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CHAPTER 5:

HUMAN RESOURCE
PLANNING
Copyright 2005 South-Western. All rights reserved.

Human
Human Resource
Resource Planning
Planning (HRP)
(HRP)
First
First component
component of
of HRM
HRM strategy
strategy
All
All other
other functional
functional HR
HR activities
activities are
are derived
derived from
from
&
&flow
flow out
out of
of HRP
HRPprocess
process
Basis
Basis in
in considerations
considerations of
of future
future HR
HR requirements
requirements
in
in light
light of
ofpresent
present HR
HR capabilities
capabilities &
& capacities
capacities
Proactive
Proactive in
in anticipating
anticipating &
&preparing
preparing flexible
flexible
responses
responses to
to changing
changing HR
HR requirements
requirements
Both
Both internal
internal &
& external
external focus
focus

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Human
Human Resource
Resource Planning
Planning (HRP)
(HRP)
Goes
Goes beyond
beyond simple
simple hiring
hiring &
&firing
firing
Involves
Involves planning
planning for
for deployment
deployment of
of human
human
capital
capital in
in line
line with
with organization
organization &/or
&/or business
business unit
unit
strategy
strategy
May
May involve:
involve:
Reassignment
Reassignment
Training
Training&&development
development
Outsourcing
Outsourcing
Using
Usingtemporary
temporaryhelp
helpororoutside
outsidecontractors
contractors

Needs
Needs as
as much
much flexibility
flexibility as
as possible
possible
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Key
Key Objectives
Objectives of
of HR
HR Planning
Planning
Prevent
Prevent overstaffing
overstaffing &
& understaffing
understaffing
Ensure
Ensure organization
organization has
has right
right employees
employees
with
with right
right skills
skills in
in right
right places
places at
at right
right times
times
Ensure
Ensure organization
organization isis responsive
responsive to
to
changes
changes in
in environment
environment
Provide
Provide direction
direction &
& coherence
coherence to
to all
all HR
HR
activities
activities &
& systems
systems
Unite
Unite perspectives
perspectives of
of line
line &
& staff
staff managers
managers
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Types
Types of
of Planning
Planning
Aggregate
Aggregate Planning
Planning
Anticipating
Anticipatingneeds
needsfor
forgroups
groupsofofemployees
employeesinin
specific,
specific,usually
usuallylower
lowerlevel
leveljobs
jobs&&general
generalskills
skills
employees
employeeswill
willneed
needtotoensure
ensuresustained
sustainedhigh
high
performance
performance

Succession
Succession Planning
Planning
Focuses
Focuseson
onensuring
ensuringkey
keycritical
criticalmanagement
management
positions
positionsininorganization
organizationremain
remainfilled
filledwith
with
individuals
individualswho
whoprovide
providebest
bestfitfit
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Aggregate
Aggregate Planning
Planning
Forecasting
Forecasting demand
demand

Considers
Considersfirms
firmsstrategic
strategicplans
planseffects
effectson
onincreases
increasesoror
decreases
decreasesinindemand
demandfor
forproducts
productsororservices
services
Assumptions
Assumptionson
onwhich
whichforecast
forecastisispredicated
predicatedshould
shouldbe
be
written
writtendown
down&&revisited
revisitedwhen
whenconditions
conditionschange
change
Unit
Unitforecasting
forecasting(bottom-up
(bottom-upplanning)
planning)involves
involvespoint
pointofof
contact
contactestimation
estimationofoffuture
futuredemand
demandfor
foremployees
employees
Top-down
Top-downforecasting
forecastinginvolves
involvessenior
seniormanagers
managersallocating
allocatingaa
fixed
fixedpayroll
payrollbudget
budgetacross
acrossorganizational
organizationalhierarchy
hierarchy
Demand
Demandfor
foremployee
employeeskills
skillsrequirements
requirementsmust
mustalso
alsobe
be
considered
considered

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Aggregate
Aggregate Planning
Planning
Forecasting
Forecasting supply
supply
The
Thelevel
leveland
andquantities
quantitiesofofabilities,
abilities,skills
skills&&
experiences
experiencescan
canbe
bedetermined
determinedusing
usingSkills
Skills
Inventory
Inventory..
Annually
Annuallyupdated
updatedhuman
humanresource
resourceinformation
information
system
system(HRIS)
(HRIS)isisdynamic
dynamicsource
sourceofofHR
HRinformation
information
Markov
Markovanalysis
analysiscan
canbe
beused
usedtotocreate
createtransition
transition
probability
probabilitymatrix
matrixthat
thatpredicts
predictsmobility
mobilityofofemployees
employees
within
withinorganization
organization
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Exhibit
Exhibit5-2
5-2

Transition
Transition Probability
Probability Matrix
Matrix for
for
Restaurant
Restaurant

