McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Human Resource Planning

Chapter 5

Chapter Overview

• How HRP Relates to Organizational Planning

• Time Frame of HRP

• HRP: An Evolving Process

• Steps in the HRP Process

• Tools and Techniques of HRP

• Human Resource Information Systems (HRIS)

• HR and the Internet

• HR and the Intranets

• Software as a Service

• Summary of Learning Objectives

5-3

Human Resource Planning (HRP)

• Process of determining human resource needs of an organization and ensuring that the organization has the right number of qualified people in the right jobs at the right time

• Also referred to as workforce planning or personnel planning

• It is ―the system of matching the supply of people—internally (existing employees) and externally (those to be hired or searched for)—with openings the organization expects to have over a given time frame‖

• Need for HRP is due to significant lead time that normally exists between recognition of need to fill a job and securing a qualified person to fill that need

5-4

How HRP Relates to Organizational Planning

• Any human resource plan must be derived from the strategic and operational plans of the organization

• Strategic business planning seeks to identify various factors critical to success of the organization

• Focuses on how organization can become better positioned and equipped to compete in its industry

• To accomplish this, the planning process should provide

• A clear statement of the organization‘s mission

• A commitment from staff members to the mission

• An explicit statement of assumptions

• A plan of action in light of available or acquirable resources, including trained and talented people

5-5

How HRP Relates to Organizational Planning

• Contributes significantly to strategic management process by providing means to accomplish outcomes desired from planning process

• Human resource demands and needs are derived from strategic and operating planning and then compared with human resource availability

• Commonly, an error occurs when human resource planners focus on short-term replacement needs and fail to coordinate their plans with strategic and long-term plans of the organization

• Nonintegrated approaches lead human resource planners to concentrate on short-term crises

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Strategy-Linked HRP

• HRP is often approached as an afterthought

• It is not a strictly human resource function

• Role of human resource personnel is to assist operating managers in developing their individual plans and integrating those different plans into an overall scheme

• Strategy-linked HRP

• Encourages genuine cooperation and is based on a close working relationship between human resource staff and line managers

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Linking HRP to the Business Strategy

5-8

Time Frame of HRP

• Organizational plans are frequently classified as

• Short-range (zero to two years)

• Intermediate range (two to five years)

• Long-range (beyond five years)

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Factors Affecting the Time Frame of HRP

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HRP – An Evolving Process

• Five stages, or benchmarks, exist along the HRP continuum

• Stage 1 – Companies have no long-term business plans, and do little or no human resource planning

• Stage 2 – Companies have a long-term business plan, but tend to be skeptical of HRP

• They do realize to some degree that human resource planning is important

• Stage 3 – Companies engage in some aspects of human resource planning, but these efforts are not integrated into long-range business plan

• Stage 4 – Companies do a good deal of human resource planning, and their top managers are enthusiastic about the process

• They have at least one human resource component integrated into the long-range plan

• Stage 5 – Companies treat human resource planning as an important and vital part of their long-term business plan

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Steps in HRP Process

• Determining impact of organization‘s objectives on specific organizational units

• Defining skills, expertise, and total number of employees (demand) required to achieve organizational and departmental objectives

• Determining additional (net) human resource requirements in light of organization‘s current human resources

• Developing action plans to meet anticipated human resource needs

5-12

Steps in Human Resource Planning Process

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Determining Organizational Objectives

• Organizational objectives

• Statements of expected results that are designed to give the organization and its members direction and purpose

• Long-term objectives and strategies are formulated based on organization‘s mission statement

• Can then be used to establish short-term performance objectives

• Short-term performance objectives generally have a time schedule and are expressed quantitatively

• Divisional and departmental objectives are then derived from the organization‘s short-term performance objectives

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Determining Organizational Objectives

• Cascade approach

• Objective-setting process designed to involve all levels of management in the organizational planning process

• It is not a form of top-down planning

• Ensures that the objectives are communicated and coordinated through all levels of the organization

• Involves both operating managers and human resource personnel in overall planning process

• In the early stages, human resource personnel can influence objective setting by providing information about organization‘s human resources

