Human resource Planning

HR planning definition

● Human Resource planning is the

process by which an organisation
ensures that:
● It has the right number and kinds of people,
● At the right places,
● At the right time,
● Capable of effectively and efficiently completing
those tasks that will help the organisation
achieve its overall strategic objectives.
Definition (cont..)

● It is the process of assessing the future

supply of and demand for human
resources.
● It also provides mechanisms to eliminate
any gaps that may exist between supply
and demand
● It is a process of determining what
positions in the firm will have to be filled
and when
Definition (cont..)

● Human Resource planning translates the

organization’s overall goal into the
number and types of workers needed to
meet those goals.
● Without clear-cut planning, estimation of
an organization’s human resource need
is reduced to mere guesswork.
Definition (cont..)

● Thus, HR planning determines the

number and types of employees to be
recruited into the organisation or phased
out of it
Factors affecting planning
1. Organisation HR policies on recruitment, promotion,
succession management and career planning,
retirement, workforce mix etc
2. organizational values and strategies
● values - If it values longevity of employees, then
the HR plan might adopt that a strategy to recruit
and promote from within.
● Strategy
● How does the organisation intend to use
HR to achieve business strategy
● If an organisation is pursuing a
diversification strategy, then the HR plan
should ensure that it is prepared with staff
that can help the firm achieve its strategy,
e.g. new organisation structure, recruitment
and selection, training etc
3. Changing demographic - more young,
more old, more educated
If the markets of labour changes to more young,
more old, more women or more educated
people etc, then the job descriptions,
compensations strategies and general way of
working might have to change to suit these
groups
4. Government policy. Requirement for
gender balance, disability employment,
mandatory retirement age
Relation between organizational planning & HR planning

● Organization’s business or strategic

planning process is the first planning
process done by the company
● The organisational strategy should :
📫 A clear statement of the company’s
mission
📫 A clear statement of the company’s
purpose, plans
📫 An action plan based on the available
resources
● Human resource planning depends on
the organizational strategy or plan
● Contributes a lot to the main
organizational strategic plan
Hr planning
⦿ Should be aware of business strategy

⦿ See that human resource programs satisfy

the top management

⦿ Convert business objectives into hr

objectives
Strategy-linked HRP
● HRP is not the responsibility of HR
managers only
● Has to be do done together with
operating managers
-a close working relationship
● Hr managers provide with the structure
and support
● Top Management support should be
there
Strategic Planning and HR
Planning
● Strategic Human Resources
Management (SHRM)
● The pattern of human resources
deployments and activities that enable an
organization to achieve its strategic goals
● Strategy formulation—providing input as to what
is possible given the types and numbers of
people available.
● Strategy implementation—making primary
© 2007
resource allocation decisions about structure,
processes,
Thomson/South-Western.
rights reserved.
All and human
2–13
resources.
HRP and Strategic Planning

● Strategic Analysis
● What human resources are needed and
what are available?
● Strategic Formulation
● What is required and necessary in support
of human resources?
● Strategic Implementation
● How will the human resources be allocated?

Human Resources Strategic

Planning Planning
2–14
 Figure 2–1 Linking Strategic Planning and Human Resources

© 2007
Thomson/South-Western. All
rights reserved. 2–15
Factors affecting planning (Cont..)

● 5. The type of people employed and the

task they perform.
● An organisation may not need to plan very
far in advance for unskilled labour, since
they will usually be in abundant supply.
● Certain high skills job require planning
activities that project a year or two into the
future. Planning for executive replacement
may need even 5 years ahead
 Organizational Life-Cycle Stages and
HR Activities
LIFE-CYCL TRAINING LABOR /
E STAGE STAFFING COMPENSATION AND EMPLOYEE
DEVELOPMENT RELATIONS
Introduction Attract best Meet or exceed Define future Set basic
technical and labor market rates skill employee-rela
professional talent. to attract needed requirements tions
talent. and begin philosophy of
establishing organization.
career ladders.
Growth Recruit adequate Meet external Mold effective Maintain labor
numbers and mix market but consider management peace,
of qualifies internal equity team through employee
workers. Plan effects. Establish management motivation,
management formal development and and morale.
succession. Mange compensation organizational
rapid internal labor structures. development.
market
movements
 Organizational Life-Cycle Stages
and HR Activities (cont’d)
LIFE-CYCLE TRAINING AND LABOR /
STAGE STAFFING COMPENSATION DEVELOPMENT EMPLOYEE
RELATIONS

