FILE019

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Human Resource
Planning
What is HRP?

It is concerned with ensuring that the
enterprise’s future needs for labor & skills
are met.

It translate the org’s objectives into terms
of the workers needed to meet these
objectives.

HRP systematically forecasts an org’s future
demand for & supply of employees.

All these definitions contain similar features
–
–
–
–
A Strategic
Long term approach
A Comprehensive staffing plan
Covering all HR activities from recruitment through
training development and career mgt to the
separation of employees by retirement &
retrenchment
– And a close relationship with organizational strategies
& objectives

Its overall purpose is to
– ensure the effective mgt of HR by providing
the required quantity & quality of employees
where & when necessary.
Importance of Human
Resource Planning
HRP provides the foundations for establishing
an effective HRM program.
 It coordinates all the HRM functions.
 It allows the HRM functions to position itself
to take the best advantage of fluctuations in
the economy or the labor mkt.
 It saves the org from the costs of failure of
inadequate HR plan

– Like unstaffed vacancies
– Expensive replacement training
– Over-hiring
The Process of Human
Resource Planning
HRP is a systematic process.
 Three important components of HRP
model are:

– Labor Demand Forecast
– Labor Supply Analysis
– Balancing Supply & Demand

The process is cyclical & ongoing

Feedback is important for subsequent forecasts.

LABOR DEMAND FORECASTS:
– It is a key component of HRP
– It involves estimating the number & type of Y
needed.
– Highly computerized method or simple ‘rule of thumb’
may be used.
– But choice depends on the specialists, complexity of
the org, mkt factors & external env.
– It is more of an art than science.
Techniques:
– There are two approaches to demand forecasting:
Quantitative & Qualitative
– The quantitative (or top down) approach involves
the use of statistical or mathematical techniques.
– Quantitative techniques can be divided into
indexation, trend analysis & simulation

INDEXATION
– Forecasts of employment requirements in relation to
one or several organizational indices are known as
indexation.
– The production function model: - assumes a
continuing relation between output & employment
numbers.
– Therefore HR needs can be determined according to
a simple equation:
NEW HR = (New output/ Former output) * Former HR

Ghosh’s refined Production Function Model:
takes the further factor of productivity into
account, producing a slightly more complex
equation:
NEW HR = Change in productivity {(New output/
Former output) * Former HR}
– This may be suitable for small org which can easily
measure output & productivity.

Work Study Model: heavily depends on
the sales forecasts & assumes constant
standard processes.

Linear Regression , Linear
programming, aggregate forecasting:
use one or several variables seen to be
closely related to labor needs.
Trend analysis:

Based upon a past HR growth.

The simplest form in small org is – SAB (same as
before) approach.

Labor Wastage Analyses: establish the trends (rise
& falls) in employees leaving orgs (retirements,
resignations, dismissals), often by section, job category
& level using the simple equation:
Labor Wastage =(Number of leavers in a period/
Average labor force in a period) * 100%

Job Matrix Approach:
considers labor movement by dept, job categories & through
hierarchical levels.

Actuarial Approaches:
use statistical methods & models to predict future HR needs on the
basis of avg. & means.

Markov Models:
are more complex statistical method

Cohort Analyses:
Single out specialist groups (cohorts) of Y, & chart their progress
through the org, The result identifies internal Hr Movement
thorough the org & therefore likely recruitment need in future.
Simulation:

Highly computerized system.

Based upon multiple variable like : new venture
analyses, change/optimization/ Renewal models,
probability forecasts, cross-impact & network analyses.
LABOR SUPPLY ANALYSIS:

Once demand is done then it must determine if the
numbers & types of employees required are available.

It must also determine when & where they will be
needed.

Supply can come from either internal or external
sources.
Internal Supply:

Begins with info from staffing establishment
charts.

This charts usually indicates actual jobs, their
present incumbents & present & future
vacancies.

Skill inventories are also also valuable source Y
info.
– It represents a comprehensive picture of the level of
skills in an org
External Supply:

If an org lacks a sufficient internal supply of
employees for promotion, or at the entry level
positions it will consider the external sources.

Many factors influences the external supply –
demographic changes, national, international &
regional economies.
Balancing Labor Demand & Supply:

HRP strives for an appropriate balance between labor
demand & supply.

Supply analyses determine how employees with the
required qualifications & personal qualities can be
attracted to fill job vacancies.

Since it is difficult to attract advanced skilled employees
this phase of planning is becoming more crucial.

Other options to full time job is – part time employment
job sharing, contractual positions etc.

