Human Resource

UNIT 4 HUMAN RESOURCE PLANNING Planning

Objectives
After completion of the unit, you should be able to understand:

 Nature and concept of Human Resource Planning (HRP);

 Objectives of HRP;
 Factors affecting HRP;
 Process of HRP; and
 Methods of forecasting and supply of Human Resources

Structure
4.1 Introduction
4.2 What is Human Resource Planning?
4.3 Objectives, Benefits and Need of Human Resource Planning
4.4 Determinants of Human Resource Planning
4.5 Levels of Human Resource Planning
4.6 Process of Human Resource Planning
4.7 Human Resource Demand Forecasting
4.8 Human Resource Supply Forecasting
4.9 Human Resource Gap Analysis
4.10 Human Resource Plan Operative Formulation
4.11 Responsibility of Human Resource Planning
4.12 Problems in Human Resource Planning Process
4.13 Guidelines for Effective Human Resource Planning
4.14 Summary
4.15 Self Assessment Questions
4.16 Further Readings and References

4.1 INTRODUCTION
Human Resource Planning is the most important HR function in an
organisation. This is the first step after sourcing human resources in an
organisation. It focuses on ensuring adequate supply of human resource,
quality of human resources and effective utilization of human resources.
Human Resource Planning is concerned with forecasting and projecting the
requirement of human resource in the organisation. This unit shall cover the
process of Human Resource Planning and the methods of forecasting and
supply of human resources.

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Sourcing of
Human
4.2 WHAT IS HUMAN RESOURCE PLANNING?
Resources
Human Resource Planning (HRP) may be defined as strategy for acquisition,
utilization, development and retention of the human resources of an
enterprise. The objective is to provide right human resources for the right
work and optimum utilization of the existing human resources. HRP exists as
a part of the planning process of business. This is the activity of the
management which is aimed at co-ordinating requirements for and the
availability of different types of employers. The major activities of HRP
include: forecasting (future requirements), inventorying (present strength),
anticipating (comparison of present and future requirements) and planning
(necessary programme to meet future requirements).

Activity A: Identify one department in any company like finance, marketing

and tabulate the existing human resource and future requirements of that
department.

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4.3 OBJECTIVES, BENEFITS AND NEED OF

HUMAN RESOURSE PLANNING
The following are the objectives of human resource planning:

1. Assessing manpower needs for future and making plans for recruitment
and selection.
2. Assessing skill requirement in future for the organization.
3. Determining training and the development needs of the organization.
4. Anticipating surplus or shortage of staff and avoiding unnecessary
detentions or dismissals.
5. Controlling wage and salary costs.
6. Ensuring optimum use of human resources in the organization.
7. Helping the organization to cope with the technological development and
modernization.
8. Ensuring career planning of every employee of the organization and
making succession programmes.
9. Ensuring higher labour productivity.

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Benefits of HRP Human Resource
Planning
Proper HRP results into a number of benefits. Some of them are:

a) Create a reservoir of talent;

b) Preparation for future HR needs;
c) Promote employees in a systematic manner;
d) Provide basis for HRD; and
e) Help in career and succession planning.

Need for HRP at Macro Level

Major reasons for the emphasis on HRP at macro level include:

Employment-Unemployment Situation: Though in general the number of

educated unemployed is on the rise, there is acute shortage for a variety of
skills. This emphasises the need for more effective recruitment and retaining
people.

Technological Changes: The myriad changes in production technologies,

marketing methods and management techniques have been extensive and
rapid. Their effect has been profound on job contents and job contexts. These
changes cause problems relating to redundancies, retraining and
redeployment. All these suggest the need to plan manpower needs intensively
and systematically.

Organizational Changes: In the turbulent environment marked by cyclical

fluctuations and discontinuities, the nature and pace of changes in
organizational environment, activities and structures affect manpower
requirements and require strategic considerations.

Demographic Changes: The changing profile of the work force in terms of

age, sex, litercy, technical inputs and social background have implications for
HRP.

Skill Shortages: Unemployment does not mean that the labour market is a
buyer’s market. Organizations have generally become more complex and
require a wide range of specialist skills that are rare and scarce. Problems
arise when such employees leave.

Governmental Influences: Government control and changes in legislation

with regard to affirmative action for disadvantaged groups, working
conditions and hours of work, restrictions on women and child employment,
casual and contract labour, etc. have stimulated the organizations to become
involved in systematic HRP.

