HUMAN RESOURCES MANAGEMENT TRAINING

MODULE 3

HUMAN RESOURCES PLANNING

Learning Objectives

1
 Orient participants to the importance of HR planning
Discuss policy development and implementation in relation to HR
planning
Provide tools and approaches for assessing staffing needs
Provide tools and examples for developing personnel policies
Develop action plans to improve HR planning and policy development
and/or implementation

1. INTRODUCTION

Many business owners prepare a business plan before starting their business. However, small
business owners often do not include human resource planning as part of their over-all business plan.
2
They may start out with only a few employees or none at all. Over time, it is important to properly
forecast employment needs. Just as failing to address potential threats in the marketplace can
jeopardize the viability of your business, failing to anticipate personnel needs can impact on overall
business success.

The success of a business is directly linked to the performance of those who work for that business.
Underachievement can be a result of workplace failures. Because hiring the wrong people or failing to
anticipate fluctuations in hiring needs can be costly, it is important that you put effort into human
resource planning.

Planning for HR needs will help to ensure your employees have the skills and competencies your
business needs to succeed. An HR plan works hand in hand with your business plan to determine the
resources you need to achieve the business’s goals. It will better prepare you for staff turnover,
recruitment, and strategic hiring – and alleviate stress when you have emergency/last-minute hiring
needs.

This module provides a detailed outline of how small business owners can develop a human resource
plan. There is also a discussion of issues to consider when developing a succession plan, the plan that
is needed to consider how to carry on the business, or sell the business, when the current
management/ownership leaves.

HR planning and assessment refer to Identifying how staffing needs will be met and what human
resources are needed to carry out and achieve organization’s activities and objectives

A staffing plan defines the human resources required to successfully achieve an organization’s
implementation and contractual responsibilities.

Outlines current staff positions and skills

Illustrates gaps in staff coverage
Outlines new services/programs requiring new or adjusted staff resources
Offers timelines for adding or adjusting staff
Has budget parameters for staff resources
Is updated annually as part of planning

2. FORECASTING HIRING NEEDS

The daily demands and hectic lifestyle of business owners and managers often has an unfortunate by-
product: human resource planning gets placed on the bottom of the list of things to get done. Failure
to anticipate potential changes in your workforce often leads to last minute or “crisis mode” decision-
making. Needless to say, quick fixes are no solution to long-term issues. Taking the time to forecast
future hiring needs today will save you time and money in the long-run.

3
HR planning must be tied to the overall business plan. You can start the process by assessing the
current conditions and future goals of your company. Perform these assessments regularly. Consider
some of the following questions:

 What are the company’s goals and objectives?

 Do these goals call for expansion into new markets?
 Are new product lines planned?
 Are changes in technology necessary to stay competitive?
 Will new skills and/or training be required to meet the company’s goals and objectives?

The following three-step method is designed to help you determine whether or not you are ready to
hire:
1. Identify Business Strategy and Needs
2. Conduct a Job Analysis and Write a Job Description
3. Determine the Feasibility of Hiring

Step 1: Identify Business Strategy and Needs

Identify Pressures and Opportunities

Consider the following internal and external opportunities and record how they may impact your
business:
 Competition: Often businesses will feel pressure to expand and hire more workers in
order to remain competitive in a particular market.
 Technology: Technological advancements may increase the demand for employees in
certain industries or professions.
 Increased customer demand: An increased demand for products or services may
require more resources to help produce or deliver services.
 Economics: Growth of the economy or lower interest rates cause increased spending,
and often increased business opportunities. Changes in the labour market impact your
ability to find and keep employees.
 Workforce changes: These include resignations, terminations, leave of absences, death,
change in employment status, and retirement.
Clarify your business strategy and direction
Describe what your business does in terms of key functions and tasks and then describe the changes
that will come into play and the direction that the business will likely take in the next few years. If you
expect to increase sales by 50% over the next five years, consider what impact that will have on your
hiring needs. If you are a start-up company, consider the different sorts of employees you will need at
each stage of development.

Identifying your business goals and needs will help you to predict future hiring needs, in terms of the
number of employees, types of skills, and work experiences. This planning process will help you to
avoid making mistakes – like hiring an employee prematurely.

Identify aspects of the business that need help

4
Once you have developed a sense of the direction your business is taking, you need to determine
what human capacity your company will need in order to accomplish those goals. Identify aspects of
the business that need help, and the skills and knowledge required of a new employee. When you are
hiring, look for a person who has a particular set of skills – not a particular person to fill a particular
job. The following questions will help you determine how many people are required, and with what
skills, to fulfill your business needs.

 What new positions are opening up?

 What special skills (e.g. computer applications) will be needed?
 What work experience (e.g. in a particular area) will be required?
 When will new staff be needed?
 When should hiring be scheduled to ensure a smooth transition?
 Does the hiring plan also provide for employee turnover and attrition?

