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Human Resource Planning

Chapter 1: Introduction & scope

Learning Objectives

To ensure proper utilization of human resources.

To check the development of the employees for the achievement of the organization goal.

To ensure proper human resource policies.

To provide proper control measures whenever required.

Appreciate the importance of HR planning

Explain the relationship between strategic HRM and HR planning

Identify the key environmental influences on HR planning

Understand the basic approaches to HR planning

Human resource planning is one of the crucial aspects of management because it helps to ensure the needed
manpower for organizational goal. Due to the globalization movement, the competition to provide quality and
low cost products has been increasing day by day. In this situation, the HR department has to plan in order to
provide the quality manpower to compete in the market. The supply of manpower must be sufficient to ensure
the healthy operation of the organization. Otherwise, the stated goals and objectives cannot be accomplished
on time.

Human resource planning may be defined as a process of predetermining future human resources needs and
course of action needed to satisfy those needs to achieve organizational goals. It ensures that organization has
right number and kind of people, at right place, and at right time capable of performing well in the
organization. Human resource planning is a continuous process rather than a one shot affair. It tries to keep
the organization supplied with required and capable people when they are demanded.
Moreover, human resource planning is a process of knowing that what kind of people should be recruited to
ensure the quality performance of the organization. It tries to ensure that the required competency is maintain
in line with organizational mission, vision and strategic objectives. It also determines and organization's
human resource needs. It identifies what is to be done to ensure the availability of human resources needed to
achieve stated goals and objectives within the given constraints.
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Characteristics of Human Resource Planning

Characteristics of effective human resource planning are as follows:

1. Future Oriented

Human resource planning is prepared to assess the future requirement of manpower in the organization. It

helps identify the size and composition of resources for future purpose.

2. Continuous Process

Human resource planning is a continuous process. The human resource planning prepared today may not be

applicable for future due to ever changing external forces of the environment. Hence, to address such changing

factors, the human resource planning needs to be revised and updated continuously.

3. Optimum Utilization of Human Resources

Human resource planning focuses on optimum utilization of resources in the organization. It checks how the

employees are utilized in a productive manner. It also identifies employees' existing capabilities and future

potentialities to perform the work.

4. Right Kinds and Numbers

Human resource planning determines the right number and kind of people at the right time and right place

who are capable of performing the required jobs. It also assesses the future requirement of manpower for

organizational objective.

Importance of human resource planning

Human resource planning is the responsibility of all managers. It focuses on the demand and supply of labour
and involves the acquisition, development and departure of people. This is recognised as a vital HR function
as the success of an organisation depends on its employees.

The purpose of HR planning is to ensure that a predetermined number of persons with the correct skills are
available at a specified time in the future. Thus, HR planning systematically identifies what must be done to
guarantee the availability of the human resources needed by an organisation to meet its strategic business
objectives. To achieve this HR planning cannot be undertaken in isolation. It must be linked to the
organisation’s overall business strategy, and concentrate on the organisation’s long-range human resource
requirements.

Cooperation between the HR function and line management is necessary for success. It allows the HR manager
to anticipate and influence the future HR requirements of the organisation. Effective HR planning ensures a
more effective and efficient use of human resources; more satisfied and better developed employees; more
effective equal employment opportunity (EEO) and affirmative action (AA) planning; and reduced financial
and legal costs.

Strategic human resource management and human resource planning

Effective HR planning considers both the internal and external environmental influences of an organisation,
its objectives, culture, structure and HRM. This is because HR planning must reflect the environmental trends
and issues that affect an organisation’s management of its human resources. This includes consideration of
globalisation, growth of Internet use, the economy, women in the work force, demographic changes, the
casualization of the work force, employee literacy, skill shortages, acquisitions, mergers and divestures,
deregulation, flexible work schedules, telecommuting, outsourcing, quality of life expectations, pollution,
income tax levels and union attitudes.

Approaches to human resource planning

To forecast the organisation’s future HR requirements and determine from where they will be obtained. Three
sets of forecasts are required:

 a forecast of the demand for human resources

 a forecast of the supply of external human resources
 a forecast of the supply of human resources available within the organisation

Two approaches used in forecasting the demand for human resources are — quantitative and qualitative.

The quantitative approach: The quantitative approach to HR planning uses statistical and mathematical
techniques. The focus of this approach is on forecasting HR shortages, surpluses and career blockages; its aim
is to reconcile the supply and demand for human resources given the organisation’s objectives. Quantitative
forecasting includes trend projection, econometric modelling and multiple predictive techniques.
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The qualitative approach: The qualitative approach to HR planning uses expert opinion (usually a line
manager) to predict the future (for example, the marketing manager will be asked to estimate the future
personnel requirements for the marketing department). The focus is on evaluations of employee performance
and promo ability as well as management and career development. Qualitative forecasting includes Delphi
Technique and Nominal Group technique.