Legislative Controls: The days of executive fiat and ‘hire and fire’ policies
are gone. Now legislation makes it difficult to reduce the size of an
organization quickly and cheaply. It is easy to increase but difficult to shed
the fat in terms of the numbers employed because of recent changes in labour
law relating to lay-offs and closures. Those responsible for managing
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Sourcing of manpower must look far ahead and thus attempt to foresee manpower
Human problems.
Resources

Impact of Pressure Groups: Pressure groups such as unions, politicians and

persons displaced from land by location of giant enterprises have been raising
contradictory pressures on enterprise management such as internal
recruitment and promotions, preference to employees’ children, displace
persons, sons of the soil etc.

Systems Concept: The spread of systems thinking and the advent of the
macro- computer as part of the on-going revolution in information
technology which emphasizes planning and newer ways of handling
voluminous personnel records.

Lead Time: The long lead time is necessary in the selection process and for
training and deployment of the employee to handle new knowledge and skills
successfully.

4.4 DETERMINANTS OF HUMAN RESOURCE

PLANNING
The function of HRP is dependent an various factors. These include both
external and internal factors of an organisation. These factors can be
considered as determinants of HRP. The figure 1 broadly outlines the
determinants of HRP.

Figure 1 Determinants of HRP

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External Factors Human Resource
Planning
 Government Policies: Policies of the government like labour
policy, industrial relations policy, policy towards reserving certain
jobs for different communities and sons-of-the-soils, etc. affect the
HRP.
 Levels of Economic Development: Level of economic development
determines the level of HRD in the country and thereby the supply of
human resources in future in the country.
 Business Environment: External business environmental factors
influences the volume and mix of production and thereby the future
demand for human resources.
 Level of Technology: Level of technology determines the kin d of
human resources required.
 International Factors: International factors like the demand for the
resources and supply of human resources in various countries.

Internal Factors
 Company Policies and Strategies: Company’s policies and
strategies relating to expansion diversification, alliances, etc.
determines the human resource demand in terms of quality and
quantity.
 Human Resource Policies: Human resources policies of the
company regarding quality of human resource, compensation level,
quality of worklife, etc. influences human resource plan.
 Job Analysis: Fundamentally, human resource plan is based on job
analysis. Job description and job specification determines the kind of
employees required.
 Time Horizons: companies with stable competitive environment
can plan for the long run whereas the firms with unstable competitive
environment can plan for only short-term range.

4.5 LEVELS OF HUMAN RESOURCE

PLANNING
HRP is carried out at the different levels such as: National, Sectoral, Industry
and Unit.

a) National Level: The Central Government plans for human resources at

the national level. It forecasts the demand for and supply of human
resources as a whole. For example, the Government of India specifies the
objectives of HRP in successive five-year plans.
b) Sectoral Levels: Central and State Governments, formulate HRPs for
different sectors. For example, industrial sector, agricultural sector etc.
c) Industry Level: HRP for specific industries are prepared by the
particular industries. 71
Sourcing of d) Unit Level: HRP for a particular department/sector of an industry is
Human prepared at this level. It again includes the following levels.
Resources
i) Plant level;
ii) Department level; and
iii) Divisional level.

4.6 PROCESS OF HUMAN RESOURCE

PLANNING
The process of HRP is entirely based on the corporate plans and objectives.
HRP is a continuous process of review, control and assessment. Figure 2
clearly indicates the HRP process.

Figure 2: HRP Process

Source: Gupta (2007)

This HRP Process focuses on the following steps.

 A talent inventory to assess current human resources and to analyze how
they can be used currently
 A HR forecast to predict future HR requirements, skills required and
labor supply
 Action plans to enlarge the pool of people qualified to fill the vacancies
through various methods
 Review and monitoring to provide feedback on the overall effectiveness
of HRP

The major stages of HRP are as follows:

a) Analysing Operational Plans

It consists of the following substages:
i) Objectives and strategic plans of the company are analyzed.
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 ii) Plans concerning technological, finance, production are analyzed Human Resource
and HRP is prepared keeping these in mind. Planning

iii) Future plans, goals, and objectives of the company are also taken
into account.
b) Human Resource Demand Forecasting
HR demand forecasting mainly involves three sub functions:
i) Demand Forecast: Process of estimating future quantity and quality
of human resources required.
ii) Manpower Gaps: Depending upon the requirement existing surplus
human resources having desired skills are matched, if not found then
shortage is shown.
iii) Supply Forecast: Basing on the existing HR inventory and the
demand forecast, the supply forecast of human resources is carried
out in an organization.
In subsequent sections these steps are explained in detail.