Use the tool below to help plan your short-term and long-term staffing needs

Figure 1.1 Mapping Out Staffing Needs

Functions or People on Additional People People People
Tasks staff people needed in 6 needed in 1 needed in 2
currently needed now months year and 3 years
1. Answering
phones &
taking
orders
2. Accounting
& managing
3. Producing &
Assembling
4.Packaging,
mailing &
inventory

Step 2: Conduct a Job Analysis

If you decide that you need additional employees to fulfill your business strategy, it is recommended
that you conduct a four-step job analysis:

1. Review your current workforce

Describe the employees you now have in terms of their knowledge, skills, and experience and
describe how they function together to get work done. Map these onto your strategic plan and
describe the skills and knowledge that you will need for the anticipated new work or function. At the
same time, consider how the current work could be reorganized to make the best use of current and
future employees.

2. Identify any skills and knowledge gaps

Note any gaps between the skills and abilities your current employees have and the skills and abilities
that your workforce needs to meet your business objectives in the future. To ensure that you have
considered the full scope of the new position from all different perspectives, ask your current
employees what they think this position would involve. The checklist below might help you identify
the desired attributes of potential employees.

5
 Employee Attributes Checklist
Examples of Needed Skills
_ Interpersonal _ Interviewing/ counseling
_ Organizational _ Roofing
_ Decision making/judgment _ Verbal and written communication
_ Tactile _ Leadership
_ Typing/word processing _ Problem solving
_ Plumbing
Examples of Needed Knowledge/Experience
_ About industry _ Program planning
_ About product _ Product design
_ About methods _ Languages
_ About market _ High school/university/college
_ About technology _ Specialized training
_ Completion of trade certificates _ Within specific business area
Examples of Needed Qualities/Approaches
_ Self-motivated _ Innovative
_ Customer-oriented _ Results-oriented
_ Team-player _ Competitive insight
_ Flexibility/adaptability _ Detail-oriented

3. Write a Job Description

After completing steps one and two, you can begin to draft a job description. Although many small
businesses do not take the time to draft job descriptions, it is a worthwhile exercise. See Module on
recruitment: Hiring Strategies for a detailed explanation on how to write a job description.

4. Set an Appropriate Salary

Start by adopting a general salary range to help you determine what you will need to budget – and
whether potential candidates are within your budget. You may want to complete a job evaluation,
whereby you rank jobs and their corresponding salaries. Weigh the importance of critical skills and
knowledge for each position, compare positions, and rank the new position on the pay scale
accordingly.

If you already employ an administrative assistant and plan to hire another, you will probably pay
him/her approximately the same rate, depending on experience. If, on the other hand, you decide to
create a new position and recruit an employee with a unique skill set, you will need to do a
comparison between the new and existing positions.
 Is the new position more junior/senior?
 Will the new position require more specialized skills and knowledge?
 Will the position have more complex tasks and different working relationships?
 Will the new position have more or less responsibility?

6
The external market is another useful resource for determining salary. Look at similar positions in
other organizations by checking job postings on the Internet, talking to others in the industry, reading
career ads in the newspaper or purchasing salary surveys.

Tips for Conducting a Job Analysis

_ Ask employees about each position within the business and how they are (or are not)
connected
_ Ask employees if they think hiring a new employee or creating a new position would be a good
idea
_ Observe employees at work and earnestly ask for their ideas about better ways to operate; be
prepared to put good suggestions into action
_ Talk to customers about which employees are easiest to deal with or provide the best service
_ Find out and understand why past employees have left – be truthful with yourself
_ Talk to customers about their needs
_ Understand the needs of people the new employee will be working with
_ Differentiate between “nice to have” and “must have” skills and experiences
_ Look at employees who are performing at a superior level and try to assess the skills and
behaviours that distinguish them; look for evidence of these behaviours during the
interview
_ Look at similar positions in other companies and the requirements they have
_ Read books or articles about companies that may have found themselves in similar
situations

Step 3: Determine the Feasibility of Hiring

Before you hire, you must understand (1) the costs of hiring, (2) the benefits of hiring, and (3) the risks
of not hiring.

(1) When calculating the full cost of hiring a new employee you must consider:
_ Labour costs, such as salary and benefits
_ Recruiting costs, which may include advertising in addition to time spent on recruiting activities,
orientation and training.

(2) Weigh the costs of hiring against the value of having an employee contributing to the business.
Potential benefits include:
 Improved morale of other employees, if a departing employee was a problem or if the area
has been understaffed for some time
 Improved morale of existing staff if the growth means new business and opportunities
 Improved productivity if a departing employee was not productive or if employees believed
that you have made the decision to hire as a result of their input
 Increased revenues once a new employee is performing at an acceptable level
 A new employee who is more qualified than current employees can help train the existing
employees
 Increased customer satisfaction and potentially saved business
(3) Some of the potential risks associated with choosing not to hire despite the need for additional
staff include:
 Loss of revenues because of an inability to keep up with demand
7
  Loss of employees because they are unwilling to continue being overworked or to do the
work of a departed employee
 No new ideas or knowledge brought in through new employees

If you decide that hiring a new employee is feasible, you are ready to begin the recruitment process
(see Module 2: Recruitment). If not, you might need to revisit your strategic plan or business
objectives.