Forecasting human resource availability

The next step in human resource planning involves forecasting human resource availability. This involves an
examination of the internal and external labour supply. Present employees who can be promoted, transferred,
demoted or developed make up the internal supply. The external supply consists of people who do not
currently work for the organisation.

Forecasting the supply of internal human resources: Techniques for forecasting the internal supply of
personnel include turnover analysis, skill inventories, replacement charts, Markov analysis and succession
planning.

Factors affecting the external supply of human resources: Not all vacancies can be filled from within the
organisation. Consequently, the organisation must tap into the external labour market (local, regional,
interstate or international). Thus, the HR manager needs to be alert to demographic changes. Changes
occurring in the external labour market are the aging of the workforce, the increases in female participation
rates, increases in school retention rates, changes in the rate of immigration, casualization of the work force,
outsourcing, and international employees.

Requirements for effective HR planning

Given that the success of an organisation ultimately depends on how well its human resources are managed,
HR planning will continue to grow in importance.
Successful HR planning requires the HR manager to ensure that:

 HR personnel understand the HR planning process

 top management is supportive
 the organisation does not start with an overly complex system
 the communications between HR personnel and line management are healthy
 the HR plan is integrated with the organisation’s strategic business plan
 there is a balance between the quantitative and qualitative approaches to HR planning.
Chapter Summary
HR planning is an important part of an organisation’s HR information system. This is because a HR plan
affects all HR activities and acts as the strategic link between organisational and HRM objectives. An effective
planning process is essential to optimising the organisation’s human resources. The alternative is reactive
decision making in a climate of increased risk and uncertainty, with the HR department contributing less to
the achievement of the organisation’s strategic business objectives. An effective HR planning system is
essential for an organisation to be proactive, because such information allows managers to make strategic
decisions that ensure optimum performance. Lansbury claims that ‘As organisations become more technically
complex and capital intensive, the greater is their dependence upon having the right kinds of human resources.’
However, the HR manager should never forget that a HR plan ‘that only generates data is useless’. The true
measure of the effectiveness of the HR function ‘is whether the right human resources of the organisation have
been in place and properly deployed to do what is necessary to implement the corporate strategy.’ This can
only be achieved when HR planning is fully integrated into the organisation’s strategic business plan, but
studies consistently show that little integration has occurred. Charles Sturt University’s Alan Fish comments,
‘Given that human resource planning is the cornerstone of all HRM activity, it is astounding how many
organisations still perceive the activity as little more than counting ‘bums on seats’’. This suggests that HR
managers still have to successfully demonstrate that HR planning is relevant to the needs of line managers.

REVIEW QUESTIONS

1. What is HR planning? How does it relate to other HRM activities?

The purpose of human resource planning 'is to assure that a certain desired number of persons with the correct
skills are available at the specified time in the future'. Human resource planning thus identifies what must be
done to ensure the availability of the human resources needed by an organisation to meet its objectives. The
other HRM activities are then enacted to achieve the human resource plan that has been developed.

2. What are the differences between the quantitative and the qualitative approaches to HR
planning?

The quantitative approach to human resource planning uses statistical and mathematical techniques and is
primarily used by theoreticians and professional human resource planners in larger organisations. The
qualitative approach to human resource planning uses expert opinion to predict the future. The focus is on
evaluations of employee performance and promotability as well as management and career development.
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Although not as sophisticated as the quantitative approaches, estimates based on expert opinion are popular
among smaller firms because of their simplicity and speed.

3. What action can an organisation take to overcome skill shortages?

The Skills Inventory will identify the skill, abilities, qualifications, etc. of employee within the organisation.
If the HR manager identifies a skill shortage within the organisation they may choose one of two main options
to rectify this problem or potential problem. (1) provide further training and development to existing
employees to upgrade their skills and qualifications to meet new organisational needs, (2) undertake external
recruitment targeting the specific needs of the organisation.

4. How can HR planning help an organisation achieve its EEO and AA goals?

The Affirmative Action goals set by an organisation must be input to the human resource demand and supply
requirements for that organisation. Affirmative Action goals probably are considered as numbers and skills as
part of the requirements and inventory of human resources.

The necessity for Affirmative Action goals is a reflection of some of the environmental influences on
organisations. As part of the total planning process, human resource planning must consider the environmental
influences on the organisation, its objectives, culture, structure and human resource management.