4.7 HUMAN RESOURCE DEMAND

FORECASTING
There are two approaches to HR demand forecasting: quantitative and
qualitative. When focussing on human resources needs, forecasting is
primarily quantitative in nature and, is carried out by highly trained
specialists. Quantitative approaches to forecasting can employ statistical
analytical models, and at times by simple calculations anticipations future HR
requirements. Organizational demands will ultimately determine which
technique is to be used. Regardless of the method, forecasting plays a major
role in HRP however small or large the organisation is.

A. Quantitative Approaches
Quantitative approaches to forecasting involve the use of statistical or
mathematical techniques Trend anlaysis modeling or multiple predictive
techniques are some of the quantitative techniques used.

a. Trend Analysis- It forecasts employment requirements on the basis

of some organizational index and is one of the most commonly used
approaches for forecasting HR demand.

Following steps indicates the steps of trend analysis.

 First, select an appropriate business factor. This should be the

best available predictor of human resources needs. Frequently,
sales or value added (selling price minus costs of materials and
supplies) is used as a predictor in trend analysis.
 Second, plot a historical trend of the business factor in relation
to number of employees. The ratio of employees to the business
factor will provide a labor productivity ratio (for example, sales
per employee). 73
Sourcing of  Third, compare the productivity ratio for at least the past five
Human years. Fourth, calculate human resources demand by dividing
Resources
the business factor by the productivity ratio.
 Finally, project human resources demand out to the target year.

b. Modeling or Multiple Predictive Techniques.

Several mathematical models, with the aid of computers are also
used to forecast HR needs, e.g., optimization models, budget and
planning analysis.
Whereas trend analysis relies on a single factor (e.g., sales) to
predict employment needs, the more advanced methods combine
several factors, such as interest rates, gross national product,
disposable income, and sales, to predict employment levels. While
the costs of developing these forecasting methods used to be quite
high, advances in technology and computer software have made
rather sophisticated forecasting more affordable to even small
businesses.

Qualitative Approaches
In contrast to quantitative approaches, qualitative approaches to forecasting
use less statistical tools. Expert forecasts and Delphi technique are the most
commonly used qualitative techniques.

a) Expert Forecasts
In this method, managers estimate future human resource requirements, their
experiences and judgments to good effect.

a) Delphi Technique
It attempts to decrease the subjectivity of forecasts by involving a group of
preselected individual and soliciting and summarizing the judgments. Thus a
group decision-making process is invoked which in turn, requires a great deal
of process orienta-tion to enhance coordination and cooperation for
satisfactory forecasts. This method works best in situation where dynamic
technological changes affect staffing levels.

Ideally, HRP should the use both quantitative and qualitative approaches
while forecasting HR demand. Both the approaches complement each other,
thus provide a wholesome forecast

Whatever technique one might utilize, but they need to be selected aptly and
done systematically.

HR planners many times go further and analyze the demand also on the basis
of workforce analysis, work load analysis and job analysis.

a. Workforce analysis to determine the rate of influx and outflow of

employee. It is through this analysis one can calculate the labor
turnover rate, absenteeism rate, etc. Qualitative methods go a long
way in analyzing the internal flow created by promotions, transfers etc.
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b. Workload analysis, calculate the numbers of persons required for Human Resource
various jobs with reference to a planned output. This takes into Planning

consideration factors such as absenteeism, and idle time, etc. Both

quantitative and qualitative techniques are utilized for accurate results.
c. Job analysis: Job analysis helps in finding out the abilities or skills
required to do the jobs efficiently. A detailed study of jobs is usually
made to identify the qualifications and experience required for them. Job
analysis includes two things: job description and job specification. Job
description, thus, is a factual statement of the duties and responsibilities
of a specific job. It gives an indication of what is to be done, how it is to
be done and why it is to be done. Job specification provides information
on the human attributes in terms of education, skills, aptitudes and
experience necessary to perform a job effectively. This you will learn
more in the next unit.

