Strategic human resources

planning
Strategic Staffing
 Strategic staffing is the process of staffing an organization in future-oriented,
goal-directed ways that support the business strategy of the organization and
enhance its effectiveness.

 The focus is integration of staffing practices with business strategy and with
the other areas of human resource management to enhance organizational
performance.

 While traditional staffing tends to focus on quickly and conveniently filling an

opening, rather than on aligning the staffing effort with the long-term
strategic needs of the organization, strategic staffing entails both short- and
long-term planning .

 Itaims at acquiring, deploying, and retaining the right number of employees

with the appropriate talents, to effectively execute the strategy, and focusing
on maximizing return on investment, instead of simply minimizing costs.
Seven Components of Strategic Staffing
“Everyone is held accountable for their budget. But no one is
held accountable for the strength of their talent pool. Isn’t it
the talent we have in each unit that drives our results? Aren’t
we missing something?”
Workforce Planning

The process of predicting an organization’s future

employment needs and the availability of current
employees and external hires to meet those employment
needs and execute the organization’s business strategy.
Workforce Planning: Why?
 Workforce planning or talent planning is the bridge that translates business
strategy into talent strategy.

 It is a strategic process that allows an organization to predict and manage

its talent supply and demand. The goal of this process is to enable the
organization to attain its business goals and execute its strategy.

 Proactive workforce planning ensures that the firm has the people it needs
to execute the strategy successfully. It is an organizational initiative, not
something solely done by HR.
 The Workforce Planning Process
1. Identify the firm’s business strategy
A firm’s strategy affect its current and future staffing requirements by
influencing the types and numbers of employees needed.

2. Articulate the firm’s talent philosophy and strategic staffing decisions:

An organization’s talent philosophy refers to a system of beliefs about how a

firm’s employees should be treated.

It is important to understand a firms commitment to promoting workers,

retaining workers, and it’s preferences for hiring people with certain skills or
training them after they are hired.
 The Workforce Planning Process
3. Conduct a workforce analysis:

Forecast both labor demand and labor supply and identify any gaps between
the two.

5. Develop and implement action plans:

Develop action plans to address any gaps between labor demand and labor
supply forecasts. The plans should be consistent with the firm’s talent
philosophy, and can include both short- and long-term recruiting, retention,
compensation, succession management, and training and development plans.

5. Monitor, evaluate, and revise the forecasts and action plans:

Evaluate how effective the firm’s workforce plan has been in terms of meeting
the company’s recruiting and hiring goals. As the business environment
changes, the firm’s forecasts and action plans may need to change, too.
Figure: Workforce planning process
 Five of the most common types of information that can be used to
evaluate general business trends in the economy: seasonal factors,
interest rates, currency exchange rates, competitive changes, and
industry and economic forecasts.
Forecasting A Firm’s Labor
Demand
Forecasting A Firm’s Labor Demand
 Organization’s product demand directly affects its need for labor. It will
probably need to hire more people if demand for products increase.
However, if the organization does plan to automate, the process of doing so
is likely to increase the firm’s demand for people with different types of
talent—people able to use and maintain the new machinery or technology.

 Accurately forecasting business activity requires identifying key business

activity factors, identifying quality sources of relevant forecasting
information for those factors, and utilizing these sources to compile
complete, accurate, and timely data.
 Forecasting A Firm’s Labor Demand
Keep in mind that

Forecasting is not an exact science, and it is rare for a forecast to be exactly right. Given this
uncertainty, it is usually best to construct estimates as a range—with low, probable, and high
estimates—and then recalculate those estimates as the organization’s internal and external
environments change, along with the firm’s assumptions about its workforce needs.

The time frame for workforce planning should reflect the length of the business planning
cycle. Short-term workforce planning involves planning sourcing, recruiting, development,
and separation activities the firm needs to do in the coming year. By contrast, long-term
workforce planning involves doing the same activities but for a multiyear period.

