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Human Resource
Planning and Alignment

McGraw-Hill/Irwin
Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Introduction
Successin business is dependent on:
Reacting quickly to opportunities
Rapid access to accurate information

Human resource planning (HR planning):

How organizations assess the future supply of, and
demand for, human resources
Provides mechanisms to eliminate gaps that may exist
between supply and demand
Requires readjustment as labor market conditions
change
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Introduction
If effective utilization of human resources is not a
significant goal for the organization:
Employment planning is likely to be informal and
slipshod
Iftop management values stable growth:
HR planning will be less important than if the goals
include rapid expansion or diversification
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Introduction

The U.S. Dept. of Labor projects that:

Asians and Hispanics will join the labor force
at rates of 44 and 36 percent
White non-Hispanics will increase by 9 percent
Workers 55-64 will increase by 52 percent
Workers 65 and older will increase by 30 percent
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Introduction
HR related government policies and regulations:
Equal opportunity and promotion call for more HR
planning for women and minorities
The age of mandatory retirement is being raised
Organizations are encouraged to hire veterans and the
disabled
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Introduction
The types of people employed and the tasks they
perform determine the kind of planning necessary
HR planning is critical for implementation of the
organization’s strategic plan
HR policies have direct effects on profitability

Strategic human resource management (SHRM)

means acknowledging that HR policies/practices have
critical links to an organization’s overall strategy
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The HR Planning Process

Thefour phases or stages of HR planning:

Situation analysis or
environmental scanning
Forecasting demand
Analysis of the supply
Development of action plans
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Situation Analysis & Environmental Scanning

The first stage of HR planning is the point at which

HRM and strategic planning first interact
The strategic plan must adapt to environmental
circumstances
HRM is one of the primary mechanisms an
organization can use during the adaptation process
Without a plan to support recruitment and selection,
it is impossible to stay competitive
The problems associated with changing environments
are greater today than ever before
Success now depends on being a “global scanner”
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Forecasting Demand for Employees
Thisphase of the process involves estimating:
How many employees will be needed
What kinds of employees will be needed

Quantitative tools can help with forecasting, but it

involves a great deal of human judgment
The demand for employees is closely tied to the
strategic direction that the organization has chosen
Growth
Reengineering
Reorganization
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Forecasting Demand for Employees
Techniques to help reduce the uncertainty inherent
in HR planning:
Expert estimates
Trend projections
Statistical modeling
Unit-demand forecasting

Key to effective planning is accurately and freely

sharing information
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The Expert Estimate
One or more “experts” provide the organization
with demand estimates based on:
Experience
Guesses
Intuition
Subjective assessments of
available economic and
labor force indicators
This is the least mathematically sophisticated approach
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The Expert Estimate
The Delphi technique elicits expert estimates from a
number of individuals in an iterative manner
Developed by the Rand Corporation
Estimates are revised by each individual based on
knowledge of the other individuals’ estimates
With the nominal group technique (NGT),
individual estimates are followed by group
brainstorming
The goal is to generate a group decision that is
preferred over any individual decision
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Trend Projection

This top-down technique:

Develops a forecast based on a past
relationship between a factor related
to employment and employment
itself
Example: Sales levels are related to
employment needs
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Modeling & Multiple-Predictive Techniques
This top-down approach uses the most sophisticated
forecasting and modeling techniques
Trend projections relate a single factor, such as sales,
to employment
Environmental factors could be gross national
product or discretionary income
Or, the organization may be mathematically modeled
so that simulations can be run
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Modeling & Multiple-Predictive Techniques
Markov chain analysis involves:
Developing a matrix to show the probability of an
employee’s moving from one position to another or
leaving the organization
The process begins with an analysis of staffing levels
from one period to another
Markov analysis can identify the probability of lower
employee retention
It does not suggest a solution to the problem
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Modeling & Multiple-Predictive Techniques
Regression analysis is a mathematical procedure:
It predicts the dependent variable on the basis of
factors (independent variables)
With simple linear regression, one dependent and
one independent variable are studied
With multiple regression, more than one independent
variable is studied
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Unit Demand Forecasting
This is a bottom-up approach
Unit managers analyze current and
future needs person-by-person
and job-by-job
Headquarters totals the unit forecasts
The sum is the corporate employment forecast
If both bottom-up and top-down approaches are
used, the forecasts may conflict
This can be resolved by averaging the variances
The Delphi technique or NGT could also be used
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Analyzing the Current Supply of Employees

This phase of HR planning should answer the

question:
“How many and what kinds of employees do I
currently have, in terms of the skills and training
necessary for the future?”
This involves more than simply counting current
employees
The smaller and more centralized the organization,
the easier it is to conduct a skills inventory
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The Skills Inventory
Both a skills inventory and a management
inventory:
Identify the skills, abilities, experiences, and training
employees currently have
Are useful for career planning, management
development, and related activities
In
its simplest form, a skills inventory is a list of:
Names
Characteristics
Skills
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The Skills Inventory

Skillsinventories vary greatly in their sophistication

Some are as simple as a file drawer of index cards
Others involve expensive and complex computer
databases
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Contents of the Skills Inventory
The only data available to the organization for later
use is what was designed into the system

