HUMAN RESOURCE PLANNING

Human Resource planning may be defined as a strategy for the acquisition,

utilisation, improvement and preservation of the human resources of an enterprise.
It is the activity of the management which is aimed at co-ordinating the
requirements for and the availability of different types of employees.

HRP is a forward looking function making an organization to identify skill and

competency gaps and initiate plans for development of deficient skills and
competencies.

Coleman defines it as a process of determining manpower requirements and the

means for meeting these requirements in order to carry out the integrated plan of
the organisation
Vetter: A process by which an organisation should move from its current manpower
position to its desired manpower position.
Wickstorm explains it from the context of a process comprising of four steps -
Forecasting, Inventory, Anticipating and Planning.
Thus the HR planning an organisation strives to have the right number of people and
the right kind of people at the right places, at the right time, doing the right things
which would be capable in achieving successfully both the organisational and the
individual needs.

Importance of HRP
1. Assessing the right number and type of future personnel needs/requirements
(shortage of certain categories of employees and/or variety of skills despite the
problem of unemployment)
2. Coping with the changes (technology, marketing, management, products,
government policies etc.)
3. Creating a highly talented pool of personnel by making the right investment in HR
4. Protection of weaker section
5. International strategies (MNCs)
6. Foundation for HR functions
7. Increasing investment in HR

HRP Objectives:
To link HRP with organizational planning
To ensure the optimum use of human resources currently employedTo assess or
forecast future skills requirements
To provide control measures to ensure that necessary resources are made available
as and when required

HRP Benefits:
Reduce labour costs associated with attrition
Reduce recruitment and replacement costs
Focus on training resources appropriately
Increase the ability to take advantage of new business opportunities
Improve employee morale and satisfaction
Control rapid expansion or reduction in workforce
Monitor staffing and retention policies

Factors affecting Human Resource Planning:

I External Factors:
a) Govt. Policies
b) Level of economic development
c) Level of technology
d) International factors
II Internal factors:
a) Company policies and strategies
b) HR policies
c) Job Analysis - Job description and Job specification
d) Time horizon
e) Type and quality of information- strategic, general organisational and specific
information needed for HRP
f) Trade unions
g) Environmental contingencies

Process of Human Resource Planning

1. Analysing organisational plans
2. Demand forecasting: Forecasting the overall human resources requirements in
accordance with the organisational plan
3. Supply forecasting: Obtaining the data and information about the present
inventory of human resources and forecasting the future changes in the HR
inventory
4. Estimating the human resource requirements
5. In case of future surplus, plan for redeployment, retrenchment and lay-off
6. In case of future deficit, forecast the future supply of HR from all sources with
reference to plans of other companies
7. Plan for recruitment, development and internal mobility if future supply is more
than or equal to the net HR requirements
8. Plan to modify or adjust the organisational plan if future supply will be inadequate
with reference to future net requirements.

1. Analysing the organisational plan: It is to be derived from the organisational plan.

It should start with with analysing the organisational plan into production,
technology, expansion and diversification, marketing, sales, finance etc. The HR
planning has to be integrated with the other plans of the organisation. HRP thus
incorporates both HR and other functional plans and derives specific requirements in
terms of number and types.
2. Demand forecasting; It involves the estimation of manpower needs for
specified/current or anticipated workload structure. Based on job analysis not only
for the existing jobs but for future jobs. The estimation takes into account the
quantity and quality (knowledge, skill, values, capabilities) aspects. Important
forecasting methods are:
a) Management judgement,
b) Statistical techniques,
c) Work study techniques,
d) Flow Model (Markov Model), and
e) Mathematical Model
a) Management judgement: Bottom-up and top-bottom approach
b) Statistical techniques: There are two models- i) Ratio-trend analysis and ii)
Econometric models
i) Ratio-trend analysis: It takes into consideration the ratio of the employees and
production on the basis of past data.
Present production as on 1st January 2023 1500 units
st
Number of operatives employed on 1 January 2023 300
Ratio between operatives and units produced(300: 1500) 1: 5
Estimated production on 1st January 2024 2500
st
Number of foremen required on 1 January 2024 500
without giving any provision for changes
Changes may be positive or negative. It may be an increase in social activity and a
decline in work or a change in values and commitment.
The ratio may be 1 : 4 units to be produced per operative 625
The ratio may be 1 : 6 units to be produced per operative 416
ii) Econometrics models: This is being done on the basis of past statistical data and
bringing the relationship among the different variables like production, sales,
workload etc. And their movements or changes from time to time.
c) Work Study Techniques: Can be adopted in organisations in which the volume of
work is easily measurable
i) Planned operations during the year 2023 1,92,000 units
ii) Standard man hour needed per unit 0.25 hours
iii) Planned man hour needed 48,000 hours
iv) Work ability per employee (300 X 8) 2,400 hours
v) No. of employees needed (48,000/2,400) 20
 d) Flow Model (Markov Model)
The Markov chain is a method of modeling the human resource internal supply using
statistical principles. The basic idea is to calculate the transition probability of all
types of employees through statistical analysis of historical data, and thus forecast
the future trend of employee turnover. The greatest feature of the application of
Markov chain is the non-aftereffect property of Markov chain, that is, in a random
process, the future state of the system is independent of the past state and is only
related to the present state. Meanwhile, the application model of Markov chain also
requires the smoothness of the transition trend, that is, the factors that affect the
current state of the enterprise don’t change greatly, and the flow of the staff has
certain regularity, otherwise it needs to be recalculated

