographical Areas as they get better understanding what would work where

Formal Training & Development

o Workshops - like Classroom

Special Assignments
o short term activity undertaken which is snapshot of what ppl are accepted to do
o internship can be extension of S.A

_______________________________________________________________________________________
Most companies use a combination of these methods to gain maximum benefit.
E.g.: Cisco’s 3E Model.

 70% through Experience

 Job rotations, assignments, special projects

 20% through Exposure

Feedback, mentoring, shadowing

 10% through Education

Readings, e-learning and courses

Mentoring and Coaching

Mentor: help the person realise what they want to do
Not actively tell what to do
shows the way & come with own decision gives broad direction
Coach: identifies the weak areas and helps to bridge it
can ask you to go workshop training, etc

Trainer: This is the Method and You need to do it

Employee Role in Succession Management

o Top-down Approach assumes employees are ready and willing
o Employee’s relationship with the organization is not permanent
o Unlike traditional employment contract current contract doesn’t guarantee job security leading to a
more transactional relationship
o Organizations must take into consideration employee’s aspirations and goals
o Managerial preferences not the sole determinant in employee development
o Employees participate more eagerly if their goals match their succession plan
o Engagement in self-development is higher if employees are aware of the strategic goals of the
company
o Career counselling and discussions during appraisal helps ensure employees voice is heard
o Development plans can be customized and organizations can provide opportunities for employees
to develop their own succession plans
o This leads to improved retention, engagement and ownership

Managing Talent: Role of HR

HR owns talent management process in order to mitigate three types of risks:
o Vacancy Risk: Inability to fill key vacant positions quickly with effective leaders that leads to
business losses and/or an inability to move forward on strategic goals
o Readiness Risk: Must develop employees so that when opportunity arises employees that are
qualified and motivated are available
o Transition Risk: HR must develop retention programs for key employees and to monitor
competitors to headhunt external candidates

HRP and Retention

 o Competitive Advantage vs Competitive Disadvantage
o The exchanges in the relationship between an employee and an employer affect both of them.
o Two considerations: psychological contract and motivation help understanding employee retention
o Psychological Contract: can create either a positive or negative relationship between an employer
and an individual.
 It is based on trust and commitment that leads to meeting both the employer’s and
employee’s expectations and needs
o Unwritten psychological contracts includes expectations about
 Tangible items (wages, benefits, productivity, and attendance)
 Intangible items (e.g., loyalty, fair treatment, and job security).
o The three major factors that affect how a given individual performs
 Individual’s ability to do the work: talents, interests, personality
 Effort expended: motivation, work-ethic, attendance/turnover, job design
 Organizational support: training and development, equipment and technology, performance
standards, management and co-workers

Turnover
o Turnover occurs when employees leave an organization and have to be replaced
o Types of Turnover:
 Voluntary or Involuntary
 Functional or Dysfunctional
 Controllable or Uncontrollable
 o Churn: hiring new workers while laying off others
o The turnover rate can be computed as a monthly/ yearly cost

o Turnover data can be gathered and analyzed in a number of different ways:

 Job and job level
 Department, unit, and location
 Reason for leaving
 Length of service
 Demographic characteristics
 Education and training
 Knowledge, skills, and abilities
 Performance ratings/levels

Turnover Costs
Determining turnover costs can be relatively simple or very complex, depending on the nature of the
efforts made and the data used

o Other areas to be included in calculating detailed turnover costs are:

• Separation costs
• Vacancy costs
• Replacement costs
• Training costs
• Hidden/indirect costs such as reduced productivity, decreased customer service, additional
unexpected employee turnover, missed project deadlines, etc.

Myths and Realities about Retention

o Money is the main reason people leave
o Hiring has little to do with retention
o If you train people, you are only training them for another employer
o Do not be concerned about retention during organizational change
 o If solid performers want to leave, the company cannot hold them

Drivers of Retention
o Organizational and Management Factors
 Clearly established goals and hold managers and employees accountable for accomplishing
results better places to work
 Effective management provides the resources necessary for employees to perform their
jobs well
 Reflect workplace commitment by employees, which leads to more positive organizational
views in the industry and communities
 Some organizations see external events as threatening, whereas others see changes as
challenges requiring responses
 Organizational politics
 Quality of organizational leadership
o Job and Work-life
Job Security:
 Decline in job security leads to rise in anxiety levels of the remaining employees
 Employees start thinking about leaving before they too get cut
 If job continuity and security are high then retention rates are higher
Job Design:
 Knowledge, skills, and abilities mismatch
 Job accomplishments and workload demands that are dissatisfying or stressful
 Timing of work schedules and geographic locations
 The ability of employees to balance work and life requirements affects their job
performance and retention

o Rewards: Compensation, Benefits, and Performance

 Tangible rewards pay, incentives, and benefits
 Employers do best if they offer competitive pay and benefits
 Use of a wide range of special benefits and perks to attract and retain employees
 Processes used to determine pay is equally important
 Another aspect is employee recognition, which can be both tangible and intangible:
 Tangible: “employee of the month” plaques and perfect-attendance certificates
 Intangible and psychological recognition includes feedback from managers and supervisors
that acknowledges extra effort and performance, even if monetary rewards are not given

o Career Training and Development

 Organizational efforts to aid their career training and development can significantly affect
employee retention
 Indicate that employers are committed to keeping employees’ knowledge, skills, and
abilities current.
 Help underused employees attain new capabilities
 Companies can help reduce attrition by showing employees that they are serious about
career advancement opportunities
 o Work relationships
 Supervisory/management support: fair and non-discriminatory, allowing work flexibility and
work-life balance, giving feedback that recognizes employee efforts and performance,
supporting career planning and development
 Co-worker relations: close relationships with co-workers can be animportant signal that a
workplace is positive

o Employer Policies and Practices

 Reasonableness of HR policies
 Fairness of disciplinary actions
 Means used to decide work assignments and opportunities

Retention Assessment and Matrices

o To ensure that appropriate actions are taken to enhance retention, management decisions require
data and analyses
o The analysis of turnover data is an attempt to get at the cause of retention problems.
o When the causes are treated, the symptoms can go away.
o Common methods of obtaining useful perspectives:
 Employee surveys
 Exit interviews
 First-year turnover evaluations

Retention Evaluation and Follow-up

o Management can take numerous actions to deal with retention issues
o The choice of a particular action depends on the analysis of the turnover and retention
problems in a particular organization and should be custom tailored for that organization
o Tracking of intervention results and adjustment of intervention efforts should be part of
retention evaluation and follow-up
o Some firms use pilot programs to see how changes affect retention before extending them
to the entire organization