Activity B: Browse through web resources and represent the list of the
demand forecasting techniques.

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4.8 HUMAN RESOURCE SUPPLY

FORECASTING
After forecasting the demand of HR the obvious step is to forecast supply of
HR.

Once an organization has forecast its future requirements for employees, it

then goes on to the next search that is from where can it fulfill its
requirements. It therefore needs to determine if there are sufficient numbers
and types of employees and how many are eligible for the requisite positions.
Supply analysis thus, involves planning for procurement: who, from where,
how and when. It scans the internal and external environment for the best-fit
candidate for the positions in demand. There are normally two sources of
supply: internal and external.

A. Internal sources: The most popular approach to be followed by all

managers is to look within the organization. Until and unless the opening
is not related to immensely diversified field of which the existing
workforce might not possess requisite skills, and the cost of training may
be working out to be high, it is easier to go in for an internal source for
recruitment. Because it is cost saving in many ways to utilize what is
already available to the organization.
A profile of employee in terms of age, sex, education, training,
experience, job level, past performance and future potential is 75
Sourcing of continuously maintained for use whenever required. Thus, if the
Human requirements in terms of growth/diversification, internal movements of
Resources
employees (transfer, promotions, retirement, etc.) are determined in
advance then the data can be very useful.

An internal supply analysis is done with

1. Staffing tables/manning charts, are pictorial representations of all

organizational jobs, along with the numbers of employees currently
occupying those jobs and future employment requirements.
2. Markov analysis, shows the percentage (and actual number) of
employees who remain in each job from one year to the next, thus
keeping track of the pattern of employee movements through various
jobs. Thus this analysis results in a composite matrix of supply.
3. Skill inventories list each employee’s education, past work experience,
etc.
4. Replacement chart helps to derive the profile of job holders,
department-wise and reveals those who could be used as replacements
whenever the need arises.
B. External sources: It is only when the cost of procuring the labour from
internal sources is more and also the present staff cannot be spared for
the future assignment, the company prefers to the external sources.
Therefore to summarize the following data should be available for a
comprehensive supply forecast:
1. The skill base, potential trainability and current and potential
productivity level of the existing work force.
2. The structure of the existing workforce in terms of age distribution,
skills, hours of work, rates of pay and so on.
3. The possible changes in the productivity, size and structure of the
workforce due to resignations and retirements, promotions and
transfers, absenteeism and other external factors (economic and
cultural), which may induce such changes.
4. The availability of the relevant skills in the external labor market for
present and future use. The HR planner will have to assess and
monitor factors such as: market value, image/preference of the
existing labor for the company, motivation of the prospective
candidates to join the company.

Activity C: Give example of the supply forecasting function of an

organisation.

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………………………………………………………………………………… Human Resource
Planning
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4.9 HUMAN RESOURCE GAP ANALYSIS

The final stage is to balance out the demand and supply gap. The closer the
gap the better it is for the company when it actually goes into procuring.

A comparison chart can be developed to find what is available and to what

extent it can fulfill the demand forecast. This exercise helps us have an idea
of the quantitative and qualitative gaps in the workforce. A reconciliation of
demand and supply forecasts will give the number of people to be recruited
or made redundant as the case may be.

In this process a company always needs to keep repeating this step as it

operate in a changing environment and requiremental changes in product
mix, union agreements, and competitive action are some of the important
things that need special attention. The human resource requirements thus
identified are translated into a concrete HR plan, backed up by detailed
policies, and other human resources instruments and strategies (for example,
recruitment, selection, training, promotion, retirement, replacement, etc.).

4.10 HUMAN RESOURCE PLAN OPERATIVE

FORMULATION
Organisations operate in a changing environment. Consequently, Human
resource requirements also change continually. Changes in product mix,
union agreements, competive actions are some of the important things that
need special attention. The human resource requirements identified need to
be translated into a concrete HR plan, backed up by detailed policies,
programmes and strategies (for recruitment, selection, training, promotion,
retirement, replacement, etc.) The box 2 represents different operative sub
types of plans as a result of HR planning.

