MODULE 2

HUMAN RESOURCE PLANNING

Lesson 1: Definition, Objectives, Advantages and Limitations of Human Resource Planning

Lesson 2: Why Conduct HR Planning?
Lesson 3: Human Resource Planning Process
Lesson 4: Evaluating The HRP Program
Lesson 5: Alignment of Business Planning and HR Planning

INTRODUCTION

This module focuses on the discussion on Human Resource Planning (HRP), which is the first scope of
Human Resource Management. HRP (also called as manpower planning) seeks to maintain and improve
the organization’s ability to achieve corporate objectives by developing strategies which are designed to
increase the present and future contribution of human resource. In this module, you will also learn the
process in HRP and why there is a need to conduct HRP.

LESSON 1: DEFINITION, OBJECTIVES, ADVANTAGES AND LIMITATIONS OF HUMAN RESOURCE

PLANNING

Definition and Importance of HR Planning

1. It is a strategy for the acquisition, utilization, improvement and retention of an enterprise’s human
resources.
2. It is a prediction of the number and types of people needed to accomplish the work of the
organization.
3. It is a process of recruiting the right people at the right time for the right job.
4. HR Planning is both a process and a set of plans. It is how organizations assess the future
supply and demand for human resources.

The primary role of every manager is to plan the organization's resources. The people are probably the
most valuable resource. It is important, therefore, to ensure that sufficient numbers of the appropriate
caliber of people are available to the organization in pursuit of its objectives: Every organization has to
make some attempts to acquire, train, re-deploy and dismiss employees in the course of its activities.
These initiatives are all far too random to be considered human resource planning. Planning for human
resources, as it is used here, is a lot more logical. According to this definition, human resource planning
is a strategic activity that is concerned with long-term resource security.
Objectives of HR Planning

The objectives of HRP are mainly to:

1. Make sure that present human resources are used as effectively as possible
2. Evaluate or forecast future needs
3. Cope up with the changing scenario
4. Attach with business plans of organization
5. Be prepared for layoffs
6. Establish a foundation for human resource development (HRD)
7. Assist in productivity bargaining

Advantages and Limitations of HR Planning

Advantages:

1. The appropriate number of employees is hired at every level of the hierarchy

2. Staffing requirements can be better balanced and movement of staff made easier
3. High labor turnover areas are identified
4. Implications of changes in recruitment, promotions and succession plans are foreseeable
5. Staff performance can be enhanced

Limitations:

1. Expensive clerical personnel and meticulous records are required;

2. Forecasting issues, particularly in the fields of technology and government policy;
3. Even for a few years in the future, forecasts can be unpredictable.
4. Inadequate planning skills among managers

The traditional perspective on HR planning is that it is an expense; nevertheless, the idea that it is an
investment is gradually receiving more attention. Therefore, it is important to make the greatest use of this
investment to guarantee that HR finds personal fulfillment and that the company maximizes the return on
the "costs" it represents.

It is important to stress the problem of uncertainty today; changes can occur in the following more detailed
analysis:

 Production and sales targets and new products

 Plans for diversifying, expanding or contracting production
 Centralization or other organizational change
 Technological changes, e.g. mechanization, improved methods, new management techniques
 Changes in hours of work, holidays, negotiations with trade unions and collective agreements
 National policies regarding taxation and redundancy
 Changes within company such as retirements, age structure, promotions

An organization must be able to find and keep the kind of human resources needed to conduct a
successful operation. Change is a dominant factor today. Processes, products, systems and methods
change quickly. The role of the computer is increasing and there is at present a shortage of systems
analysts and programmers, and this will continue for a number of years. New techniques, including
operational research, have an impact on how businesses are organized and change the manning pattern.
Some careers require more talents, while others require fewer. As a result, careful planning is required. A
company can benefit from significant cost reductions, and one area where this is particularly potential is
in the field of labor turnover, which can result in significant cost savings.

LESSON 2: WHY CONDUCT HR PLANNING?