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Strategies
Strategies for
for Managing
Managing
Shortages
Shortages
Recruit
Recruit new
new
permanent
permanent employees
employees
Offer
Offer incentives
incentives to
to
postpone
postpone retirement
retirement
Rehire
Rehire retirees
retirees partparttime
time
Attempt
Attempt to
to reduce
reduce
turnover
turnover

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Work
Work current
current staff
staff
overtime
overtime
Subcontract
Subcontract work
work out
out
Hire
Hire temporary
temporary
employees
employees
Redesign
Redesign job
job
processes
processes so
so fewer
fewer
employees
employees are
are needed
needed

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Strategies
Strategies for
for Managing
Managing Surpluses
Surpluses
Hiring
Hiring freezes
freezes
Do
Do not
not replace
replace those
those
who
who leave
leave
Offer
Offer early
early retirement
retirement
incentives
incentives
Reduce
Reducework
work hours
hours
Voluntary
Voluntary severance
severance
leaves
leaves of
of absence
absence

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Across-the-board
Across-the-board pay
pay
cuts
cuts
Layoffs
Layoffs
Reduce
Reduce outsourced
outsourced
work
work
Employee
Employee training
training
Switch
Switch to
to variable
variable pay
pay
plan
plan
Expand
Expand operations
operations
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Succession
Succession Planning
Planning
Involves
Involves identifying
identifying key
key management
management positions
positions
the
the organization
organization cannot
cannot afford
afford to
to have
have vacant
vacant
Purposes
Purposes of
ofsuccession
succession planning
planning

Facilitates
Facilitatestransition
transitionwhen
whenemployee
employeeleaves
leaves
Identifies
Identifiesdevelopment
developmentneeds
needsofofhigh-potential
high-potentialemployees
employees&&
assists
assistsinincareer
careerplanning
planning

Many
Many organizations
organizations fail
fail to
to implement
implement succession
succession
planning
planning effectively
effectively

Qualified
Qualifiedsuccessors
successorsmay
mayseek
seekexternal
externalcareer
careeradvancement
advancement
opportunities
opportunitiesififsuccession
successionisisnot
notforthcoming
forthcoming

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Exhibit
Exhibit5-4
5-4

Sample
Sample Replacement
Replacement Chart
Chart

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Exhibit
Exhibit5-5
5-5

Pros
Pros &
& Cons
Cons of
of Disclosing
Disclosing Succession
Succession
Planning
Planning

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Reading
Reading5.1
5.1

Heirs
Heirs Unapparent
Unapparent
Experts
Experts are
are looking
looking more
more carefully
carefully at
at
leadership
leadership needs
needs for
for 21st
21st century,
century,&
&
warning
warning of:
of:
AAshrinkage
shrinkageininpool
poolofofavailable
availablemanagers
managers
Escalating
Escalatingcosts
costsininrecruiting
recruitingoutside
outsidetalent
talent
AAlack
lackofofattention
attentiontotodeveloping
developingleaders
leadersfrom
fromwithin
within

Blame
Blame inattention
inattention to
to succession
succession planning
planning on
on
corporate
corporate worlds
worlds concentration
concentration on
on costcostcutting
cutting &
& downsizing
downsizing
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Reading
Reading5.1
5.1

Heirs
Heirs Unapparent
Unapparent

Old
Old solutions
solutions to
to succession
succession planning
planning
wont
wont work
work in
in increasingly
increasingly complex
complex
world
world
Essential
Essential to
to develop
develop executives
executives who
who
can
can cope
cope with
with globalization
globalization &
& flourish
flourish
in
in new
new corporate
corporate climate
climate buffeted
buffeted by
by
changes
changes
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Reading
Reading5.2
5.2

Succession
Succession Planning
Planning Design
Design Shifts
Shifts
Key
Key design
design shifts
shifts for
for succession
succession systems:
systems:

Identify
Identifycore
corestrategic
strategiccapabilities/competencies
capabilities/competenciesrelated
relatedtoto
key
keypositions
positions&&develop
developleadership
leadershipmodel
model
Place
Placeinitiative
initiative&&responsibility
responsibilityfor
forindividual
individualdevelopment
developmentinin
hands
handsofofcandidate
candidateemployees
employees
Development
Developmentprocess
processthat
thataligns
alignsmastery
masteryofofcompetencies
competencies
with
withfirms
firmsstrategic
strategicgoals
goals&&mission
mission
Create
Createsuccession
successionprocess
processmore
moreopen
open&&less
lessexclusive
exclusive&&
secretive
secretive
Design
Designsuccession
successionprocess
processfor
forongoing
ongoing&&frequent
frequentreview
review

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Reading
Reading5.2
5.2

Succession
Succession Planning
Planning Design
Design Shifts
Shifts
A
Asuccession
succession system
systemmust:
must:

Make
Makesense
sensefor
for&&be
beusable
usableby
bydifferent
differentbusiness
businessunits,
units,each
each
having
havingunique
uniqueneeds
needs
Process
Processtotofocus
focus&&guide
guidedevelopment
developmentofofexecutives
executivestotomeet
meet
strategic
strategicpurposes
purposes
Be
Bealigned
alignedwith
withother
otherHR
HRprocesses
processesalso
alsoinintransition
transition
Assure
Assurepool
poolofofpotential
potentialleaders
leadersisisbeing
beingprepared
preparedfor
for
executive
executivepositions
positions
Be
Beowned
ownedby
bysenior
seniormanagement
management
Deal
Dealwith
withdiversity
diversityissues
issues&&changing
changingdemographics
demographics
Measurably
Measurablyadd
addvalue
value&&contribute
contributetotobusiness
businesssuccess
success

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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
Long-term
Long-term

IsIsactivity
activityconceptualized
conceptualized
as
aslong-term
long-termvalue?
value?

