Chapter 3
Planning for Human Resources
Chapter 3 Objectives
• Understand how human resource planning contributes to a firm’s
competitive advantage
• Explain why and how firms engage in strategic planning
• Explain why and how human resource planning activities are
conducted
• Describe how HRM practices developed in response to the HR plan
• Understand the role of human resource information systems in
planning and other HRM practices
Opening Case: Gaining Competitive
Advantage at General Motors
• Problem: Time spent on completing HR transactions
hurts employee and HR productivity.
• Solution: Developing an employee services center
website.
• How the employee services center enhanced
competitive advantage:
– Significant reduction in cost and time.
– Improvement in speed and quality of employee work.
– Improvement in the productivity of HR department.
Linking Human Resource Planning to
Competitive Advantage
• HR planning: Process of identifying and responding to
organizational needs and charting new policies,
systems, and programs that will assure effective
human resource management under changing
conditions.
• Objectives of HR planning
– Enable organizations to anticipate
their future HRM needs.
– Identify practices that will help them
meet those needs.
Linking Human Resource Planning to
Competitive Advantage (Cont.)
• HR planning ties together all human resource
activities and integrates these with the rest of the
organization.
• It enables companies to gain control of their
future by preparing for events that are likely to
occur.
Linking Human Resource Planning to
Competitive Advantage (Cont.)
Linking Human Resource Planning to
Competitive Advantage (Cont.)
• Consequences associated with the failure to
plan for human resources
– Employers are forced to respond to events after
they occur; that is, they become reactive, rather than proactive.
– An organization may be unable to correctly anticipate an
increase in its future demand for employees, leading to
understaffing.
– Understaffing leads to consequences such as increased stress
levels, increase in back orders, decrease in customer goodwill,
an increase in competition, and a loss of market share.
Strategic Planning
• Through the strategic planning process, organizations
determine where they are going.
• The process consists of the following activities:
Determine the
organizational
mission.
Scan the
organizational
environment.
Set strategic goals.
Formulate a
strategic plan, part
of which addresses
human resource
needs.
Strategic Planning
Step 1: Determine the Organizational Mission
Need a Vision Statement – “What do we
do?”
Mission statement is a declaration of the
organization’s overall purpose.
Mission defines the basic business scope
and operations that distinguish the
organization from others of a similar nature.
Strategic Planning
Step 2: Scan the Organizational Environment
External and internal environments must be scanned to
identify threats and opportunities.
External environment: Includes political, legal, economic,
social, and technological issues; the industry
environment must also be scanned.
Internal environment: Assessment of the firm’s strengths
and weaknesses in order to form strategic goals that
take advantage of strengths.
The task of gathering information for strategy formulation
rests with all managers and employees.
Strategic Planning
Step 3: Set Strategic Goals
Strategic goals specify the desired outcomes that must
be reached for the firm to accomplish its mission.
They should be specific, challenging, and measurable
Strategic Planning
Step 4: Formulate a Strategic Plan
Strategic plan specifies the courses of action
a firm must take in order to meet its strategic
goals.
Formulated by:
Translating organizational goals into more narrow
functional or departmental goals.
Devising strategies for meeting these goals.
Human Resource Planning
• Through HR planning, an
organization is able to generate a
list of future human resource needs
and a plan for meeting them.
• To derive HR needs, the
organization must forecast its
demand and supply.
Human Resource Planning (Cont.)
• Demand forecasting involves predicting the number and
types of people the organization will need at some future
point in time.
• Supply forecasting involves estimating which organizational
positions are expected to be already filled.
Demand
Supply
Forecast
Forecast
HR
Needs
Human Resource Planning (Cont.)
Demand Forecasting – Statistical Approaches
An organization predicts needed workforce size on the
basis of certain business factors.
A business factor is an attribute of the business such as sales
volume or market share, which closely relates to the size of the
needed workforce.
Is used when an organization operates in a stable
environment.
Most commonly used statistical methods are trend, ratio,
and regression analysis.
Human Resource Planning (Cont.)
Demand Forecasting – Statistical Approaches
Trend
Analysis
Ratio
Analysis
• Future demand for human resources is projected on the basis of past
business trends regarding a business factor.
• Process of determining future HR demand by computing an exact
ratio between the specific business factor and the number of
employees needed.
• A statistically sophisticated tool where forecasts are based on the
Regression
relationship between a business factor and workforce size.
Analysis
Human Resource Planning (Cont.)
Demand Forecasting – Statistical Approaches (Cont.)
• Precaution regarding the use of statistical
methods
– Statistical methods of demand forecasting assume
that the relationship between workforce size and the
business factor remains constant over time.
– If this relationship were to change unexpectedly, the
forecast would become inaccurate.
Human Resource Planning (Cont.)
Demand Forecasting – Judgmental Approaches
• Involves the use of human judgment,
rather than a manipulation of numbers.
• Two most common techniques:
• Group brainstorming
• Sales force estimates
Human Resource Planning (Cont.)
Supply Forecasting
• Steps to supply forecasting
– Step 1: Organization groups its positions by
title, function, and level of responsibility.
– Step 2: Estimate within each job group, how
many of its current employees will:
• Remain in their positions during the planning
period.
• How many will move to another position.
• How many will leave the organization.
Human Resource Planning (Cont.)
Estimating Future HR Needs
A firm derives its specific staffing needs by combining the results of the supply
and demand forecasts within each job group
Demand
Supply
Forecast
Forecast
HR
Needs
Outcomes of the HR Planning Process
Dealing with an Oversupply of Employees
• The current trend toward organizational restructuring
usually results in a smaller workforce.
• 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 outcomes that are often
associated with layoffs, employers are encouraged to
seek alternatives.
Outcomes of the HR Planning Process
Dealing with an Undersupply of Employees
• Hiring additional workers
• Alternatives to additional hiring
– Improve productivity of existing workforce through additional
training
– Overtime
– Additional shifts
– Job reassignments
– Temporary workers
– Improve retention rates
Human Resource Information Systems (HRIS)
• A computerized information
package that provides
management with increasing
capacity to record, store,
manipulate, and communicate
information across wide
geographic boundaries, with
access to many users
Human Resource Information Systems (HRIS)
(Cont.)
A Company’s HRIS contains information about:
A company’s jobs
• Number and types of
jobs
• Number of people
needed in each job
• Qualifications needed to
perform each job
A company’s employees
• Individual’s equal
employment opportunity
classification
• Date of hire
• Salary history
• Performance ratings
Human Resource Information Systems (HRIS)
(Cont.)
Purposes served by a company’s HRIS:
Handles most of the record keeping done by HR professionals.
Reduces paperwork and cuts administrative costs.
Organizational members outside the HRM department can more easily
access the information.
Store information essential for filling vacant positions.
Human Resource Information Systems (HRIS)
(Cont.)
• HRIS on the “Net” – Intranet
– Internet networks that are accessible only to employees within
the company.
– They can store a great deal of HR information.
– It allows companies to save money by eliminating printing and
distribution costs.
– Employees like it because it allows them to quickly and privately
access HR information.
• HRIS on the “Net” – Extranet
– Link a firm's intranet to a variety of outside organizations and
vendors.
– Gives employees secure access to information and services
from outside parties.
Human Resource Information Systems (HRIS)
(Cont.)
• Ensuring the confidentiality of HRIS information
– The organization must ensure that user access is
limited to relevant information.
• Sensitive and confidential information should only be
accessible by the HRM department or specified individuals.
– Institute strong written policies that stipulate the
organization’s intention to protect employee
privacy rights.