To use HR more effectively and efficiently, HR planning must be conducted. By providing data on the
number of individuals and types of people required for job openings, HR planning helps in arranging
recruiting and selection successfully.

In a rapidly changing business such as computer programming, the company must be able to respond
quickly to changing needs of its employees. Careful planning is a central to this process. Planning for HR
is a crucial component of HRM. In other words, careful HR planning is necessary for the effective
implementation of many of the HRM functions covered in this module.

The organization can determine the mix of skills it will need in the future through the HR planning process.
Before the head of HR can plan for its recruitment, selection, and training of employees, the HR planning's
output is necessary.

Employees with higher levels of satisfaction and development have a better opportunity of growing and
making use of their talents. Greater employee happiness is frequently the result of this situation. A
company can be better helped in achieving its goals and objectives through the systematic planning of
HR. It can also be a useful tool for organizing the growth and development of its employees.

LESSON 3: HUMAN RESOURCE PLANNING PROCESS

Before we proceed with the stages in HR Planning process, let us first discuss the different categories that
are important in HR Planning.

There are four categories of staff that are important in human resource planning. These are as follows:
a. Existing staff
b. New recruits
c. Potential staff
d. Leavers

Each of these categories requires different decisions to be made by the managers concerned, and some
of these are set out below:

CATEGORY DECISIONS REQUIRED

Existing staff Performance appraisal
Productivity
 Development
Equal opportunities
Training
Remuneration
Promotion/career development

New recruits Recruitment methods

Selection procedures
Induction
Training
Terms of contract

Potential staff Recruitment methods

Public relations
Wage/salary levels
Employee benefits

Leavers Dismissals for poor

performance
Retirements
Redundancy procedures
Labor turnover

The list in the table above outlines some of the extensive effects of HRP activities. Clearly, we are
considering a process which affects every aspect of human resource management: recruitment, training,
remuneration, performance assessment, termination of employment and so on. Furthermore, it is a
process that is intrinsically related to the organization's organizational goals as well as to the economic,
social, and political environment.

Six Distinct Phases or Stages in HR Planning

1. Analysis of the current situation, environmental scanning, and forecasting of the labor
supply

The strategic plan must adapt to changing environmental conditions, and one of the main tools a business
can employ to facilitate this process is human resource management (HRM). Rapid technology
advancements, for instance, may require a firm to quickly find and hire workers with brand-new abilities
that it had not previously required. This stage will provide information about the current situation with
human resources and how it relates to the overall economy. The targeted business goals may cause HR
issues, thus having a good understanding of them is essential for planning.

2. Forecasting Demand of Employees

This is an estimation of the number and type of personnel that will be required. This involves determining
how many employees the company will need to be productive and competitive as well as figuring out their
specific qualifications. To properly plan out the required steps, a forecast of future development is required.

There are two considerations:

a. What is the manpower demand for specific types of position at any given point of time to perform
various roles?
b. What is the best employment profile to be used for future trends?

The most important steps in forecasting HR requirements is to identify what is to be forecasted. This
requires the drawing of a forecasting model which would attempt to do three things:

a. Define categories of skills in terms of kind or amount.

b. Identify each type and level of job.
c. Identify self-contained units which require separate quantitative HR forecasts.

There should be definitions of skill categories:

a. Managerial
b. Technical
c. Professional and administrative
d. Manual/operative supervisory
e. Clerical and office

3. Analyzing the Current Employee Supply or Manpower Inventory

This is to determine how many and what kind of employees the company currently have in terms of skills
and training necessary for the future.

Useful tools in analyzing current HR situation in the company include:

a. HR inventory – taking of firm’s employees; head count of employees.

b. Skills Inventory – analyzing the individual skills and abilities of all kind of employees at all levels.
c. Human Resource Audit – seeks to answer the question “what has been and is happening to our
HR?”