Comprehensive
Comprehensive

Does
Doesititcover
coverentire
entire
organization
organizationororisolated
isolated
components?
components?

Planned
Planned

IsIsititthought
thoughtout
outahead
aheadofof
time
time&&isisititwell
well
documented?
documented?

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Integrated
Integrated

Does
Doesititprovide
providebasis
basisfor
for
integrating
integratingmultifaceted
multifaceted
activities
activitiesthat
thatmight
might
otherwise
otherwisebe
befragmented
fragmented
&&disconnected?
disconnected?

High
High value-added
value-added

Does
Doesititfocus
focuson
oncritical
critical
business
businesssuccess
successissues
issues
ororon
onthings
thingsthat
thatmust
mustbe
be
done
donebut
butare
arenot
notcritical?
critical?
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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
Operationally
Operationally reactive
reactive HR
HR

Focuses
Focuseson
onimplementing
implementingday-to-day
day-to-daydemands
demandsfor
forHR
HR

Operationally
Operationally proactive
proactive HR
HR

Improves
Improvesupon
upondesign
design&&delivery
deliveryofofexisting
existingHR
HRbasics
basics
before
beforeproblems
problemsset
setinin

Strategically
Strategically reactive
reactive HR
HR

Focuses
Focuseson
onsupporting
supportingsuccessful
successfulimplementation
implementationofof
business
businessstrategy
strategy

Strategically
Strategically proactive
proactive HR
HR

Focuses
Focuseson
oncreating
creatingstrategic
strategicalternatives
alternatives

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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
HR
HR becomes
becomes strategically
strategically reactive
reactive in
in
business
business strategy
strategy implementation
implementation through:
through:
Supporting
Supportingexecution
executionofoftactics
tacticsthat
thatdrive
drivelong-term
long-term
strategies
strategies
Developing
Developingcultural
cultural&&technical
technicalcapabilities
capabilities
necessary
necessaryfor
forlong-term
long-termsuccess
success
By
Byproviding
providingchange
changemanagement
managementsupport
supportfor
for
tactical
tacticalactivities
activities

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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
1.
1. Define
Define business
business unit
unit for
for which
which HR
HRpractices
practices are
are
being
being designed
designed
2.
2. Specify
Specify key
key trends
trends in
in external
external business
business
environment
environment
3.
3. Identify
Identify &
&prioritize
prioritize firms
firmssources
sources of
of competitive
competitive
advantage
advantage
4.
4. Define
Define required
required culture
culture &
&technical
technical knowledge
knowledge &
&
skill
skill areas
areas required
required to
to support
support the
the sources
sources of
of
competitive
competitive advantage
advantage
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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
5.
5. Identify
Identify cultural
cultural characteristics
characteristics that
that firm
firmshould
should
reduce
reduce or
or eliminate
eliminate ifif itit isis to
to optimize
optimize competitive
competitive
advantage
advantage
6.
6. Design
Design HR
HR practices
practices that
that will
will have
have greatest
greatest impact
impact
on
on creating
creating desired
desired culture
culture
7.
7. With
With these
these decisions
decisions made,
made, firm
firmshould
should establish
establish
action
action plans
plans for
for detailed
detailed design
design of
ofHR
HRprocesses
processes
8.
8. Final
Final step
step specifies
specifies means
means by
by which
which effectiveness
effectiveness
of
of entire
entire process
process isis measured
measured
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Reading
Reading5.3
5.3

Strategic
Strategic Levels
Levels of
of HR
HR
Become
Become proactive
proactive by:
by:

Learning
Learningenough
enoughabout
aboutother
otherfunctional
functionalareas
areastotoallow
allowHR
HRtoto
contribute
contributetotobusiness
business
Expanding/enriching
Expanding/enrichingparameters
parametersofofHR
HRagendas
agendasthrough
through
which
whichstrategic
strategicalternatives
alternativesare
aredefine
define&&created
created

Creates
Creates culture
culture of
of of
of creativity
creativity &
&innovation
innovation
Involved
Involved in
in full
full breadth
breadth of
of mergers
mergers &
&acquisition
acquisition
activities
activities
Creates
Creates internal
internal capabilities
capabilities based
based on
on future
future
external
external environmental
environmental requirements
requirements
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