This is because human resource planning must reflect the environmental trends and issues that impact on the
organisation's management of its human resources. Government regulations relating to occupational health
and safety, equal opportunity, affirmative action and superannuation, for example, must be integrated with the
organisation's human resource management objectives and activities.

Similarly, changes in the demographic composition of the population can affect the type and availability of
labour. This in turn can have an impact on the organisation's Equal Employment Opportunity
(EEO)/Affirmative Action (AA) objectives. The growing role of women in the workforce for example, is
dependent on improved child-care facilities, availability of part-time work, job security after an absence for
child-bearing, maternity leave and special parental leave.

5. What is the role of the HR manager in the HR planning process?

The human resource manager needs to be able to forecast what the organisation's future human resource
requirements will be and from where they will be obtained. Quantitative and qualitative approaches are used.
To do this, three sets of forecasts are required:

* a forecast of the demand for human resources

* a forecast of the supply of external human resources
* a forecast of the supply of human resources available within the organisation.

Once the human resource manager has estimated the personnel needs of the organisation, the next challenge
is to fill the projected vacancies. Present employees who can be promoted, transferred, demoted or developed
make up the internal supply. The external supply in contrast consists of personnel who do not currently work
for the organisation. Techniques for forecasting the internal supply of personnel include turnover analysis,
skill inventories, replacement charts and Markov analysis.

For HR planning to be a success, the HR manager must ensure that:

* human resource personnel understand the HR planning process
* top management is supportive
* the organisation does not start with an overly complex system
* the communications between HR personnel and line management are good
* the HR plan is integrated with the corporate plan
* there is a balance between the quantitative and qualitative approaches to HR planning.

6. What is the relationship between HR planning and strategic management?

As part of the strategic planning process, HR planning must consider the environmental influences on an
organisation, its objectives, culture, structure and HRM. This is because HR planning must reflect the
environmental trends and issues that affect an organisation’s management of its human resources. Government
regulations relating to conditions of employment, EEO, industrial relations and occupational health and safety,
for example, must be integrated with an organisation’s HRM strategies. Similarly, changes in social values
and in the demographic composition of the population can affect the type and availability of labour. This, in
turn, can have an impact on an organisation’s EEO and AA objectives.

7. What is succession planning? What are its benefits? What are the characteristics of effective succession
planning?
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Succession planning is concerned with the filling of management vacancies. It stresses the development of
high potential employees and takes a long-term view of the organisation's human resource needs. Succession
planning makes use of replacement charts but generally expands on these to include additional information on
current performance, promotability, developmental needs and long-term growth potential.

Traditionally, managers have developed their own replacements, but this approach is often found wanting
because of its ad hoc and subjective nature. Effective development requires a systematic analysis of the
manager's training and development needs; the identification of appropriate learning experiences via job
assignments; special projects, and formal training programs. As a result, organisations increasingly use
assessment centres in conjunction with line management input to identify future senior managers and assess
their development needs.

The human resource manager's role is to ensure that succession planning provides the organisation's future
managers with the necessary preparation to successfully fill potential vacancies. This means having an
effective performance appraisal system, needs-oriented training and development programs, and a corporate
culture that fosters individual growth and promotion from within. Otherwise succession planning will become
an academic exercise producing only static charts and unnecessary paperwork.

8. What major demographic changes are likely to affect organisations in the near future? How are
these changes likely to affect organisations? How can HR planning help organisations
successfully deal with these changes?

Changes in social values and in the demographic composition of the population can affect the type and
availability of labour. This, in turn, can have an impact on an organisation’s EEO and AA objectives.

The growing role of women in the work force, for example, depends on improved child-care facilities,
availability of part-time work, job security after an absence for child bearing, maternity leave and special
parental leave. The workforces of Australia, Hong Kong, Japan, Singapore, South Korea, Taiwan and the
USA, for example, are all ageing. The ageing of the work force combined with a global shortage of skilled
personnel will force employers to employ larger numbers of older workers. Fortunately, the use of technology
will make work less physically demanding, permitting older people to work longer. ‘An ageing work force,’
says one expert, ‘will compel companies to rethink virtually every aspect of how they organise business in
order to tap into the knowledge and experience of their older workers while keeping promotion opportunities
open for younger employees.’
In response to these types of changes organisations might choose to introduce different work practices such
as flexible work hours, job sharing, outsourcing, increased use of part-time and casual workers, tele-working,
working from home. All of which will have an impact on a range of HR practices.

9. What can an organisation do when it is faced with (a) a surplus of human resources? (b) a shortage of
human resources?

(a) If a surplus of human resources exists an organisation can use one (or more) of the following options: stop
recruiting, reduce casual and part-time employment, start early retirements, start retrenching or reduce
work hours.
(b) If a shortage of human resources exists an organisation can use one (or more) of the following options:
increase overtime, increase casual and part-time employment, postpone retirements, start recruiting,
accelerate training and development, and use outsourcing.