Maturity Encourage sufficient Control Maintain flexibility Control labor costs

turnover to minimize compensation and skills of an and maintain labor
layoffs and provide costs. aging workforce. peace. Improve
new openings. productivity.
Encourage mobility
as reorganizations
shift jobs around.
Decline Plan and implement Implement tighter Implement Improve
workforce cost control. retraining and productivity and
reductions and career consulting achieve flexibility
reallocations, services. in work rules.
downsizing and Negotiate job
outplacement may security and
occur during this employment-adjus
stage. tment policies
Process of HR planning

● Review your current organizational strategic

plan
● Review the current human resources situation
● Forecast on the future HR needs ( supply and
demands)
● Planning on meeting HR needs
● Implement the plan – recruit, select, training ,
downsizing
1. Reviewing the current strategic
plan
● HR planning goes hand in hand with the organizational
strategic planning
● Strategic planning refers to the organizational
decision about how it wants to accomplish its mission
and strategies
● The first stage of HR planning is the point at which
HRM and strategic planning initially interact.
● What is the future direction of the company and what
are the implications of HR
● Future direction in terms of technology, markets,
organizational structures, etc
2. Review the current human
Resource situation
● This is done by studying HR records to
determine:
● How many do we have in what category?
Quality and quantity
▪ Who is leaving the organization and when (
project turnover as result of resignation and
termination)
3. Forecasting Future Human
Resource Needs

I. Forecast Staff demand

II. Forecast Staff supply
Forecasting demand

● How many, what levels when

● The demand is closely tied to the strategic
direction that the organization has decided to
take. – are we engaged in reengineering?,
technological changes? that will shrink/change
the workforce in the coming years
Forecasting demand (cont…)

● Consider:
● major customer requirements and hence forecast
on revenue and seasonal fluctuations
● Projected staff turnover ( as a result of resignation
or termination or retirement)
● Strategic decisions to upgrade the quality of
products or services or enter new markets
● Technological and other changes resulting in
increased productivity
 How does HR Planning occur?

1. What does the environment look like?

2. What are our future personnel needs?
(forecast demand)
a. Judgmental
■ Estimates
■ Rule of Thumb
■ Delphi Technique
■ NGT
■ Brainstorming
 The Nominal Group Technique
A small group of 4-5 people gathers around a table. Leader
identifies judgment issue and gives participants procedural
instructions.

Participants write down all ideas that occur to them, keeping

their lists private at this point. Creativity is encouraged during
this phase.

Leader asks each participant to present ideas and writes them

on a blackboard or flipchart, continuing until all ideas have been
recorded.

Participants discuss each other’s ideas, clarifying, expanding,

and evaluating them as a group.

Participants rank ideas privately in their own personal order and

preference.

The idea that ranks highest among the participants is adopted

as the group’s judgment.
 The Delphi Technique
Leader identifies judgment issues and develops questionnaire.

Prospective participants are identified and asked to cooperate.

Leaders send questionnaire to willing participants, who record

their judgments and recommendations and return the
questionnaire.

Leaders compiles summaries and reproduces participants’

responses.

Leader sends the compiled list of judgment to all participants.

Participants comment on each other’s ideas and propose a final

judgment.

Leader looks
for consensus

Leader accepts consensus judgment as group’s choice.

 How does HR Planning occur?

1. What does the environment look like?

2. What are our future personnel needs?
(forecast demand)
b. Statistical
■ Regression
Statistical Techniques Used to Project
Staffing Demand Needs
Name Description
Regression analysis Past levels of various work load indicators, such as sales,
production levels, and value added, are examined for
statistical relationships with staffing levels. Where
sufficiently strong relationships are found, a regression (or
multiple regression) model is derived. Forecasted levels of
the retained indicator(s) are entered into the resulting
model and used to calculate the associated level of
human resource requirements.

Productivity ratios Historical data are used to examine past levels of a

productivity index (P):

P = Work load / Number of People

Where constant, or systematic, relationships are found,

human resource requirements can be computed by diving
predicted work loads by P.
Statistical Techniques Used to Project
Staffing Demand Needs (cont’d)
Name Description
Personnel ratios Past personnel data are examined to determine historical
relationships among the employees in various jobs or job
categories. Regression analysis or productivity ratios are
then used to project either total or key-group human
resource requirements, and personnel ratios are used to
allocated total requirements to various job categories or to
estimate for non-key groups.

