ASIAN DEVELOPMENT FOUNDATION COLLEGE

P. Burgos St., Tacloban City

LESSON #4: EC 6
(Human Resource Management)

Topic: Human Resource Planning

 Human Resource Planning (HRP) and Strategic Planning

 Human Resource Planning is also defined as an HR undertaking that ascertains the company’s present and
subsequent HR needs. It serves as a link between human resource management and the entire strategic plan
of the organization.
 Strategic planning is an organization’s process of formulating and implementing its strategies and assessing
their effects on the internal and external environment of the firm.
 The main objective of this relationship is to make sure that Human Resource Management activities are
taken into consideration prior to formulating the corporate plan.

Corporate Strategic Plan Human Resource Planning

 Know the purpose of your existence.
 Specify long-term goals.
 Define your values and principles.
 Opportunities and threats.
 Environmental scanning.
 Industry/competitor analysis.
 Strengths and weaknesses.
 Forecast demand for employees.
 Resources, people, process, systems.
 Competitive strategy.
 Action plan.
 Strategy alignment.
 Design, structure, and systems among others.
 Allocate resources.
 Leadership, communication/change.
 Assessment of goals.
 Alignment of strategies to goals.
 Providing feedback.
 Formulate management philosophy.
 Create a healthy company culture.
 Outline code of conduct.
 Demographic trends.
 Outside supply of labor.
 Competitor benchmarking.
 Personality and competencies.
 Predict HR demand.
 Predict HR availability and suitability.
 Effectiveness and efficiency.
 Productivity improvement programs.
 External fit/alignment/internal fit.
 Analyze demand and supply gap.
 Termination and separation.
 Enhancement programs.
 Measure effectiveness of initiatives.
 Keeping track of activities.

 Companies do not take off by themselves. Practically every strategic planning decision has to take into
consideration the people issues related to it.
 Once the company has formulated its strategies, top-level management should make a decision as to the
number and type of people who will implement the strategy.
 Strategic planning and human resource planning jointly set objectives in relation to the firm’s processes and
human resources.
 The Process of Human Resource Planning

Organizational
mission, goals,
objectives, and
strategic requirments.

Current
Decide action. manpower
inventory

Forecasting
Employee demand and
plan supply

Manpower
gaps

1. Understand the organizational mission, goals, objectives, and strategic requirements.

2. Conduct a head count of present employees.
3. Know the future demand for employees. Conduct a skill inventory each year to approximate the need for
manpower for existing positions. Investigate the sources of supply of human resources. The sources can
come from academic institutions and people from other organizations seeking employment.
4. Determine the number of employees you currently have and how many you need. Study the gap between
the demand and supply.
5. Estimate the possible increase or decrease in human resources. The increase may come from new hires,
contingent workers, transfers, re-instated employees. Decreases may come from resignation, retirement,
study leaves, dismissal, lay-off, job abandonment, death, and other factors.
6. Decide whether to hire or to downsize. If the number of employees is more than what is needed, then
there is an oversupply of personnel. The action will be to downsize. If the number of employees is less
than what is needed, then there is an undersupply of manpower. The action will be to recruit additional
manpower.

 Factors that Affect Human Resource Planning

1. Company’s goals, objectives, and strategies.
2. Time spent for planning HR needs.
 3. Uncertainties of business activities.
4. Exactness of forecasting manpower needs.
5. Structural design of the company.
6. Internal and external availability of manpower.
7. Preparation period of positioning talents.

 Forecasting: A Key Component to Successful Human Resource Planning

 Forecasting involves predicting the company’s future human resource needs. This process could be
challenging and complex, but vital to the long-term performance of an organization.
 Managers need to regularly predict their HR needs and the core competencies of the firm as part of their
strategic planning activity. They should focus on these three major considerations:
a. Predicting demand for labor;
b. Predicting supply for labor; and
c. Reconciling the gap between demand and supply for labor.
 Being deliberately mindful to each will help managers attain their human resource needs, thus improving
organizational effectiveness and increasing profitability.

 Predicting a Firm’s Demand for Employees

 Predicting the need for labor has been an essential indicator of a company’s progress. No matter the size,
the company will need to conduct a forecast of its labor needs.
 There are two methods of predicting HR needs: quantitative and qualitative. Organizational needs will
eventually determine which method to use; however, no matter which method is selected, predicting HR
should never be ignored, even by small companies.
1. Quantitative Approaches. The quantitative prediction method covers the use of numerical information
or mathematical procedures in analyzing data.
a. Trend analysis is based on the concept that what has happened in the past will give the HR officer
an idea what will take place in the future.
 Trend analysis ties past employment flows to subsequent labor needs.
 Managers chart trends that affect the number of employees based on certain variables such
as sales volume and employee count during a certain business period.
 The table below shows the connection between sales volume and number of employees as
basis in determining the future HR needs.

Year 2009 2010 2011 2012 2013

Business Factor
Sales Volume (₽) 10,500,000 8,800,000 7,900,000 9,600,000 10,200,000
Number of Employees 240 200 165 215 ?

b. Ratio Analysis is the process of anticipating future HR demands by calculating the precise ratio
between certain variables. This method is considered more accurate than trend analysis.
c. Regression Analysis is identical to both trend and ratio analyses in such a way that forecasts are
based upon the relation between certain predictors like sales volume and number of employees.
 In this method, the organization draws lines and marks called a scatter diagram. It then
calculates a regression line which goes through the middle of the marks on the scatter
diagram.
2. Qualitative Approaches. It predicts future HR needs based on the opinions or gut feel of some selected
members of the organization outside experts or others concerned with the future labor needs of the
 company. This method is often seen as subjective and judgmental hence, biases are most likely to
occur.
 Delphi technique is a type of qualitative forecasting method that aims to minimize biases of
forecast by seeking expert opinions and summing up their decisions.

 Predicting the Supply of Employees

 If the demand projection has been made, the company gets a better picture of the number and type of
positions it will need to execute the work at a specific time.
 Decision will then be finalized on which positions will be filled on a certain future time. This process is
known as supply forecasting.

 Outcomes of the HR Planning Process

 Once the HR planning activity is accomplished, the company should set and carry out HRM practices that
will aid the managers in handling the possibility of occurrence of either an undersupply or oversupply of
personnel.

 Dealing with Workforce Oversupply

 If there are more workers than jobs, the first action is to downsize, which typically refers to lay-off.
However, due to some undesirable effects of lay-offs, managers may consider option such as:
 Suspend hiring
 Set limits to overtime
 Avoid contingent workers
 Early retirement
 Reduce pay
 Job sharing
 Offer career breaks like study leave

 Dealing with Workforce Undersupply

 An undersupply of personnel indicates that there are more jobs than workers. If this happens, the first move
of the company should be to hire additional employees. However, the company may consider the following
alternatives:
 Encourage overtime
 Create another work shift
 Job re-assignment
 Strengthen retention program