Use the checklist on the following page as you carry out the human resource planning process.
Remember: There should be a strong relationship between how many additional employees you hire
and how much of an increase in sales, production, etc. that you can expect.

The brief scenarios that follow will walk you through different steps of the human resource planning
process. In HR Scenario 1, the owner of Wood Works executes step one of the process. Identifying her
business strategy and needs helped her determine her hiring needs.

In HR Scenario 2, the manager of XYZ Children’s Clothing Company executes steps one through three
in order to determine how she should respond to an employee’s resignation – and the possibility of
switching to an automated manufacturing process.

HR Scenario 1: Identifying Business Strategy & Needs

Company Name: Wood Works
Owner: Brenda Parade

Blen owns and operates Wood Works, a small business. She produces wood home decoration items
including frames, clocks, and vases. Recently the company has been selling significantly more clocks
and her research indicates that there is untapped market for all of her products.

Blen makes products in her garage. She has one part-time helper to assemble and package products.
Her roommate helps with accounting and shipping. She can barely keep up with the orders that are
currently coming in.

Wood Works currently only sells in Addis Ababa. Her limited resources limit her profitability. Blen
wonders if she should be looking for another employee. She considers her business objectives and
needs:

_ She identifies pressures and opportunities: The company is facing increased demand for all
products, especially the clocks. The demand is expected to continue over the medium to long
term. There is an untapped market for wood products in Adama and Bahirdar. Blen is slipping
behind on orders.
_ She clarifies her business strategy and direction: Blen wants to increase production of clocks to
keep up with increasing demand. She also wants to investigate alternatives for more efficient
distribution of products and explore options for expanding into Adama & Bahirdar over the
next three years. She also intends to continually develop new products and attend large gift
shows to be able to reach more retailers.
8
 _ She identifies aspects of the business that need help: Blen needs help immediately with
assembling and distributing clocks. She also needs to think about better ways to produce
clocks quickly. With increased sales, she will need more help with accounting and distribution.
In order to expand to the Adama & Bahirdar she will need to know more about that market.
She also needs to free up more of her time so that she can develop new products. She also
needs someone who can work at fit shows. She would also like to take a holiday and leave
someone else in charge.

Blen decides, based on her analysis, to hire a full-time person on a one year contract to assembler
more products. This will allow her to investigate more efficient alternatives to production and decide
if the person is required long-term.

She also decides to outsource the accounting tasks to a professional accountant and have her
roommate focus her efforts on packaging and shipping. Blen will then have more time to consider an
expansion into Adama & Bahirdar

3. EMPLOYMENT ARRANGEMENTS

Once you have determined that hiring new staff is desirable and feasible, you must decide what type
of employment arrangements would best suit your company.

Consider the following questions:

Are there candidates in-house or is an external search required?
When mapping out your HR requirements for the coming months or years, determine whether or not
any of your current employees might be suitable for these newly created positions.
Will training be provided, or will candidates be required to have the skills needed for the position?
Training is often required when a particular skill is needed or there is a shortage of qualified people.
Many companies prefer to hire people who already have the skills in order to avoid training costs.
Will the position be full-time, part-time, or contract?
Your decision to hire full-time, part-time, seasonal, temporary, peak, contract employees or
independent contractors should depend primarily on the type of work and the timing of the work. You
should also consider the payment structures; full-time employees are more likely to require benefits
than part-time and contract people.

4. SUCCESS
5.
6.
7.
8.
9. ION PLANNING
4. SUCCESSION PLANNING
4.1 Non-family succession
Succession planning is a process that is often neglected by small business owners. This is
understandable when day-to-day operations are more than enough to keep you busy. The thought of

9
losing control of your business – whether due to illness, death, or other factors – is unpleasant.
However, the reality is that people age and accidents happen. By planning for succession or by
considering your business exit strategy, you will also give yourself the freedom to voluntarily step
away from your business to pursue other interests – if you so choose.

If you want your business to survive beyond you, planning for changes in management is crucial. By
keeping all business responsibilities in your own hands, you put the sustainability of your business in
jeopardy. Succession must be managed for all significant positions in a company – not just owner(s) or
senior manager(s). Business processes and institutional memory should be passed along not only at
the ownership and executive levels, but also on the supervisory, professional, and skilled levels.16

The founder/owner has the power to suit his or her beliefs and values when choosing a method of
succession. Some may decide to sell the business, while others may maintain an arm’s length
relationship with the business as the board chair. You have the option of grooming talent within your
organization or looking outside of the business to find managers with the necessary qualifications.

It is wise to start the planning process by identifying your business’s existing competencies. You
should then evaluate and assess current employees to determine how they match up to
organizational needs. Coaching, mentoring, training, and recruiting methods can be used to fill gaps –
and prepare your staff for future responsibilities.

Training Employees to Take on New Roles

Measurable Gap

Employee’s _ Skill training Skills and

current skills & _ Enriching experience
experience assignments needed for
_ Mentoring new position

10