Name Employee number

Present location Date of birth
Date of employment Job classification
Skills, knowledge, education Foreign language skill
Professional qualifications Publications
Licenses and patents Hobbies
Supervisory evaluations Salary range
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Contents of the Skills Inventory
Oftenomitted, but increasingly important, are:
Employees’ stated career goals
Geographical preferences
Intended retirement date

The
main categories within a skills inventory:
Data summarizing the employee’s past
Data summarizing present skills
Data that focus on the future

Today, many skills inventories are more complex

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Maintaining the Skills Inventory
The two principal methods for gathering data:
the interview and the questionnaire
The questionnaire is faster and cheaper, but can be
inaccurate
Some contend that a trained interviewer can complete
questionnaires more quickly and accurately
Plansfor keeping files updated must be made
The more often changes are made and the data is
used, the more often updates should be performed
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Maintaining the Skills Inventory
Should data be stored in a manual system or
on a computer?
How much does the computer system cost?
How frequently the data will be used?
A computer allows comparative analysis over time

Skills inventories are useful only if management

uses the data to make significant decisions
Before accessing the data, managers must be trained
to avoid abuse of the system
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Action Decisions in HR Planning

After the supply of and demand for workers has

been analyzed, the two forecasts must be compared
Whenever there is a gap between the two estimates, a
course of action must be chosen
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Action Decisions in HR Planning
Ifthe supply of workers is less than the demand:
It can be filled with present employees who are
willing to work overtime
Ifthere is a shortage of skilled employees:
Train and/or promote present employees
Recruit less-skilled employees
Recall employees who were previously laid off
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Action Decisions in HR Planning
Organizations are using more:
Part-time workers
Subcontractors
Independent professionals

 This is in response to:

Intense global competition
Rapid technological change
Fears caused by recent workforce reductions

Over 5 million U.S. citizens are contingent workers

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Action Decisions in HR Planning
Possible solutions to an employee surplus:
Attrition
Early retirements
Demotions
Layoffs
Terminations

Employees who are considered surplus are seldom

responsible for the conditions leading to the surplus
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Action Decisions in HR Planning
Most organizations avoid layoffs by using attrition,
early retirement, creation of work, and so on
Attrition can be accelerated by encouraging
employees to leave early
Drawbacks to losing workers over the age of 50:
They tend to be healthier than younger workers
They have fewer work-related injuries
They are less likely to change jobs
They take critical skills and experience with them
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Action Decisions in HR Planning

By 2010, the median age of the

U.S. workforce will be 40.6 years
Over half the workforce will be
protected by the Age Discrimination
in Employment Act
Promisesshould not be made that can’t be kept
Once promised, it may be illegal to change them
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Action Decisions in HR Planning
Ifvoluntary reductions don’t eliminate the gap
between supply and demand, layoffs may be
necessary
Corporations too frequently and quickly turn to
layoffs
They fail to consider the consequences
About one-third lay off too many workers
Poorly designed workforce reductions can kill morale
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Human Resource Information Systems
Information is the key to successful HR planning
A human resource information system (HRIS) is an
integrated way to acquire, store, analyze,
and control information flow through an organization
A highly developed HRIS can increase the efficiency
and response times of:
Tracking applicants
Skills inventory
Career planning
Employee service programs
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Human Resource Information Systems
Computer technology makes it possible to integrate
multiple HR needs into a single system:
Enrolling in benefits programs
Processing employee transactions (pay increases)
Using learning modules

An HRIS developed for use by upper-level

executives is called an executive information system
(EISs)
Computerized HRISs have allowed organizations to
broaden their view of succession planning
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Human Resource Information Systems
Factors that make succession planning for executive
level positions more important than ever:
Large numbers of aging executives
Increasingly popular early retirement
Fortune500 companies anticipate 33 percent turnover
among their executives over the next five years
Many companies now realize the critical need for
a comprehensive retention plan
This plan may include consulting and part-time
assignments
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Employee Privacy, Identity Theft, & HRIS
HRIS makes it easier to invade employee privacy
Danger lies both within and outside the organization
The friendlier the system, the easier it can be for
unauthorized access
Identity theft occurs when:
Someone uses another’s name, address, social
security number, or other information:
Without the person’s knowledge
With the intent to commit fraud or other crimes
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Employee Privacy, Identity Theft, & HRIS

Identity theft is fast becoming a national problem

Complaints from U.S. victims rose from 1,380 in
1999 to over 210,000 in 2003
Identify theft is a felony under the Identity Theft and
Assumption Deterrence Act of 1998
The problem will continue to escalate
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Employee Privacy, Identity Theft, & HRIS
The costs of identify theft to the employee are
numerous:
Average 175 researching and tracking the crime
23 months correcting credit reports
$800 in out-of-pocket expenses to restore financial
health and standing
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Employee Privacy, Identity Theft, & HRIS
Safeguards to minimize privacy risks in an HRIS:
Determine the best way to collect data
Limit the information collected to what is relevant
Tell employees what information is kept on file and
how it is used
Let employees inspect and correct their information
Keep sensitive information separate
Limit internal use of personal information
Only disclose personal information to outsiders with
employee consent
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Employee Privacy, Identity Theft, & HRIS
Organizations should carefully evaluate their
policies regarding access to HRIS data to determine:
How much information, legally
The greatest
and ethically, should be disclosed threat to privacy is
when employees
How much control employees
don’t retain the
should have over the release of right to authorize
the release
personal information
No federal legislation guarantees employees the right
to inspect and amend data in an HRIS