Workforce planning should be done for those positions throughout the organization whose
execution is considered critical for the success of their units and the firm as a whole. If
innovation and intangible assets, such as knowledge or creativity, generate a firm’s
competitive advantage, then top managers and knowledge workers are essential. If an
organization’s competitive advantage is based on service, its success depends on the quality
and performance of its customer-facing employees.
Forecasting A Firm’s Labor Demand
 The time frame for a business activity forecast is at the discretion of
the organization. It may make sense for organizations in relatively
stable, predictable environments to make five-year or even 10-year
forecasts.

 Organizations in more dynamic, unpredictable environments may

have great difficulty making reasonably accurate business forecasts
for periods greater than 6 to 12 months out.
Forecasting A Firm’s Labor Demand:
Types
Types of forecast of a firm’s labor demand

 Seasonal Forecasts
 Interest Rate Forecasts
 Currency Exchange Rate Forecasts
 Competition-Based Forecasts
 Industry and Economic Forecasts
 Legal Factors
 Internal Forecasting Tools for Labor
Demand
Internalforecasting can be done by depending on the goals that organization has
generated internally, including the

◦ Investment in human resources required to reach their optimum profit level; identify the minimal
as well as optimal staffing levels the firm needs to meet its goals.

◦ Staffing levels the firm needs to generate a given amount of revenue within a particular period
of time

◦ Increasing the firm’s staffing levels to execute a growth strategy or decreasing the firm’s
staffing levels during a restructuring

◦ Obtaining the new talent the firm needs to create new products or provide different services.

*Most important labor demand forecasts are those for the positions and skills that will be
central to the organization’s intended strategic direction
 Internal Forecasting Tools for Labor
Demand
• Ratio Analysis: It is a mathematical way of calculating the number of employees a
firm needs to produce certain levels of output, by using past staffing ratios.

Example of ratios include:

◦ Production-to-employee ratio
◦ Sale-to-employee ratio (by time, product and revenue per-sale)
◦ Revenue per employee
◦ Managers –to- employees
◦ Inventory levels to employees
◦ Store size to employees
◦ Number of customers or customer orders to employees
◦ Labor costs to all production costs
◦
• Scatter plots: It is a graphic representation projecting how two different variables
are related.
Table: The Population Served as It Relates to the Required Number of
Ambulance Drivers
 Internal Forecasting Tools for Labor
Demand
 Trend Analysis: It involves looking at past employment patterns—the
employer’s, the industry’s, or even the nation’s patterns and using those patterns
to predict a firm’s future labor needs.

 Judgmental Forecasting: Instead of trying to identify past relationships between

staffing levels and various factors, judgmental forecasting relies on the
experience and insights of people in the organization to predict a firm’s future
employment needs.

As historical trends and relationships can change, it is usually best to supplement

the more mechanical ratio, scatter plot, and trend forecasting methods with
managerial judgment. The mechanical methods can be used as a starting point to
make the estimates, and then managers can use their judgment to modify the
estimates
 Internal Forecasting Tools for Labor
Demand
 Return on Investment Analysis: The initial investment the company has made
in the new hires, which should then be divided into the value the new hire(s)
brings to the company and multiplied by 100 to determine the firm’s percentage
return on its investment.

a. The costs to advertise the position, interview and screen candidates, pay for
their travel, and relocate, train, and compensate them is calculated.

b. How much revenue during the period will be directly generated as a result of
this position? How much money per period will this position save the
organization in terms of increased efficiency, and how much value will it add in
greater productivity, quality, or customer service? The sum of these figures is
the value of adding this position.
 Example: Return on Investment (ROI) Analysis

P/C New employee Rest of the Total

staff
Profit $60,000 $15,000 (5%) $75,000

Recruitment Salary
Cost and training
$7,000 $25,000 $32,000

ROI=100 * [($60,000 + $15,000)/($7,000 + $25,000)] =

$75,000/$32,000 = 234%
Forecasting a Firm’s Labor Supply

Strategic staffing requires firms to understand current

and future skill and competency trends in the labor
market.
Forecasting a Firm’s Internal Labor
Market
Transition Analysis: It is a quantitative
technique used to analyze internal labor
markets and forecast internal labor supply.
The Transition Analysis Process
Illustrated
 Forecasting a Firm’s Internal Labor
Market
Limitations of transition analysis

a. Because it’s hard to make accurate estimates based on small numbers, a

transition analysis is most useful for larger employers. It is less effective for very
small employers. Managers can also use their judgment to adjust the probabilities.
They may recalculate the employee deficits and surpluses upward or downward
by the percentage growth rate they expect the business to experience.

