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Human Resources Planning (HRP)

What is Planning?
The process of setting goals and deciding how best to achieve them.

What is planning concerned with?

It is concerned with the end (what is to be done) as well as with means (how it is to be done).

Planning is one of the functional areas of HR

The process of anticipating an organizations future human resource needs and then developing action plans for fulfilling identified needs.

The systematic review of human resource requirements.

Human resource planning is a process by which an organization ensures that it has the right number and kinds of people at the right place at the right time capable of effectively and efficiently completing those tasks that will help the organization achieve its overall strategic objectives.

Linked to the organizations overall strategy and planning to compete domestically and globally. Overall plans and objectives must be translated into the number and types of workers needed. Senior HRM staff need to lead top management in planning for HRM issues.

The Required Number of Employees With The Required Skills

Are Available When Needed

Objectives of Human Resource Planning

Enable organizations to anticipate their future HR needs To identify practices that will help them meet those needs

Benefits of HR Planning Helps in planning job assignments Helps cope with fluctuations in staffing

Identifies recruiting needs

Provides other useful information

Factors That Determine HR Plans

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Planning Includes Forecasting

Human Resource Planning



Gap? HR Needs

Demand Forecasting


Judgmental methods

Forecasting Methods

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Statistical approaches
1. Trend analysis

2. Ratio analysis 3. Regression analysis

Trend Analysis
300 250 200 150 100 50 0 2000 2001 2002 2003 Employees Sales

Ratio Analysis
# patients = 100 # nurses = 25 patient/nurse ratio = 4/1

If there are 300 patients, how many nurses are needed?

Regression Analysis


# Employees 25




# Customers

Judgmental methods
Managerial judgment

Forecasting Involves Two Activities

1. Monitoring current HR
programs and personnel staffing levels 2. Investigating future HR needs and concerns

Human Resources Audit

Forecast Labor Supply Forecast Labor Demand

Supply = Demand?

Surplus: Layoffs Transfers Demotions

Shortage: Recruiting Training Career Development

The Goal of HR Planning

The goal of forecasting and planning is to keep a stable workforce that meets the needs of the organization.

Dealing with Downsizing

Investigate alternatives to downsizing Involve those people necessary for success in the planning for downsizing

Develop comprehensive communications plans

Nurture the survivors Outplacement pays off

Assessing HR Effectiveness
Diagnostic Measures of HR Effectiveness HR expense per employee Compensation as a percent of expenses HR department expense as a percent of total expenses Cost of hires Turnover rates Absenteeism rates Workers compensation per employee

Overview of the HR Evaluation Process


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Assessing HR Effectiveness
HR Audit A formal research effort that evaluates the current state of HR management in an organization Audit areas: Legal compliance (e.g., EEO, OSHA, ERISA, and FMLA) Current job specifications and descriptions 230

Assessing HR Effectiveness
Valid recruiting and selection process Formal wage and salary system Benefits Employee handbook Absenteeism and turnover control Grievance resolution process Orientation program Training and development Performance management system

Using HR Research for Assessment

HR Research The analysis of data from HR records to determine the effectiveness of past and present HR practices.
Primary Research Research method in which data are gathered first-hand for the specific project being conducted. Secondary Research Research method using data already gathered by others and reported in books, articles in professional journals, or other sources.

HR Performance and Benchmarking

Comparing specific measures of performance against data on those measures in other best practice organizations Common Benchmarks Total compensation as a percentage of net income before taxes Percent of management positions filled internally Dollar sales per employee Benefits as a percentage of payroll cost 233

Doing the Benchmarking Analysis

Return on Investment (ROI) Calculation showing the value of expenditures for HR activities.
A = Operating costs for a new or enhance system for the time period

B = One-time cost of acquisition and implementation

C = Value of gains from productivity improvements for the time period


HR Business Performance Calculations

from Jac 235 Source: Adapted 2002 Fitz-Enz, Top 10 Calculations for Your HRIS, HR Focus, April 1998, S-3. Southwestern

Figure 211a

HR Business Performance Calculations

Doing the Benchmarking Analysis

Economic Value Added (EVA) A firms net operating profit after the cost of capital (minimum rate of return demanded by the shareholders) is deducted. Cost of capital is the benchmark for returns for all HR activities. Utility analysis Analysis in which economic or other statistical models are built to identify the costs and benefits associated with specific 237 HR activities

Estimating Internal Labor Supply for a Given Unit

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Outcomes of Human Resource Planning

Comparison of demand and supply

Demand higher than supply

Supply larger than demand

Demand equal to supply

Plan for growth

Plan for workforce reduction

Plan for stability

Steps in HRP Process

Forecasting the supply of human resources Forecasting the demand for human resources
Comparing forecasted supply and forecasted demand

Taking appropriate actions

HR Planning Process


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Employment Planning and the Strategic Planning Process

HRP has become more important in recent years for a number of reasons

1. Globalization of Business
2. New Technologies 3. The changing skill levels in
the Workforce

1. The changing
demographics of the workforce

2. Mergers and

3. Legal developments

Requirements for effective HR planning

HR personnel understand the HR planning process
Top management is supportive The communications between HR staff and line management are healthy The HR plan is integrated with the organizations strategic business plan

Linking HR planning practices to competitive advantage

Effective HR Planning

Competitive Advantage

An Organizational Framework
A mission statement defines what business the organization is in, including why it exists and who its customers are. Strategic goals Set by senior management to establish targets for the organization to achieve. Generally defined for the next 5-20

An Organizational Framework Corporate assessment Gap or SWOT (StrengthsWeaknesses-OpportunitiesThreats) analysis determines what is needed to meet objectives.

An Organizational Framework
Strengths and weaknesses and core competencies are identified. HRM determines what knowledge, skills and abilities are needed by the organizations human resources

An Organizational Framework

Linking Organizational Strategy to Human Resource Planning

Ensures that people are available to meet the requirements set during strategic planning. Assessing current human resources A human resources inventory report summarizes information on current workers and their skills.

Linking Organizational Strategy to Human Resource Planning

Human Resource Information Systems (HRIS) are increasingly popular computerized databases that contain

important information abut employees.

Linking Organizational Strategy to Human Resource Planning

Assessing current human resources Succession planning includes the development of replacement charts portray middle-to-upper level management positions that may become vacant in the near future lists information about individuals who might qualify to fill the positions

Linking Organizational Strategy to Human Resource Planning

Determining the Demand for Labor A human resource inventory can be developed to project year-by-year estimates of future HRM needs for every significant job level and type. Forecasts must be made of the need for specific knowledges, skills and abilities.

Linking Organizational Strategy to Human Resource Planning

Where Will We Find Workers migration into a community recent graduates individuals returning from military service increases in the number of unemployed and employed individuals seeking other opportunities, either part-time or fulltime The potential labor supply can be expanded by formal or on-the-job training.

Linking Organizational Strategy to Human Resource Planning

Matching Labor Demand and Supply Employment planning compares forecasts for demand and supply of workers. Special attention should be paid to current and future shortages and overstaffing. Decruitment or downsizing may be used to reduce supply and balance demand. Rightsizing involves linking staffing levels to organizational goals.

Possible HR Areas for Core Competencies

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Linkage of Organizational and HR Strategies

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HR Planning Responsibilities
Top HR executive and subordinates gather information from other managers to use in the development of HR projections for top management to use in strategic planning and setting organizational goals

Typical Division of HR Responsibilities in HR Planning

Small Business and HR Planning Issues

Attracting and retaining qualified

outsiders Management succession between generations of owners Evolution of HR activities as business grows Family relationships and HR policies
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