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Sourcing of
Human
Resources Box 2: HR Operative Plan

 Recruitment plan: will indicate the number and type of people required and when
they are needed; special plans to recruit right people and how they are to be dealt
with via the recruitment programme.
 Redeployment plan: will indicate the programmes for transferring or retraining
existing employees for new jobs.
 Redundancy plan: will indicate who is redundant, when and where; the plans for
retaining, where this is possible; and plans for golden handshake, retrenchment, lay-
off, etc.
 Training plan: will indicate the number of trainees or apprentices required and the
programme for recruiting or training them; existing staff requiring training or
retraining; new courses to be developed or changes to be effected in existing
courses.
 Productivity plan: will indicate reasons for employee productivity or reducing
employee costs through work simplification studies, mechanization, productivity
bargaining; incentives and profit-sharing schemes, job redesign, etc.
 Retention plan: will indicate reasons for employee turnover and show strategies to
avoid wastage through compensation policies; changes in work requirements and
improvement in working conditions.
 Control points: the entire manpower plan be subjected to close monitoring from
time to time. Control points be set up to find out deficiencies, periodic updating of
manpower inventory, in the light of changing circumstances, be undertaken to
remove deficiencies and develop future plans.


4.11 RESPONSIBILITY FOR HUMAN

RESOURCE PLANNING
Top level executives are responsible for HR planning as it is one of the
important factors influencing the success of an organisation. The plans are
usually prepared by the Human Resource Department in consultation with
other departments. The Human Resource Department offer consultation,
counsel and advice to various divisional heads and coordinate the various HR
estimates from time to time. Prof. Geisler outline the responsibilities of
Human Resource Department in respect of HR planning as:

 Assist and counsel operating managers to plan and set objectives.

 Collect and summarise manpower data keeping long-run objectives and
broad organisational interest in mind.
 Monitor and measure performance against the plan and keep top
management informed about it.
 Provide proper research base for effective manpower and organisational
planning.

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4.12 PROBLEMS IN HUMAN RESOURCE Human Resource
Planning
PLANNING PROCESS
The main problems in the process of HRP are as follows:

a) Inaccuracy: HRP is entirely dependent on the HR forecasting and

supply, which cannot be a cent per cent accurate process.
b) Employee resistance: Employees and their unions feel that by HRP, their
workload increases so they resist the process.
c) Uncertainties: Labour absenteeism, labour turnover, seasonal
employment, technological changes and market fluctuations are the
uncertainties which HRP process might have to face.
d) Inefficient information system: In Indian industries, HRIS is not much
strong. In the absence of reliable data it is not possible to develop
effective HRP.
e) Time and expense: HRP is time consuming and expensive exercice, so
industries avoid.

4.13 GUIDELINES FOR EFFECTIVE HUMAN

RESOURCE PLANNING
Few guidelines to improve effectiveness of HRP process are discussed below.

a) Tailormade: HRP should be balanced with corporate objectives.

b) Appropriate time: The period of HRP process should be appropriate to
the needs and circumstances of an organization.
c) Adequate organization: HRP process should be adequately/properly
organized.
d) Top management support: Before starting the HRP process the support
and commitment of top management should be ensured.
e) Participation: HRP will be successful if all in an organization are
participating.
f) Information system: An adequate database should be developed for
facilitating HRP.
g) Balanced focus: The quantity and quality should be stressed in a
balanced manner.

4.14 SUMMARY
To sum up, HRP is the process of determining the number and kind of human
resources required in an organization for a specific time period in future.
HRP is important for an organization because of the changing scenario. HRP
is formulated at various levels. The main steps involved in it are analysis of
organizational plans, demand forecasting, supply forecasting and identifying
manpower gaps. 79
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Human
4.15 SELF ASSESSMENT QUESTIONS
Resources
1) Explain the objectives of HRP.
2) Describethe process of HRP with illustrations.
3) Discuss the problems in HRP and state measures to overcome them.
4) Briefly review the forecasting techniques.

4.16 FURTHER READINGS AND REFERENCES

Gupta, C.B. (1997). Human Resource Management, S. Chand & Sons, New
Delhi. Pattanayak, B. (2001). Human Resource Management, PHI, New
Delhi.
Aswathappa, K. (1999). Human Resource and Personnel Management,
Tata McGraw Hill, New Delhi.
Jyothi, P. and Venkatesh, D.N. (2006), Human Resource Management,
Oxford latest reprint book is also available
Armstrong, Michael (2020), A Handbook of Human Resource Management
Practice, Kogan Page

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