10. What can organisations do to better utilise older, unskilled workers?

To make better use of older workers organisations could use a variety of different work practices including
job sharing, and working from home. Mentoring would also be a valuable approach to ensure the transfer of
knowledge or experience to younger employees. Better use can also be made of unskilled employees by
introducing further training and development, multi-skilling, or mentoring.

DIAGNOSTIC MODEL

1. Identify and discuss the factors from the diagnostic model (figure 1.11) that have significance for HR
planning.

Internal and External Influences will affect both the supply of and demand for human resources over time.
Organisation purpose, objectives, strategy, structure, and culture will affect the internal supply and demand
for human resources over time. HR Planning objectives are part of the HRM objectives of the organisation.
HRM Strategy and Activities will affect the demand for human resources over time. HRM Outcomes will
contribute to any surplus or shortage of human resources. For example, employee commitment can be
considered as a `skill'. A HRM Audit will assess the extent to which HR Plans have been achieved. In short,
all aspects of the diagnostic model have significance for human resource planning.

2. Examine the impact of HR planning on the acquisition, development, reward, maintenance and
departure of an organisation’s human resources.
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Acquisition, development, reward, motivation, maintenance and departure are Human Resource Activities.
They are the activities implemented if the planning process finds that there is a surplus or shortage of vacancies
in the organisation. Acquisition can consist of some more specific HRM activities such as job analysis and
design, recruitment, selection, training, development, career development, and motivation. The
implementation of these activities is an outcome of the HR planning process.

3. Discuss the impact that HR planning may have on commitment, competence, cost-effectiveness,
congruence, adaptability, performance, job satisfaction and employee motivation.

To be successful, an organisation needs employees. Its effectiveness and ultimate survival depends on having
the right people in the right jobs at the right times. Consequently, to successfully meet its future labour
requirements, the organisation requires a HR plan focused on future employee needs and developed from the
organisation’s strategic business plan.

The purpose of HR planning is to ensure that a predetermined number of persons with the correct skills are
available at a specified time in the future. Thus, HR planning systematically identifies what must be done to
guarantee the availability of the human resources needed by an organisation to meet its strategic business
objectives. HR planning cannot be undertaken in isolation. It must be linked to the organisation’s overall
business strategy. To be of value, HR planning must be an integrated part of the organisation’s strategic
planning process. It should be noted that strategic planning which reviews the organisation’s external and
internal environment precedes HR planning (see chapter 1).

A common mistake is for the HR manager to concentrate on short-term replacement needs rather than on the
organisation’s long-range human resource requirements. Such a non-strategic approach produces surprises in
employee availability, quantity and quality, and forces the HR manager to deal with a series of short-term
crises. This approach is clearly inefficient: it is reactive and represents a management-by-crisis approach. If
the right number of qualified and skilled employees is not available, an organisation may not be able to meet
its strategic business objectives. High technology firms such as IBM and Motorola, for example, often have
strategies for developing new products or entering new markets that depend on the availability of appropriately
qualified and skilled human resources. Similarly, Foster’s move into China, with the establishment of
breweries in Tianjin, Shanghai and Guangdong, and its acquisition of winemakers Mildara Blass Ltd and
Rothbury Wines Ltd have created demand for personnel with new skills and different experiences. The top
management of Foster’s China, for example, now all speak Mandarin. Pacific Dunlop’s strategic decision to
exit the food and medical technology industries, in contrast, meant that it no longer needed food and medical
technology-related skills.
Cooperation between the HR function and line management is necessary for success. Such a partnership links
HR planning with corporate strategic planning and ensures that HRM is proactive. It allows the HR manager
to anticipate and influence the future HR requirements of the organisation. Thus, HR planning can be seen as
a systematic process linking the management of human resources to the achievement of the organisation’s
strategic business objectives. Effective HR planning ensures a more effective and efficient use of human
resources; more satisfied and better developed employees; more effective equal employment opportunity
(EEO) and affirmative action (AA) planning; and reduced financial and legal costs.

As part of the strategic planning process, HR planning must consider the environmental influences on an
organisation, its objectives, culture, structure and HRM. This is because HR planning must reflect the
environmental trends and issues that affect an organisation’s management of its human resources. Government
regulations relating to conditions of employment, EEO, industrial relations and occupational health and safety,
for example, must be integrated with an organisation’s HRM strategies. Similarly, changes in social values
and in the demographic composition of the population can affect the type and availability of labour. This, in
turn, can have an impact on an organisation’s EEO and AA objectives.