1. Determine the time that should be covered - shorter lengths of time are more
accurate
2. Establish categories, also known as as states to which employees can be assigned.
Categories should not overlap and must take into account every possible category to
which individuals are assigned. The number of states should not be too small or large
3. Count annual movements (flows) among states for several periods. These states
are called as absorbing (gains or losses to the company) or non-absorbing (changes
in position, levels or status). losses include deaths, disability, retirements etc and
gains include hiring and promotions.
4. Estimate the probability of transitions from one state to another state based on
past trends. Demand is a function replacing those who make a transition
MARKOV ANALYSIS EXAMPLE
PROBLEM: Using transition probabilities of 2020-22, estimate the workforce at end of 2023
using the 2022 staffing data, and then, using the same transition probabilities, anticipate
staffing availability and requirements for year 2024 when full-time jobs are downsized.

Transition Probabilities from 2020-2022

Current 2023

Job Category Level SP SS ASM RSM Exit No. Employees

Sales Personnel (SP) 1 .50 .10 .05 .00 .35 300

Senior Sales Personnel (SS) 2 .05 .60 .10 .00 .25 200

Assistant Sales Mgr. (ASM) 3 .00 .06 .80 .10 .04 50

Region Sales Mgr. (RSM) 4 .00 .00 .00 .70 .30 30

2024 Forecasts
Job Total after
2023 Employees SP SS ASM RSM Exit
Category Exit
SP 300 150 30 15 0 105 195

SS 200 10 120 20 0 50 150

ASM 50 0 3 40 5 2 48

RSM 30 0 0 0 21 9 21

Totals 160 153 75 26 166 414

New Requirements for 2024 (difference from 2023)

Expansion
SP 400 (+100)

Reduction
SS 150 (-50)

Expansion
ASM 55 (+5)

Reduction
RSM 26 (-4)

Forecast for Workforce One Year (Beginning of 2024)

Job Category Current Workforce Requirements Availability Reconciliation
& Level 2023 for 2024 for 2024 & Gaps
SP 300 400 160 - 240 (Shortage)
SS 200 150 153 + 3 (Surplus)
ASM 50 55 75 + 20 (Surplus)
RSM 30 26 26 0 (Balanced)

e) Mathematical Model:

En2 =(Laggn + G)1/x / Y

En is the estimated level of personnel demanded for in ‘n’ planning period

Lagg is the overall aggregate level of current business activity in rupees
G is the total growth in business activity anticipated in ‘n’ years in today's rupees
X is the average productivity improvement anticipated from today through the
planning period (if x = 1.08, which means an average productivity improvement of 8
%)
Y is a conversion figure relating today’s overall activity to personnel required (total
level of today’s business activity divided by the current number of personnel). It
reflects the level of business activity per person.

Supply Forecasting:
Demand forecasting estimates the number and kind of employees required for an
organisation. The next step is to ensure the supply of the same . Supply forecasting
measures the number of people likely to be available from within and from outside
the organisation after making allowances for absenteeism, internal movements,
promotions, wastage, changes in hours of work etc.
Reasons for Supply forecasting:
1. Help to quantify the number of people or positions expected to be available in
future to help the organisation to realise its objectives
2. Helps to clarify likely staff mixes that will exist in future
3. Assess the existing staffing levels in different parts of the organisation
4. Prevent shortage of people where and when they are most needed
5. Monitor expected future compliance with legal requirements of the job
reservations
Supply forecasting analysis covers the following:
1. Existing human resources
2. Internal source of supply
3. External source of supply

1. Existing employees
This is facilitated by HR audit which summarises the skills and abilities of all the
employees individually. This is done in two domains, namely: skill inventories and
management inventories
i) Skill inventories: It covers collection of data of each employee in the following areas
Personal data like age, gender, marital status
Skill, education, experience, training
Special qualifications from any professional bodies, achievements or recognition or
awards etc
Salary and job history - present and past salary, dates of pay raises, types of jobs held
Company data relating to seniority, date of retirement
Physical health and psychological test results
Any specific preference for geographical location or type of jobs
ii) Management inventories: Strengths, weaknesses, promotion potentials, career
goals, number and type of personnel supervised, total budget managed, previous
management responsibilities handled etc
2. Internal sources:
Inflows and outflows - employee turn over rate, absenteeism, productivity level,
movement among jobs through transfers and promotions/demotions
3. External sources: Through recruitment and selection from the labour market by
advertisement, campus selection, references, employment exchanges etc