b. Multiple moves—for example, a person being promoted twice in the same

period—cannot be accounted for.

c. In some cases, past trends will not be as accurate as managers’ estimates are.
This is particularly true if new strategic directions are being considered.

d. A transition analysis also assumes that all employees in a job have an equal
probability of movement, which of course, isn’t likely to be the case.
Forecasting a Firm’s Internal Labor
Market
Talent Inventories: A detailed record or database that summarizes
each employee’s skills, competencies, and qualifications.

Manual or computerized talent inventories are detailed records or

databases that summarize each employee’s skills, competencies,
education, training, languages spoken, previous performance reviews,
and chances of being promoted.

Replacement Charts

Replacement chart visually shows each of the possible successors for a

job and summarizes their present performance, promotion readiness,
and development needs.
The Replacement Chart for a Vice
President of Human Resources Position
Forecasting a Firm’s Internal Labor
Market
 Employee Surveys: Conducting employee surveys and monitoring
indicators of employee age profile, employee satisfaction/ dissatisfaction
(including employee absenteeism and grievances) can help to identify the
potential for increased turnover in the future.

For organizations with a talent philosophy consistent with retaining

employees, or for organizations for which turnover is particularly harmful
to a firm’s strategy execution, staying in touch with the attitudes of the
company’s employees and managers can be critical.
Forecasting the External Labor
Market
Forecasting the External Labor Market

Organizations monitor the external labor market in two ways:

 Through organization’s own observations and experiences:

Whether the quality and quantity of applicants responding to job

announcements improving or getting worse. May include demographic
information, talent availability, local hiring challenges, local and
international competitors, commonly used drivers to attract talent, and
local salary expectations.

 By monitoring labor market statistics generated by others:

Includes availability of data on nation’s productivity, benefits,

employment, and unemployment.
Action Plan
Resolving the Gaps Between the Firm’s Labor Supply and Labor
Demand.

Action plan

A strategy to proactively address an anticipated surplus or shortage

of employees. An action plans should always be consistent with the
firm’s business strategy, talent philosophy, and HR strategy.
Example of an Action Plan
The American Nursing Association created a steering committee to develop an action
plan to address the nursing shortage in the United States.
Here is a portion of the action plan developed to increase the supply of nurses36:

Communicate nursing’s economic value—educate the public about the pivotal role
nursing plays in the nation’s health care system.

Improve the work environment— improve the conditions under which nurses work so
that quality patient care is optimized and nursing staff is retained.

Communicate the professional nursing culture— assert nursing’s high standards of

professional practice, education, leadership, and collaboration to better appeal to
potential nurses and enhance the image of the profession.

Education— reshape nursing education to enhance nursing’s image.

Recruitment/Retention— enhance professional opportunities to attract and sustain

excellent nurses for long, rewarding careers.
Dealing with Talent Shortage
Dealing with a Temporary Talent Shortage
Dealing with a Persistent Talent Shortage

Dealing with a Temporary Employee

Surplus
Dealing with a Persistent Employee
Surplus
Dealing with Talent Shortage
Dealing with a Temporary Talent Shortage

◦ Offering hiring incentives such as sign-on and retention bonuses

consisting of stock options or cash
◦ Additional advertising and search firms,
◦ Lowering hiring standards
◦ Recruit people currently working for the company
◦ Identify cause of the turnover
◦ Relocating facilities
◦ External talent networks: freelancers, vendors, and outsourcing
providers
Dealing with Talent Shortage
Dealing with a Persistent Talent Shortage

◦ If the shortage is likely to last a number of years, an organization must reduce its
demand for the talents that will be in short supply and/or increase its supply of
employees with the qualifications it needs.

◦ Increasing their use of automation and technology.

◦ Redesigning jobs so that they need fewer people with the talents that are in short
supply.

◦ Slowing down the company’s innovation rate, eventually reducing the amount of
output.