The major tool used is the skills inventory which is done after determining the kind of skills, abilities,
experiences, and training the employees currently have. By keeping track of these, the organization can
quickly determine whether a particular skill is available when it is needed. A skills inventory in its simplest
form is a list of names, characteristics, and skills of the people working for the organization.
In assessing the supply of labor available to the organization, there are two major areas to be reviewed:

1. The existing workforce (the internal labor market)

2. The supply of potential employees (the external labor market)

Under each of these areas a number of important questions need to be asked, relating to key aspects of
manpower recruitments and utilization. A typical analysis of supply will be a focus on the following:

Existing staff Potential staff Less leavers

Numbers Location Retirements

Categories Categories Wastage rates

Skills Skills Redundancies

Performance Trainability Dismissals

Flexibility Attitudes

Promotability Competition

Typical questions that managers need to ask when assessing the state of their internal labor market are
as follows:

Job categories – What categories of staff do we have such as engineers, process workers, etc.?
Numbers – How many people do we have in each category?
Skills – What skills are available amongst existing employees?
Performance – What levels of performance are we getting from our various categories of employee?
Flexibility – How easy is it to transfer employees between jobs? Are individual skills transferable? What
about trade union views on this point?
Promotability – How many of our employees are ready for promotion into more demanding roles? What
training could be reasonably provided to assist promotions?
Age Profiles – Do we have any age-related problems due to imbalances between experienced and
inexperienced staff?
Sex distribution – Have we an appropriate balance between the sexes, given the requirements of our
business?
Minority groups – Are minority groups properly represented in the workforce?
Leavers – What is our labor turnover rate by staff category and department? How many people are due
for retirement? Are any redundancies likely? How many people left for reasons of dissatisfaction? Are any
trends noticeable?
Answers to the above questions can provide a reliable picture of the state of the organization’s own labor
force. The resulting information can be matched with the demand forecast for labor in the various
categories identified by the management. The overall outcome is likely to fall within one of three
possibilities:

1. The supply available more or less matches the forecast of demand by staff category
2. The supply exceeds forecast requirements in one or more categories
3. The supply falls short of requirements in one or more categories

The first outcome is unlikely for all except small or very stable workforces. The second outcome is more
likely in an industry that is contracting, as in the coal and steel-producing industries, or that has suffered
some short-term economic disaster, such as an international boycott. The third outcome is likely to apply
to most organizations most of the time, that is to say, they are always short of appropriately qualified
personnel in one part or another of their business.

4. Forecasting HR Supply

The population count is the overall stock of HR at any particular time. Future labor supply can be predicted
by looking at past trends, patterns, and anticipated developments. How many will leave is a crucial factor
in predicting the labor supply. The length of service is an important indicator of leaving. The availability of
training resources will also have an impact on union attitudes and compensation practices as well as the
future labor supply.

5. Reconciling HR Requirements and Supply Forecasts

Both HR requirements and supply forecasts may reveal gaps which exist between employment and labor
force; between occupations employed and occupations not employed; between employees educated
and/or trained. The main process includes:

a. Assessment of performance of present workforce

b. Identification of possible discrepancies and imbalances compared with production
targets
c. Identification of possible causes for such imbalances and deviations

6. Action Plan Development

After analyzing both the supply and demand for future workers, these two forecasts are compared to
determine what, if any, action should be taken. Whenever there is a discrepancy between these two
estimates, the organization needs to choose a course of action to eliminate the gap.

a. Action decisions with a shortage of employees/planning for growth or expansion

 Recruitment – when HR plans indicate an undersupply of employees, firms can recruit personnel
to staff jobs with anticipated vacancies.
 Training and promotion – instead of hiring new workers to meet increasing demands, an
organization may decide to improve the productivity of the existing workforce through additional
training.
 Other options would be the use of overtime, additional shifts, job re-assignments, outsourcing, or
hiring temporary workers.
 This situation would be indicative of growing sales, increasing demand for the product and
expanding operations for the organization.

