Chapter 3

HUMAN RESOURCE PLANNING

Objectives:
After studying this chapter you would be able to:
1. Define human resource planning and explain why organizations conduct it.
2. Understand the basic relationship between strategic planning and human resource
planning
3. Explain the human resource planning process.
4. Describe some of the most common used human resource forecasting techniques.
5. State what management can do:
- When shortage of employees exists
- When surplus of employees exists.
6. Explain the role of inventory or employee information in the preparation of human
resource plan.
7. Distinguish between demand for and supply of employees in an organization.

HUMAN RESOURCE PLANNING

What is Human Resource Planning?
The acquisition of people to perform each job within the organization is the role of the staffing
function. This function is interrelated closely with planning, because human resource needs
must be forecasted sufficiently in advance to enable qualified individuals to be available for job
openings as they occur. Human resource planning, therefore, is the process of systematically
reviewing human resource requirements to ensure that the required number of employees, with
the required skills, are available when they are needed (Mondy & Noe, 1990). It is a means of
deciding the number and type of personnel that organization needs now and in the future. Then,
translates the organization's objectives into the number of employees required to meet those
objectives. Without clear-cut planning estimation of human resource need is reduced to mere
guesswork.
To ensure that people are available to provide the continued smooth development, organizations
engage in human resource planning. The purpose of developing human resource planning is to
asses where the organization is, where it is going, and what implications these assessments have
on future supplies and demands of human resource. Attempts must then be made to match
supplies and demands, making them compatible with the achievement of the organization's
future needs.
The Importance of Human Resource Planning
Organizations are composed of financial, material and human resources. Of these human
resource represents one of the organization's most valuable assets. However, because the
organization does not own people, as it does physical and capital assets, this resource is seldom
given proper attention.
Its supply of personnel must be sufficient to ensure the healthy operation of the organization.
Toward this objective of continuing healthy operations, the organization needs to be undertaken
human resource planning. Human resource planning, according to Chatterjee (1995), therefore:
- assumes a crucial role in the future success or failure of an organization.
- enables a manager to predict his/her manpower requirements, to determine the
deployment of personnel and to control wage and salary costs.
- provides management information about the existing strength and weaknesses of the
people in the organization.
- assesses the kinds of skills required to be developed as well as recruited.
- estimates human resource requirements over a specified time frame in relation to the
organization's goals. Provides an indication of the lead-time that is available to evolve
new strategies in selecting and training the required additional manpower or reducing the
strength of the workforce.
In general, the following are the major reasons for undertaking human resource planning.
1. Future Human Resource Requirements
Planning is vital for determining the human resource needs for the future.
2. Cope With Change
Human resource planning enable the management to cope with changes in technology,
competitive forces, markets, government regulations, etc. Such changes often generate
changes in job content, skill demands, number and types of personnel.
 3. Decreasing or Increasing Growth of Organizations
The manner, the pace and the direction in which an organization is growing dictates the
need for a human resource plan. Years of comfortable growth may give rise to slower
growth prospects or even reduced growth prospect (Chatterjee, 1995).
4. Foundation for Human Resource Functions
The plan provides essential information for designing and implementing human resource
functions such as recruitment, selection, employee mobility (transfers, promotions, lay-
off, etc.) and training and development.
In general, human resource planning:
- Should be planning - something done in advance rather than just as a spur-of-the-
moment reaction to immediate pressure.
- Should guide and coordinate all personnel activities so that they work together to
support the overall strategy rather than operate independently of one another.
- Should be responsive to both the external and the organization environment.
- Should be strategic - linked with high level planning rather than performed in
isolation (Scarpello & Ledvinka, 1995).
The Human Resource Planning Process
Planning for human resource should be tied in with overall long-term organizational plan. In
other words, after organizational strategic plans have been formulated, human resource planning
can be undertaken. Strategic plans are reduced to specific quantitative and qualitative human
resource plans (Mondy & Noe, 1990). Many organizations carry out systematic planning only
for those categories of personnel, which have been in short supply or for those types of skills
which require a long development time within the organization. This being as it is, most
organizations identify short term and long-term human resource needs by examining their
strategic plan.
As can be seen in the figure (Mondy & Noe, 1990) next page, below, the human resource
planning has two components. These are requirements and availability. Forecasting human
resource requirements involves determining the type and number of people needed in an
organization.
EXTERNAL ENVIRONMENT
INTERNAL ENVIRORNMENT