Time series analysis

Past staffing levels (instead of work load indicators) are
used to project future human resource requirements. Past
staffing levels are examined to isolate and cyclical
variation, long-tem terms, and random movement.
Long-term trends are then extrapolated or projected using
a moving average, exponential smoothing, or regression
technique.
 Regression Analysis
1. Statically identify historical predictor of workforce size
Example: FTEs = a + b1 sales + b2 new customers

2. Only use equations with predictors found to be

statistically significant

3. Predict future HR requirements, using equation

Example: (a) FTEs = 7 + .0004 sales + .02 new
customers
(b) Projected sales = $1,000,000
Projected new customers = 300
(c) HR requirements = 7 + 400 + 6 = 413
Determining the Relationship Between
Hospital Size and Number of Nurses
How does HR Planning occur?

2. What are our future personnel needs?

(demand forecast cont.)
b. Statistical (cont.)
■ Ratio analysis
How does HR Planning occur?

3. Are resources available – internally or

externally – to fill those needs?
a. Internal
■ Replacement charts
Employee Replacement Chart for
Succession Planning
How does HR Planning occur?

3. Are resources available – internally or

externally – to fill those needs?
a. Internal
■ Replacement charts
■ Promotability
How does HR Planning occur?

3. Are resources available – internally or

externally – to fill those needs?
a. Internal
■ Replacement charts
■ Promotability
■ Succession planning
■ Skills inventory
■ Transition (Markov) matrix
 A Sample Transition Matrix
Part A: Personnel Supply
Estimated Personnel Classification in Year T + 1 (%)
Classifications in Year T P M S Sr A Exit
Partner .70 .30
Manager .10 .80 .10
Supervisor .12 .60 .28
Senior .20 .55 .25
Accountant .15 .65 .20

Part B. Staffing Levels

Estimated Personnel Availabilities in Year T + 1 (%)
Beginning
Classifications in Year T Levels P M S Sr A Exit
Partner 10 7 3
Manager 30 3 24 3
Supervisor 50 6 30 14
Senior 100 20 55 25
Accountant 200 30 130 40
10 30 50 85 130
How does HR Planning occur?

3. Are resources available – internally or

externally – to fill those needs?
b. External – what do you look at?

- try to determine availability of

qualified labor; Surplus? Shortage?
How does HR Planning occur?

4. What should we do?

- create plan of action to reconcile supply
and demand

a. Set objectives
b. Generate alternatives
Staffing Alternatives to Deal with
Employee Surpluses

Source: Compliments of Dan Ward, GTE Corporation

Staffing Alternatives to Deal with
Employee Shortages

Source: Compliments of Dan Ward, GTE Corporation

How does HR Planning occur?

4. What should we do?

- create plan of action to reconcile supply
and demand

a. Set objectives
b. Generate alternatives
c. Assess alternatives
 Alternative Scheduling Options
Percent Using
Alternative (N = 427 companies)

The following definitions were used in this survey

for alternative scheduling strategies:

• Part-time: A regular employee who works fewer than 35 hours per week. 84%
• Flextime: A system than enables employees to vary their schedules:
Usually, the flexibility applies to starting and finishing times.
40%
• Compressed workweek: A full-week schedule (usually 40 hours) than
occurs in fewer than five days, such as four 10-hour days.
23%
• Job sharing: Two or more employees split a full-time position, diving the
responsibilities, and, to some degree, the compensation.
18%
• Work-at-home: A program that enables employees to complete work at
home (or at a remote office closer to home) on a regular basis. It is often
referred to as “flexplace” or “telecommuting.” 13%
How does HR Planning occur?

4. What should we do?

- create plan of action to reconcile supply
and demand

a. Set objectives
b. Generate alternatives
c. Assess alternatives
d. Choose alternative – KEEP
PHILOSOPHY IN MIND
How does HR Planning occur?

5. How did we do?

a. Did company avoid surplus/shortage?

b. Evaluate usefulness of methods used

c. Goals v. Production Levels, etc.

Techniques of forecasting demand

● Experts estimates - provide the

organisation with demand estimates
based on experience, guesses, intuition,
and subjective assessment of available
economic and labour force indicators
● Trend Projections - Developing a
forecast based on past relationship
between a factor related to employment
and employment itself
Techniques for forecasting ….

● Statistical modeling -Using

sophisticated forecasting and modeling
techniques, using factors such as sales,
GDP, incomes etc and develop
mathematical models for forecasting
● Unit demand forecasting - The unit
manager analysis person by person, job
–by-job needs in the present as well as
in the future
Forecasting supply
● Internal supply
● The main task is to determining which current
employees might be qualified for the projected
openings
● This determines how many, and what kind of
employees are currently available in terms of skills and
training necessary for the future.
● The major tool used to assess the current supply of
employees is the skills inventory
● In some organisations, there will be a separate
inventory just for managers called a management
inventory
Skills inventory

● Purpose: to note what kind of skills, abilities,

experiences, and training the employees
currently have.
● By keeping track of these, the organisation can
quickly determine whether a particular skill is
available and when it will be needed
● Skills inventory are also useful in career
planning, management development and
related activities
Contents of a skills inventory

● Once a decision has been made to

create a skills inventory, the HR manager
must determine what information will be
contained in the system.
Contents of a skills inventory (cont..)