b. Action decision in surplus condition/planning for reductions

The current trend toward organization restructuring usually results in a smaller workforce. Therefore, when
an organization’s strategic plan calls for restructuring, the HRM response is usually one of downsizing.
Downsizing usually means layoff. Because of the negative outcomes that are often associated with layoffs,
employers are encouraged to seek alternatives such as the following:

 Attrition
 Early retirement
 Demotion
 Freeze hiring
 Restricted overtime

LESSON 4: EVALUATING THE HRP PROGRAM

It is crucial for managers to regularly and continuously assess the HR planning process, just like they do
with other HR responsibilities. An organization would always be able to hire the right amount of individuals
at the right time with the help of a proper HR planning process. Such perfection is seldom achieved.
However, the planning process can be assessed in terms of relative accuracy and ability to provide the
right mix of HR.

Its planning process may be considered to be effective if the company is typically able to hire the right kind
of employees at or around the time they are needed and the organization usually has a surprise or a
shortage of suitable workers. On the other side, the process of planning may be difficult or inadequate if
the company frequently finds itself scrambling to hire people on short notice, if it frequently hires the wrong
kind of people, or if it ends up with an excessive number of employees on the payroll.

If HR planning is done well, the following benefits should result: Upper management has a better view of
the human resource dimensions of business decisions. HR costs may be lower because management can
anticipate imbalances before they become unmanageable and expensive. More time is available to locate
talent because needs are anticipated and identified before the actual staffing is required.

There are now better chances to include minority and female groups in future expansion initiatives. Better
planning can be done for manager development.

To the extent that these results can be measured, they can form the basis for evaluating the success of
HR planning. Another approach is to measure projected levels of demand against actual levels at some
point in the future. But the most telling evidence of successful HR planning is an organization in which the
human resources are consistently aligned with the needs of the business over a period of time.
LESSON 5: ALIGNMENT OF BUSINESS PLANNING AND HR PLANNING

Planning for HR shouldn't be done independently. Business plans should be the basis for determining the
size of an organization's workforce, including its occupational mix. Figure 2.1 illustrates the alignment of
business planning and HR planning.

Figure 2.1

Every division of the business participates in HR planning. It must adapt business strategies to HR needs,
assess individual's present performance levels, and forecast their potential. It offers career management
or charting, as well as a system, forms, instructions, and a chart for comparing skill requirements for jobs
with those of the available workforce. It includes everything that is related to people, including the cost to
morale, to leadership, to productivity, to different types of remuneration, and to resource conservation. It
provides for the total human input required by the company and assures a planned return for its cost.

Long-Range Planning – To survive more than the next year or two, organizations must engage in long
range strategic plans. This entails preparing the mission and vision statement as well as formulating
strategies to achieve them.

All these should involve a long-range analysis of employment. Each of these changes mentioned could
have a significant influence on the availability and preparation of personnel. An organization cannot
achieve its long-range strategic goals without the necessary personnel.
Middle-Range Planning – The plans may be stated in terms of sales, number of units produced, or some
index of business activity. Achieving these goals and objectives requires the proper mix of people. This
includes projecting the number of employees needed for each job created to achieve identified business
goals.

Short-range Planning – Budgets and economic forecast are frequently developed without a careful
analysis of whether the HR will be available to achieve them. Supervisors and managers should anticipate
the number of employees and the specific training that would help employees acquire the skills needed to
make them productive.

Succession Planning – ensuring that another individual is ready to move into a position of higher
responsibility.

Replacement Chart – an HRM organizational chart indicating position that may become vacant in the
near future and the individuals who may fill the vacancies

References:

https://www.academia.edu/15361919/BBA_Human_Resource_Management_Module
Crispina R. Corpuz, *Human Resource Management Third Edition*. Rex Book Store
By:
Dr. Rakesh D., et al (2021). *Human Resource Management First Edition*. Archers and Elevators
Publishing House Inc.

Prepared by:

Prof. Rachelle E. Esperanza