Chapter 16: Human Resource Planning

Human Resource Planning and Its Importance

HR planning is both a process and a set of plans. It is how organizations assess the future supply
and demand for human resources. In addition, an effective HR plan also provides mechanisms to eliminate
any gap that exists between supply and demand. Thus, HR planning determines the numbers and types of
employees to be recruited into the organizations.

HR planning also involves linking a firm's HRM practices to its strategic business needs, which
have been identified by the strategic planning process. HR planning may be done on both short-term and
long-term (three or more years) basis. Its aim is to ensure that people will be available with the appropriate
characteristics and skills when the organization needs them.

It is a process by which a company ensures that it has the right number and kind of people, in the
right places at the right time, doing the things for which they are economically most useful. It is a method
for determining future HR requirements and developing action plans to meet them. It is defined as a strategy
for the requisition, utilization, improvement, and retention of an enterprise's HR and it encompasses the
subject concerned with the developing range of manpower policies, including those for recruitment,
development, and retention.

Why Conduct HR Planning?

HR planning must be conducted for more effective and efficient use of HR. HR planning helps in
scheduling recruitment and selecting effectively by providing information that determine how many people
are needed and the kinds of people needed for job openings.

In a rapidly changing business such as computer programming, the company must be able to
respond quickly to changing needs of its employees. Careful planning is central to this process. HR planning
is a major building block of HRM. That is, the successful implementation of many of the HRM functions
discussed throughout this book depends on careful HR planning.

Through the HR planning process, the organization can identify the mix of skills it will need in the
future. The output of HR planning is required before the head of HR can plan for its recruitment, selection,
and training employees.
Wendell French, Human Resources Management (Houghton Mifflin Company, 2007).

More satisfied and better developed employees have better chances e developing and utilizing their talents.
This situation often leads to greater employee satisfaction. Through a systematic planning of HR, a
company can better assisted in attaining its goals and objectives. It can also be an effective means of
planning the development and growth of its employees.

Human Resource Planning Process

Six Distinct Phases or Stages

1. Situation Analysis and Environmental Scanning/Analysis of the Current Situation/Forecasting

Supply of Manpower
The strategic plan must adapt to environmental circumstances, a HRM is one of the primary
mechanisms that an organization can use during the adaptation process. For example, rapid
technological changes in t environment can force an organization to quickly identify and hire employees
with new skills that previously were not needed by the organization. This stage will reveal data of the
current HR situation and its position to the nation economy. HR problems may surface in the light of
desired corporate goals and a clear understanding of it is fundamental in the planning process,
2. Forecasting Demand for Employees
This is estimating not only how many but also what kind of employees will be needed. This involves
making a projection in terms of the number employees the firm should have to make productive and
competitive as well determining their specific qualifications. It is necessary to have an indication of
future development in order to plan out necessary steps.

There are two considerations:

a. What is the manpower demand for specific types of position at any given point of time to
perform various roles?
b. What is the best employment profile to be used for future trends?

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 The most important step in forecasting HR requirements is to identify what is to be forecasted. This
requires the drawing of a forecasting model which would attempt to do three things:

a. Define categories of skills in terms of kind or amount.

b. Identify each type and level of job.
c. Identify self-contained units which require separate quantitative HR forecasts.

There should be definitions of skill categories:

a. Managerial
b. Technical
c. Professional and administrative
d. Manual/operative supervisory
e. Clerical and office

3. Analyzing the Current Supply of Employees/Inventory of Manpower

This is to determine how many and what kind of employees the company currently have in terms
of skills and training necessary for the future.

Useful tools in analyzing current HR situation in the company include:

a. HR Inventory-stock taking of firm's employees; head count of employees.

b. Skills Inventory-analyzing the individual skills and abilities of all kind of employees at all
levels.
c. Human Resource Audit-seeks to answer the question "what has been and is happening to
our HR?"

The major tool used is the skills inventory which is done after determining the kind of skills, abilities,
experiences, and training the employees currently have. By keeping track of these, the organization can
quickly determine whether a particular skill is available when it is needed. A skills inventory in its simplest
form is a list of names, characteristics, and skills of the people working for the organization.