● The list of data that can be coded into the

skills inventories is endless and it must be
tailored to the needs of each organisation.
● Some of the most common items include:
● Name and Employees number
● Present location
● Date of birth, date of employment
● Job classification
Contents of a skills inventory (cont..)

● Specific skills and knowledge

● Education and field of education( formal
education and course taken since leaving
school)
● Professional qualification
● A supervisors evaluation of the employees
capabilities
● Salary range,
● Employees stated career goals and objectives,
including geographical preferences and
intended retirement date
Components of a skills inventory

Content can be put into three components

of as follows:
1. Data summarizing the employees past:
2. Data summarizing status of present
skills
3. Data that focus on the future
Data summarizing the employees
past
● a) Title and brief job description
highlighting positions held in the over the
years either in the organisation or
previous organisations
● b) Critical skills developed in these
positions – manual, cognitive, creative
Data summarizing the employees
past (cont..)
● C) Educational achievements – high
school, job relevant classes, college
(major minor)
● D) significant special project
accomplished during the last five years (
within this organisation or the previous
organisation)
Data summarizing the status of the
present skills
● A) skill related highlights last three
performance appraisals
● B) Employee perception of what is done
well on present job e.g. skill
competencies, perception of how skills
could be improved
● C) Employees supervisor perception of
the same
3. Data that focus on the future
● A) personal career goals – one year, three
years, identify specific positions and
aspiration. Avoid global generalities like “higher
up”
● B) view of the individuals present supervisors
as to what he or she could be prepared to
become. List specific position
● C) specify training and development efforts
that the individual is motivated to undertake –
on the job, off the job, classroom or
experiential
● The above three components are just a
sample and some organisations may
have a skill inventory cataloguing
different job classification
Maintaining the skills inventory
● The skill inventory is maintained by continuous
gathering, handling and updating data. Decisions to be
made include:
1. Method of data gathering: The two principle
method of gathering data are interviewing and
questionnaire
2. When to update: Updating must be planned – e.g.
annual update, or where changes are frequent,
monthly update
3. Manual or computerizes: A decision will also have
to be made on whether to store data manually or to
computerize it
Forecasting external supply

● From the labour market

● Consider: economic indicators –
competition and wage levels, cost of
living, education levels, unemployment
levels
● Forecast on the availability of potential
job candidates in specific occupation e.g.
IT, HR, Finance etc - is there an under
or over supply.
Action decisions in HR planning

● After HR planning system has analyzed both

the supply and demand for future workers,
these two forecasts are compared to
determine what if any actions should be taken.
● Whenever there is a discrepancy between the
tow estimates, organisations need to choose a
course of action to eliminate the gaps
Action decisions on a shortage of
employees
● Use of overtime - if the shortage is small and the
employees are willing to work overtime, it can be filled
with present employees
● Recruitment for skills where there are gaps.
● recalling employees who were laid off
● Use of part time workers, subcontracting,
● Training and development staff to meet the resource
gaps
● Promoting employees from lower level to higher levels
where there are gaps
Action decisions in surplus
conditions
● Attrition and Hiring Freeze – through attrition,
individuals who quit, die, or retire are not replaced.
Those who remain must handle the same workload with
fewer people.
● Early Retirement/ Buy Outs –a means of encouraging
more workers to leave the organisation early with some
incentives .
● Lay offs – can be temporary or permanent. A temporary
lay off occurs during slack periods when the workforce.
As soon as the work resumes to its normal level, workers
are called.. Companies have no legal obligation to
provide a financial cushion to laid-off employees
● Leave of Absence without Pay – this gives workers
the opportunity to take leaves of absence without pay.
Individuals offered this leave are usually employees
whose jobs may be eliminated in the future.
● Demotions – to reduce the number of employees
where there is a surplus at a senior level and there is a
shortage at a lower level
● Transfers – employees can be transferred from
areas/departments with surpluses to department with
shortages
● Creation of more work – the
organisation can expand its operations
by going into other locations or
producing additional products
● Note: As an approach to dealing with a
surplus, most organisations avoid lay
offs and rely more on attrition, early
retirements and creation of work
Plan to meet Human Resource
need
Develop operational plans for each of the
above actions: e.g.
I. Training and development plans
II. Recruitment and selection plans
III. Retirement/right sizing plans
IV. Transfer plans