Strategic Planning

Human Resource Planning

Forecasting Comparison of Forecasting

Human Resource Requirements Human Resource
Requirements and Availability Availability

Demand Surplus of Shortage of

Supply Workers Workers

Recruitment

Restricted Hiring
Reduced Hours,
No action Early Retirement
Layoff Selection

The Human Resource Planning Process

These projections will reflect various factors, such as development plans in government
organizations where as production plans in business firms. Forecasting human resource
availability involves identifying both the internal sources and external sources. It is important
here to note that one of the major objectives of human resource planning is to enable the
organization not be understaffed or overstaffed. Thus, it is the responsibility of the management
to compare requirements and availability to determine whether there will be a surplus or
shortage of employees. If a surplus is projected, then, the organization must use different
employee reduction methods, such as early retirements, restricted hiring, dismissal, etc. On the
other hand, if shortage is predicted, the organization must obtain the right type and number of
people from the labor market through recruitment and selection.

Although there is no universally accepted set of procedures for undertaking human resource
planning process, there is a general agreement upon the major processes and contents of human
resource planning as illustrated below.

Organizational Current Forecasting Implementation Audit

Goals & Plans Human Human Programs &
Resource Resource Adjustment
Steps in the Human Resource Planning Process.

Organizational Goals and Plans

Human resource planning is a part of the strategic planning for the entire organization.
Moreover, to be relevant, a human resource planning process should be clearly tied to the
organization's strategic goals (Mondy & Noe, 1990). For example, a business firm Human
Resource Manager and his staff can not make operational plans, unless they have information
about sales forecasts, market trends, technological advances, organizational expansion, and the
like.

The organizational goals are the result of its strategic planning. Different kinds of public or
business plans can be designed ahead for different number of years. Some organizations plan ten
to twenty years ahead. Such long range planning by organizations is an exception. Most
organizations plan only for the fairly short run of say one to five years. Generally speaking,
however, human resource planning for up to one year is considered short range and is widely
practiced in many organizations. On the other hand, planning for two to four years is considered
medium range and planning for five years and beyond is long-range.

Current Human Resource Situation

The second phase of the planning process is the preparation of an inventory of human resource
within the organization. This is often called human resource inventory or a manpower
information system. The inventory consists of up-to-date information concerning each
employee's knowledge, skills and abilities. It enables management to assess the type and
number of employees available in the organization. Moreover, a summary of this sort gives
planners a comprehensive understanding of the capabilities that are to be found in the
organization's workforce (Werther & Davis, 1996).

The inventory or employee information has several important uses. The major ones are:
- It enables to compare the number, types and skills specified by the forecast with the
present baseline.
- It enables to ascertain what skills must be developed from the current personnel, via
training.
- It enhances the opportunities for employees to satisfy their career aspirations through
promotion and development.
- It enables to reconcile human resource demand with supply.

Human resource inventory includes job classifications, age, gender, organizational level, rate of
pay, and functions. It may also include resume date, skill, education, training received, and
career interest (Mondy & Neo, 1990). This manpower information can be collected, stored and
retrieved manually by means of filing system in small organizations, where as computerized
system is practically a must for the larger organizations that wish to handle employee
information for many years.
This step enables planners to evaluate the status of current human resources. What skills,
interests, and experiences of current employees have? What jobs are being done? How many
employees are doing particular jobs? Current employees are the most likely candidates to meet
future needs and should be the first ones considered for new positions (Baird, 1990).

Human Resource Forecast

Human resource forecasts are attempts to predict an organization's future demand for
employees (Werther & Davis, 1996). It is a determination of the demand for employees for
given time periods in the future such as one, three and five years. The forecast also requires the
preparation of an estimate of the supply of people who will be available for the selected time
period. The supply is composed of two main parts. There are:
- an estimate of the numbers and types of personnel presently on the payroll.
- The portion which must be recruited externally.

