Human Resource Planning

Lecture 03

Chalani Kuruppu
MLRHRM (Col.),
BBA (Hons) (Sheff Hallam), PQHRM (IPM)  
Lecturer
Faculty of Business
SLIIT - Malabe Campus
 Learning Outcomes
• Describe HR planning
• Explain the importance of HR planning
• Identify and describe the main objectives of HR planning
• Identify and describe HR planning issues
• Identify and describe types of planning
• Describe the HR planning process
• Explain demand and supply for human resources
• Explain shortage and excess of HR
 Performance
A model of Evaluation
Human Resource Management
Pay Management
Objectives

Training & 1. Procurement Strategic Generic Goal

Development of right people Goals
Job Job in the fight way. To generate
2. Retention of 1. Improvement and retain in
Analysis Design the most of Employee appropriate
Employee
appropriate Productivity. and contented
movements 2. Employee
employees. employee
3. Employee Development force which
3. Enhancement gives the
Human Hiring & Commitment
Management of of Quality of
Resources 4. Employee maximum
Planning Recruitment Selection Induction Incentives Work Life.
Motivation individual
4. Ensuring
5. Control of contribution to
Legal organizational
Employment
Welfare Compliance. success.
Costs
Administration

Health & Safety

Administration

Discipline
Management

Grievance
Handling

Labour Relations
Source: Opatha, 2002, performance Evaluation of Human Resource,
Management
Human Resources Planning

 HRP is the “process of determining future

employee needs and deciding steps or
strategies to achieve those needs for the
purpose of accomplishing organization
goals and objectives”.

 HRP is the “process of assessing the

organization’s human resource needs in
the light of organizational goals and
making plans to ensure that a competent,
stable workforce is employed”.
Human Resources Planning

 HRP is a strategy for the acquisition, utilization,

improvement and retention of the human
resources required by the enterprise in pursuit of
its objectives.

 It is generally concerned with matching

resources to business needs in the longer term,
although it will sometimes address shorter term
requirements.
Human Resources Planning

 It addresses human resource needs both in quantitative and

qualitative terms, which means answering two basic questions:
 First, how many people, and

 Second what sort of people?

 Human resource planning also looks at broader issues relating

to the ways in which people are employed and developed in
order to improve organizational effectiveness.

 It can therefore play an important part in strategic human

resource management.
Human Resource Planning
 It is arguable that forecasting staff and skill requirements
has become more difficult in recent times because of the
increasing uncertainty and rate of change in the business
environment. However, it has also become more necessary,
because the risks of ‘getting it wrong’ are correspondingly
greater.

 HRP is a form of risk management. It involves realistically

appraising the present and anticipating the future in order
to get the right people into the right jobs at the right time and
managing employee behaviour, organization culture and
systems in order to maximize the human resource in response
to anticipated opportunities and threats.
Human Resource Planning (HRP)

 Is the first component of HRM strategy.

 All other functional HR activities are derived

from and flow out of the HRP process.
 Has its basis in considerations of future HR
requirements in light of present HR capabilities
and capacities.
 Is proactive in anticipating and preparing
flexible responses to changing HR
requirements.
 Has both an internal and external focus.
Human Resource Planning and
Business Planning
 Conceptually, human resource planning
should be an integral part of business
planning.

 It should identify the core competences

the organization needs to achieve its goals
and therefore its skill requirements.

 There are strategic business plans, human

resource planning interprets them in terms
of people requirements.
The significance of HRP

 To determine future employee needs (employee demand)

 To utilize human resources more efficiently and effectively

 To control employee cost
 To develop highly competent managerial and professional
employees
 To formulate and implement strategic plans
HR Planning Issues

Staffing Questions

 How do we manage staffing in times of recession

or expansion?
 What impact does technology change, mergers or
relocation have on staffing issues?
 Do we always have the right people in the right
jobs at the right time?
 How do we get our human resources: buy them
or make them or both?
AIMS OF HRP

The aims of HRP in any organization will depend largely on its context but in
general terms, the typical aims might be to:

 Attract and retain the number of people required with the appropriate skills,
expertise and competencies;

 Anticipate the problems of potential surpluses or deficits of people;

 Develop a well trained and flexible workforce, thus contributing to the

organization’s ability to adapt to an uncertain and changing environment;

 Reduces dependence on external recruitment when key skills are in short

supply by formulating retention, as well as employee development strategies;

 Improve the utilization of people by introducing more flexible systems of work.