Appropriate balancing needs to be estb. between hiring
& firing as it affects productivity, moral, career
opportunity & other legislative requirements like EEO.
Drawbacks of Human
Resource Planning

Too difficult & time consuming

Requires HR specialists – who are rare & expensive

Complexity of internal & external environment of a
particular organization.

Culture & Structure of the org are very difficult to alter.

Political & economical conditions may change during the
long process of HRP.

Top mgt may not understand the need for change.
Benefits of Human
Resource Planning

Better use of HR.

Organizational & employee objectives can be more closely matched.

Substantial improvement in productivity & profitability can be
achieved.

Recruitment at right time at right cost in line with future org
requirement.

Ideal labor & under supply can be avoided.

Labor surplus can be used for development of new opportunities.

Future skill needs can be met by timely training & development

Morale can be maintained by smooth mgt of career.

Likely redundancy can be managed effectively with minimum
disruption.

Overall HRP is a means of ensuring that all HRM activities are
effectively integrated with business strategies & HR functions
receive appropriate recognition
Effective Human
Resource Planning

Effective HRP depends on :
– Top mgt understanding & commitment
– Recognition of equal importance of HR & other
organizational resources.
– An understanding of the crucial link between internal
& external env. & org strategies.
– Effective link between HRP & HRM
– Provision of adequate staff, time & resources for HRP.
– Effective HRIS.
Environment of Human
Resource Planning

All org exists in broad economic environment.

This economic env may either assist or hinder HRP.

Peter Blunt has categorized env into 4 groups:
– Placid randomized – stable eco situation with separate org in clear &
traditional mkt.
– Placid, clustered – env is relatively stable & certain but comprised of
larger org.
– Disturbed, Reactive – flexible org facing greater competition
– Turbulent – the present stage of development, characterized by rapid
change, frequent mergers & takeovers.

The first three categories are largely historic.

Since dif org operates under dif env, astute mgr needs to identify
their org’s particular industry & socio-economic env & then develop
staffing plans with these aspects keeping in minds.

Organizational env consists of
– Conditions
– Circumstances
– Influences

These factors affect org’s ability to achieve its
objectives.

Every org exists in an env which is both internal &
external in nature.

Both Internal & external env are composed of 5
elements:

Physical, Technological, Political, Economic & Social.

Major challenge for HR Mgr – not only to understand &
cope with the env but also to influence them.
External & Internal
Environment of Human
Resource Planning

External env – exists outside the org.

External environment can have a significant impact on
policies, strategies & plans of HRM.

By analyzing ex env. HR mgr can assess likely current &
future changes and determine possible impact on its
workforce.

External env factors include: physical, technological, social,
demographic, cultural, political & economic aspects.
– Physical factors:
 Includes: climate, location, transportation facilities & general
attractiveness of the area in which org are located.
 Can have positive or negative influence on the attraction &
retention of employees.
– Technological factors:
 It provides an important basis for improving
productivity & Competitiveness.
 Challenge of HR mgr is to assess the impacts of tech on
Y numbers, work skills & career opportunities.
– Economic & Labor Market factors:
 Inflation, recession has severe impact of HRP.
 Increased international competition.
Other External Factors………..
– Political Factors
– Social Factors
– Age Distribution
– Women in Work Force
– Rising Education Level
– Increasing Service Job
Cultural Change
– Employee Rights
– Work & Leisure

Internal env – may hinder or assist in goal achievement.
– Ownership:
 May influence the nature of HRP by restricting or encouraging
proposed changes according to the practice or traditions of the
parent org.
– Size:
 Influences its degree of complexity including features such as lines
of communication, possible feelings of alienation among
employees
– History & Structure:
 May also affects employee recruitment & maintenance plans.
Formulating Human
Resource Planning

Once Labor Demand forecasts & supply analysee have been conducted and
compared – a series of staffing plans need to be developed, in line with
corporate level strategies.

The component of HRP will include:
– integrated plans for future work & job design
– Recruitment
– Selection
– Training & Development
– Career mgt
– Succession
– Remuneration
– Separation & retirement/retrenchment
– Reward systems
– Performance mgt

An integrated approach is essential not only for good
HRM practice but also to ensure that org objectives,
structure & cultures are effectively & efficiently
aligned.

Effective HRP also recognizes – that the best plan are
likely to be disrupted by internal & external changes.

So, proactive HR mgr takes care to include a series of
contingency plans.

HRP should also be cyclical, involving continuous
monitoring & review.
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