These figures for the planning period are obtained by subtracting the current available
manpower from the projected demand. If the figures are positive, employees will have to be
recruited, selected and hired; if the figures show negative, employees may eventually have to be
laid off.

The demand forecast is an estimate of types and numbers of personnel the organization will
require in the future. It is derived from goals and plans. For example, the public organization's
goals and plans should provide the human resource planners with information on such factors as
projected social service, development activities, number of population to be served, new
bureaus or departments to be created, and the like.

Generally, human resource planners must use several techniques of forecasting manpower
requirement and availability. Some of the techniques available are qualitative and quantitative in
nature.
Human Resource Forecasting Techniques.
Forecasting technique range from judgment to sophisticated quantitative models. The most
commonly used techniques of forecasting are:
 Judgment and Experience
 Zero-Base Forecasting
 Bottom-up Approach
 Work Standard Data
 Key Predicative Factors.

Judgment and Experience

This method is based on the estimates made by people like executives or experts who are very
familiar with the entire nature of the jobs in the organization. It is appropriate for short-range
forecasts. The manager and heads of various units of the organization make estimates of future
human resource requirements by judgmentally converting information on future organizational
activities into numbers and types of personnel needed. For example, these activities in public
organization may include services to be provided, population to be served, projects to be
completed, etc.

Zero-Base Forecasting
The zero-base forecasting approach uses the organization's current level of employment as the
starting point for determining future staffing needs (Mondy & Noe, 1990). Whenever vacancies
exist due to retirement, layoff, death, or resignation, the vacant positions are not immediately
filled. Instead, personnel requirement analysis is made to determine whether the organization
can justify filling them. The same procedure is followed when organizations create new
positions. Zero-base human resource forecasting, therefore, requires management at different
levels to thorough study and analysis their human resource needs.

Bottom-up Approach
In bottom-up approach, managers from various levels are asked to contribute to employment
forecasting. It has the advantage of drawing many managers into the process and giving them a
sense that they are participating in one of the importance activities of the organization. Here,
unit managers send their employment needs forecasting proposals to the top management who
compare these with the plan and finalize them. According to Mondy and Noe (1990), human
resource forecasting is often most effective when managers periodically project their human
resource needs, comparing their current and anticipated levels, and giving the human resource
department adequate lead time to explore internal and external source.

Work Standard Data

Another means of forecasting human resource requirements is to use work measurement
standard. This is a means of determining the relationship between tasks and the number of
employees needed to perform the tasks. In this case many organizations have established data
for man-hours or unit times to perform tasks. According to Chatterjee (1995), the technique is
useful only in cases where the volume of work can be satisfactorily quantified, total production
and activities in terms of clear units are estimated and the number of man hours required to
perform/ produce each unit is carefully calculated.

The total projected units of work for the organization are translated into man-hours or man-days
and the number and type of employees by using the pre-established time standards. However,
work standard technique cannot be applied for estimating professional personnel requirements.
For this, judgment, experience and managerial intent are some of the major determinants of how
many and what types of employees are needed.

Key Predictive Factors

The core element of the "key predictive factors" method is to identify one major indicator with
which total human resource requirement correlates highly. For example, one of the useful
predictors of academic staff employment levels in the Ethiopian Civil Service College is the
number of students to be served. Moreover, to identify predictor variables, the manpower
planning office of business organization must examine several variables such as sales volume,
units produced, or number of customers served to find which variable or variables provides a
good correlation between the number and type of employees needed.
Implementation Programs
After the optimal alternative for addressing the organization's human resource issues has been
chosen, it is translated into operational programs with specific plans, target dates, schedules, and
resource commitments (Mondy & Noe, 1990). The implementation phase of the human resource
planning requires translating the plan into action. For example, if a shortage of accountants in
Region 5 has been forecasted and if the plans reveal, both recruitment plus upgrading of the
present accounting talent, then both recruitment and training programs will have to be
strengthened and expanded. The following are the major implementation actions.

Recruitment and Selection

The analysis of human resource requirements indicates a shortage of specific skills such as
accountants, economists, administrators and the like. In such case, the human resource manager
must examine both the internal and the external sources of supply, and then efforts must be
made to attract the best-qualified candidates to the organization.