Types of Planning

 Aggregate Planning

 Anticipating the needs for groups of employees in

specific, usually lower level jobs and the general skills
employees will need to ensure sustained high
performance.

 Succession Planning

 Focuses on ensuring that key individual management

positions in the organization remain filled with
individuals who provide the best fit for these critical
positions.
HRP Process
1. Forecast future demand for HR

2. Estimate HR supply

3. Compare forecast demand with estimated supply

4. Develop strategies to be taken

5. Assess HRP effort

Feedback
Demand Forecasting

 Demand forecasting is the process of

estimating the future numbers of

people required and the likely skills
and competences they will need.

anupama.d@my.sliit.lk
Causes of demand for human
resources
1. Demand for the product
2. Strategic Plan of the Organization
3. Production method
4. Retirements
5. Resignations
6. Deaths
7. Leaves of absence
8. Termination
9. External factors such as economic, social and political
forces
Forecasting Demand for
Employees

Quantitative Methods

Forecasting Demand

Qualitative Methods
Quantitative Approach: Trend
Analysis
 This involves studying of a firm’s past employment needs
over a period of years to predict future needs.
 The purpose of this method is to identify trends that
might continue into the future.

E.g. Years No. of workers

2006 100
2007 97
2008 100
2009 105
2010 103
2011 101

anupama.d@my.sliit.lk
Quantitative Approach:
Ratio Analysis
 Making forecasts based on the ratio
between some causal factors (e.g. sales
volume) and the number of employees
required (e.g. number of sales people).

E.g. If sales person traditionally generates

Rs.500,00.00 in sales, then for the
company to produce an estimated sales of
Rs.3 million next year, it should require
six sales persons next year.
Qualitative Approaches to Demand
Forecasting
 Management Forecasts

 The opinions (judgments) of supervisors, department

managers, experts, or others knowledgeable about

the organization’s future employment needs.

 Delphi Technique

 An attempt to decrease the subjectivity of forecasts by

soliciting and summarizing the judgments of a

preselected group of individuals.

 The final forecast represents a composite group

judgment.
The Delphi Technique
Leader identifies judgment issues and develops questionnaire.

Prospective participants are identified and asked to cooperate.

Leaders send questionnaire to willing participants, who record

their judgments and recommendations and return the
questionnaire.

Leaders compiles summaries and reproduces participants’

responses.

Leader sends the compiled list of judgment to all participants.

Participants comment on each other’s ideas and propose a final

judgment.

Leader looks
for consensus

Leader accepts consensus judgment as group’s choice.

Forecasting supply of human resources

 Supply forecasting measures the number of

people likely to be available from within and
outside the organization, having allowed for
attrition (labour wastage and retirements),
absenteeism, internal movements and
promotions, and changes in hours and other
conditions of work.

• Supply of inside candidates (internal supply)

• Supply of external candidates (external supply)

Internal Labor Supply
 Qualifications Inventories

 Personnel Replacement Charts

 Position Replacement charts

 Computerized Information

Systems
Internal Labour Supply
 Qualifications Inventories
Manual or computerized records listing
employee’s education, career and
development interests, languages, special
skills, etc, to be used in selecting inside
candidates for promotion.

 Personnel Replacement Charts

Are company records showing present

performance and promotability of inside
candidates for the most important positions.
 Position Replacement Cards
A card prepared for each position in a
company to show possible replacement
candidates and their qualifications.