4. Forecasting HR Supply

The total stock of HR at any given time is the population count. Past trends, patterns, and expected
developments give us a picture of future manpower supply. An important element in the forecasting of labor
supply concerns how many will leave. The length of service is an important indicator of leaving. Availability
of training resources will also affect the future supply of labor as well as union attitudes and payment policies.

5. Reconciling HR Requirements and Supply Forecasts

Both HR requirements and supply forecasts may reveal gaps which exist between employment and
labor force; between occupations employed and occupations not employed; between employees educated
and/or trained and those not educated and/or trained. The main processes include:

a. Assessment of performance of present workforce

b. Identification of possible discrepancies and imbalances compared with production targets
c. Identification of possible causes for such and deviations

6. Action Plan Development

After analyzing both the supply and demand for future workers, these two forecasts are compared
to determine what, if any, action should be taken. Whenever there is a discrepancy between these two
estimates, the organization needs to choose a course of action to eliminate the gap.

a. Action decisions with a shortage of employees/planning for growth or expansion

• Recruitment-when HR plans indicate an undersupply of employees, firms can recruit personnel to

staff jobs with anticipated vacancies.
• Training and promotion instead of hiring new workers to increasing demands, an organization may
decide to improve the productivity of the existing workforce through additional training
• Other options would be the use of overtime, additional shifts, job assignments, outsourcing, or
hiring temporary workers,

This situation would be indicative of growing sales, increasing demand for the product and
expanding operations for organization.

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b. Action decisions in surplus condition/planning for reductions

The current trend toward organization restructuring usually results in a smaller workforce. Therefore,
when an organization's strategic plan calls for restructuring, the HRM response is usually one of downsizing.
Downsizing usually means layoffs. Because of the negative outcome that are often associated with layoffs,
employers are encouraged to alternatives such as the following:

Attrition

• Early retirement
• Demotion
• Freeze hiring
• Termination
• Restricted overtime

This is the case when the company is experiencing cutbacks.

Evaluating the HR Planning Program

Like other HR functions, it is important for managers to evaluate the HE planning process on a
regular and ongoing basis. An ideal HR planning process would enable an organization to always hire
exactly the right number of people a exactly the right time. Such perfection is seldom achieved. However,
the planning process can be assessed in terms of relative accuracy and ability to provide the right mix of
HR.

That is, if the organization is usually able to hire the right kind of employees at around the time they
are needed and the organization seldom has a surprise or a shortage of qualified workers, then its planning
process may be deemed t be working effectively. On the other hand, if the organization is often scrambling
to hire people on short notice, if it is often hiring the wrong kind of people, or if it ends up having too many
people in the payroll, then the planning process might be flawed or defective.

Alignment of Business Planning and HR Planning

HR planning should not occur in isolation.

The size of an organization's workforce, including
its occupational mix, should be based upon
business plans See Figure 15.

HR planning involves every phase of the

company. It must translate company plans into HR
requirements and evaluate the current
performance levels of individuals and predict their
potential. It provides career management or
charting: and provides systems, forms, guides,
and charts for matching job requirements with
skills available. It encompasses everything that
concerns people its cost, morale, leadership,
productivity, forms of compensation, and
conservation of the resource. It provides for the
total human input required by the company and
assures a planned return for its cost.

Long-range Planning-To survive more than the next year or two, organizations must engage in long-range
strategic plans. This entails preparing the mission and vision statement as well as formulating strategies to
achieve them.

All these should involve a long-range analysis of employment. Each of these changes mentioned
could have a significant influence on the availability and preparation of personnel. An organization cannot
achieve its long-range strategic goals without the necessary personnel.

Middle-range Planning-The plans may be stated in terms of sales, number of units produced, or some
other index of business activity. Achieving the goals and objectives requires the proper mix of people. This
includes projecting the number of employees needed for each job created to achieve identified business
goals.

Short-range Planning-Budgets and economic forecasts are frequently developed without a careful
analysis of whether the HR will be available t achieve them. Supervisors and managers should anticipate

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the number employees and the specific training that would help employees acquire the skills needed to
make them productive.

Succession Planning- ensuring that another individual is ready to move into a position of higher
responsibility.

Replacement chart - an HRM organizational chart indicating positions that may become vacant in the near
future and the individuals who may fill the vacancies,
Stephen Robbins, Fundamentals of Human Resource Management (John