Most experts are agreed that the search for manpower must always begin within the organization
where a thorough check on the quantity and quality of existing employees can be made to yield a
manpower audit. The organization itself is a captive source and when the qualifications,
experiences and capacities of manpower within is known, offering them new avenues and
openings can act as powerful incentives (Chatterjee, 1995).

After analyzing the internal human resource availability, the organization will have to examine
the labor market. Recruiting new personnel from the open labor market can be costly and
complicated process that has a strong impact on organizational effectiveness. In order to acquire
the best-qualified people, organizations must have a good policy to ensure that employment
conditions are sufficiently attractive. Once a pool of potential applicants has been developed
there is a need to assess this pool to predict which candidates will assist the, organization in the
attainment of its objectives if selected. Here, employee selection refers to the development of
policies and procedures, and evaluating potential employees in terms of job specification. It is a
means of determining, which people best meet the needs of the organization.
Performance Appraisal
Performance appraisal is the process by which organizations evaluate individual job
performance. When it is done correctly, employees, their supervisors, the human resource
department, and ultimately the organization benefit by ensuring that individual efforts
contribute to the strategic focus of the organization (Werther & Davis, 1996). Organizations use
performance appraisal for manpower planning purposes, as input into personnel information
systems. Moreover, it provides reliable data for management decisions in regard to:
- employee's readiness for taking a new jobs, through transfers and promotions
- training and management development needs.
In general, information collected through performance appraisals enables management to assess
employees' performance and potential for future development.

Promotion, Transfer, Layoff and Retirement

Organizations are ever changing. Because of the needs of the organization and employees, the
occurrence of some sort of employee movement is always there. In implementing the human
resource plans, some employees may be promoted from jobs to another positions that are higher
in pays, responsibilities and/or organizational levels while others may be transferred to another
jobs either to fill vacant positions or to provide the employee with new skills and to enable
him/her be a better candidate for promotion in the future.

When human resource plan reveals that the internal supply of employees exceeds the
organization's demand, reduction of surplus workers becomes unavoidable task. Such situation
can be corrected through layoffs, early retirements and/or restricted hiring. When the
organization is unionized, layoff procedures are usually stated clearly in the labor management
agreement. Typically, workers with the least seniority are laid off first. If the organization is
nonunion, it may base layoff on a combination of factors, such as seniority and productivity
level (Mondy & Noe, 1990). In early retirement some employees are reluctant, but others may
be willing to retire. This being the case, early retirement is supposed to be voluntary and the
organization must offer some sort of inducement.
Training and Development
Training and management development must be in the context of the organization's human
resource development policy. They must be based on recognized needs such as:
- changes in technology
- the introduction of new products
- changes in organizations set-up
- organization's desire to upgrade the skills and knowledge of employees with a view to
help them do their current jobs properly and prepare them for future responsibilities, and
the like.
The training and management development programs are relevant and useful only when they are
implemented towards the attainment of organizational objectives.
Motivation and Compensation
The system of motivation and compensation should serve to help the organization achieve the
manpower plan. Compensation is what an organization provides its employees in exchange for
their work contribution. If the organization is not paying competitive rates, the current
employees are likely to leave the organization. Pay dissatisfaction not only affects the quality of
work life but it also has a trouble in recruiting and retaining employees. On the other hand, if the
treatment of employees is perceived to be arbitrary, then the organization will also have problem
of meeting its human resource requirements.
Audit and Adjustment
Human resource planning requires considerable time, personnel, and financial resources. The
return on this investment may not justify the expenditure for small firms. Increasingly, however,
large organizations use human resource planning as a means of achieving greater effectiveness
(Werther & Davis, 1996). For any of various reasons, the human resource programs for meeting
the desired targets may be falling short of organizational objectives. A system for evaluating and
measuring progress should be set up. Many systems of measurement can be used depending
upon the specific program being evaluated.

Moreover, another reason for reviewing progress is to check if changes in the human resource
plans are made necessary, because of changed circumstances or because of the original planning
has been proven wrong.