 Computerized Information Systems

This involves computerizing employee
information using various software
packages.
Generally these information are linked with
the firm’s other HR systems such as
automated applicant tracking systems.
An Executive Replacement Chart
External Labor Supply
Factors Influencing the External Labor Supply:
 Demographic changes in the population

 National and regional economics

 Education level of the workforce

 Demand for specific employee skills

 Population mobility

 Governmental policies
Sources of Information About External Labor
Markets

 Department of Labor publications

 State and local planning and development

agencies
 Chambers of Commerce

 Industry and trade group publications

 State and local employment agencies

Strategies in surplus conditions of HR

 Freeze hiring

 Attrition (voluntary departure)

 Early retirement on voluntary basis

 Reduction of reward expenditure

 Lay off

 Termination
Strategies in shortage conditions of
HR
 Have current employees work overtime

 Subcontract work to other firms

 Provide opportunities for learners for a period of time

 Hire part-time employees

 Hire casual employees

 Hire temporary employees

 Hire permanent full-time employees

HRP Considerations
Balancing supply and
demand
Elements of The HR Plan
 Acquisition of personnel
 Effective Utilization
 redeployment
 methods improvement
 training to prevent obsolescence
 Development and Improvement
 broad-based training and development
 performance management systems

 Retention
 proper remuneration
 long-term career planning
 healthy employee relations
 good working environment
Requisites for Successful HRP
 HRP must be seen as equally vital as business
planning.
 Top-management support.
 Periodic review and revision of the
forecasting techniques and the forecasts.
 Without long range planning concentration
becomes focussed on short-term needs
resulting in “crisis management” reactions.
 An excellent and up-to-date HRIS.
 Active involvement of line managers and co-
ordination between line mgrs and HR
function.
Labour Turnover
 The analysis of the numbers of people leaving the
organization (labour turnover or wastage).

 It provides data for use in supply forecasting, so that

calculations can be made on the number of people
lost who may have to be replaced.

 The analysis of the numbers of leavers and the

reasons why they leave provides information that
will indicate whether any action is required to
improve retention rates.

 It can prompt further investigations to establish

underlying causes and identify remedies.
Reasons for Labour Turnover
 An analysis of the reasons for leaving derived from exit
interviews will provide useful information on which to
base retention plans.
 Exit interviews aim to establish why people are leaving,
not to persuade them to stay.
 More pay;
 Better prospects (career move);
 More security;
 More opportunity to develop skills;
 Better working conditions;
 Poor relationships with manager/team leader;
 Poor relationship with colleagues;
 Bullying or harassment;
 Personal – pregnancy, illness, moving away from
The cost of labour turnover
 Leaving costs – payroll costs and personnel administration of leaver;
 Direct cost of recruiting replacements (advertising, interviewing,
testing etc);
 Opportunity cost of time spent by HR and line managers in
recruitment;
 Direct cost of introducing replacements (induction course, cost of
induction manuals etc);
 Opportunity cost of time spent by HR and managers in introducing
new starters;
 Direct cost of training replacements in the necessary skills;
 Opportunity cost of time spent by line managers and other staff in
providing training;
 Loss of the input from those leaving before they are replaced in terms
of contribution, output, sales, customer satisfaction and support etc;
 Loss arising from reduced input from new starters until they are fully
trained
So now CAN YOU,

• Describe HR planning

• Explain the importance of HR planning

• Identify and describe the main objectives of HR

planning

• Identify and describe HR planning issues

• Identify and describe types of planning

• Describe the HR planning process

• Explain demand and supply for human resources

• Explain shortage and excess of HR

Additional Reading
 Chapter 29 - Human Resource Planning
ARMSTRONG’S HANDBOOK OF HUMAN RESOURCE MANAGEMENT
PRACTICE
(uploaded to Moodle)

 Chapter 06 - Human resource planning

Essentials of Human Resource Management
(uploaded to Moodle)