◦ Business process outsourcing/ relocation of an entire business function (production,

manufacturing, or customer service, to an independent service provider in the same or
a different country).
 Dealing with Talent Surplus
Dealing with a Temporary Employee Surplus

 Letting go temporary or contingent workers

 Temporary layoffs
 Across-the-board salary cuts or reduction in work hours
 Reallocating workers to expanding areas of the business
 Other creative solutions to temporary surpluses includes unpaid
vacations, sabbaticals, job sharing.
Dealing with Talent Surplus
Dealing with a Persistent Employee Surplus

Early retirement incentives

Layoffs
not filling vacated positions

However, layoffs can damage workforce morale and hurt the firm’s reputation as
an employer. Action plans to address a persistent employee surplus can also
involve-

reassignments
 hiring freezes
steering employees away from careers in that position to reduce the need for
future layoffs.
 Retraining employees to fill other jobs in the firm can help bring labor supply
and demand into balance
Keep in mind that…
The goal of any staffing strategy is to acquire and retain the most
productive employees and remove lower performers.

Planning activities that enable an organization to anticipate its

future employment needs and scale down gradually , instead of
abrupt mass layoffs or dramatic restructuring , can help to control
the company’s restructuring costs and retain top performers.
Staffing Planning
The three questions that need to be answered are:

◦ How many people should be recruited?

◦ What resources are needed?
◦ How much time will it take to hire the employees?
 Staffing Planning
How Many People Should Be Recruited?

 Staffing yields: the proportion of applicants moving from one stage of the
hiring process to the next.

 Hiring yields (also called selection ratios), or the percentage of applicants

ultimately hired.

It is important to remember that the key issue is not whether the firm’s
staffing yields are high or low. What matters is whether the staffing system is
producing the right numbers of the right kinds of employees in the right time
frame.

Efficiently managing the application process is the key.

Figure: The Staffing Yield Pyramid
 What Resources Are Needed?
There are six basic costs related to external hiring that account for 90
percent of hiring costs:

1. Advertising expenses
2. Agency and search firm fees
3. Employee referral bonuses
4. Recruiter and applicant travel costs
5. Relocation costs
6. Company recruiter costs (prorated salary and benefits if the recruiter
performs duties other than staffing)

Additional 10 percent to cover miscellaneous expenses including testing,

reference checking, hiring manager time, and administrative support
What Resources Are Needed
The internal cost per hire includes four elements:

1. Internal advertising costs

2. Travel and interview costs
3. Relocation costs
4. Internal recruiter costs
 Estimating Needed Resources for
Staffing Effort
It is important to determine the size of the recruiting staff and resources that will
be needed and to secure the appropriate budget and resources before the staffing
initiative begins.

Two methods of estimating needed resources for a staffing effort:

◦ Workload-driven forecasting: forecasting based on historical data on the

average number of hires typically made per recruiter or the average number
of recruits processed per recruiter over a given period staffing.

◦ Efficiency–driven forecasting: the total cost associated with the

compensation of the newly hired employees.
Efficiency–driven forecasting example
 If a firm’s internal and external staffing costs were BDT 100,000,
and 10 people were hired, each with a starting base salary of BDT
60,000, the firm’s staffing efficiency would be 100,000/600,000 or
16.67 percent.

 Lower staffing efficiency percentages reflect greater staffing

efficiency.

 Again, suppose the firm wants to achieve a staffing efficiency ratio

of 15 percent or less, and plans to hire 25 new employees per
month at an average starting base salary of BDT 50,000. In this
case, the firm will have a budget of $187,500 (25 × $50,000 × 0.15)
a month to spend on recruiters and other staffing resources.
How Much Time Will It Take to Hire the Employees?

 Itis important for planning purposes that the timeline

for the recruiting effort be established to ensure that the
correct number of new hires will be ready to start when
they are needed.

 Required time for hiring depends on the job position,

staffing technology used, nature of the organization and
job market.

 Maintain progress report help in future projection of

time.
Example of time required for hiring
Class Exercise
 Multiply the percentages together for each stages.

 20%x80%x15%x50%=1.2%

 Pool x hiring yield = hire

Pool x 1.2% =50
Pool= 50/1.2%
=4167 applicant needed to hire 50 employee