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Cascade Approach to Setting Objectives

5-16

Environmental Factors Affecting Human Resource Needs

• Many external factors influence organization‘s objectives and human resource needs

• Government influences

• Laws and regulations imposed by local, state, and federal governments

• Spending patterns of the various governments

• General economic conditions

• Recession or economic boom

• Interest rates and level of unemployment

• Competition – Emergence or departure of

• Direct competitors

• Businesses that compete for same labor and other resources

• Changes in workforce

• Workforce composition and its work habits

• Changes in technology 5-17

Determining Skills and Expertise Required (Demand)

• Important to determine skills and abilities required to meet objectives rather than look at skills and abilities of present employees

• Starting point is to review current job descriptions

• Translate needed skills and abilities into types and numbers of employees

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Methods of Forecasting Human Resource Needs – Judgment Methods

• Managerial estimates – Calls on managers to make estimates of future staffing needs

• These estimates can flow top-down, vice-versa or a combination

• Delphi technique – Uses a panel of experts to make initially independent estimates of future demand

• An intermediary then presents each expert‘s forecast and assumptions to the other members of the panel

• Each expert is then allowed to revise his or her forecast as desired

• This process continues until some consensus or composite emerges

• Scenario analysis – Using workforce environmental scanning data to develop alternative workforce scenarios

• Developed in brainstorming sessions with line managers and HR managers

• Encourages open, out-of-the-box thinking 5-19

Methods of Forecasting Human Resource Needs – Mathematically Based

• Include various statistical and modeling methods

• With increasing proliferation of user-friendly software and computers, it will probably be used more frequently

• Statistical methods

• Uses historical data in some manner to project future demand

• Modeling methods

• Usually provide a simplified abstraction of the human resource demands throughout the organization

• Changing the input data allows testing the human resource ramifications of different demand scenarios

5-20

Statistical Modeling Techniques Used to Forecast Human Resource Needs

5-21

Benchmarking

• Thoroughly examining internal practices and procedures and measuring them against the ways other successful organizations operate

• In HRP, it involves learning what other successful organizations in the industry are forecasting and how they are arriving at their forecasts

• Consultants and professional organizations such as industry associations can be employed to help with the benchmarking process

• Advantage

• It forces HR professionals to look at other ways of doing things

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Determining Additional (Net) Human Resource Requirements

• Skills inventory

• Consolidated list of biographical and other information on all employees in the organization

• Information to be included

• Personal data – Age, sex, marital status

• Skills – Education, job experience, training

• Special qualifications – Membership in professional groups, special achievements

• Salary and job history – Present and past salary, dates of raises, various jobs held

• Company data – Benefit plan data, retirement information, seniority

• Capacity of individual – Test scores on psychological and other tests, health information

• Special preferences of the individual – Geographic location, type of job

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Determining Additional (Net) Human Resource Requirements

• Popularity of skills inventory has increased by use of computers

• Intranets have ability to conduct comprehensive skills inventories and then slot employees into training to fit needs of organization

• Advantages

• Furnishes a means to quickly and accurately evaluate skills available within organization

• Helps determine promotion and transfer decisions

• Necessary for making other decisions, such as whether to bid on a new contract or introduce a new product

• Aids in planning future employee training and management development programs

• Aids in recruiting and selecting new employees

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Skills Inventory Form Used by PPG Industries

5-25

Determining Additional (Net) Human Resource Requirements

• Management inventory – Specialized, expanded form of skills inventory for an organization‘s current management team

• Contains basic types of information

• Usually includes a brief assessment of past performance and potential for advancement

5-26

Anticipating Changes in Personnel

• Changes such as retirements – Forecasted from information in the skills inventory

• Changes such as transfers and promotions – Estimated by taking into account

• Age of individual in specific jobs

• Requirements of organization

• Individuals with potential for promotion can and should be identified

• Deaths, resignations, and discharges, are more difficult to predict

• Past experience and historical records

• Planned training and development experiences to be considered when evaluating anticipated changes

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Developing Action Plans – Adding Human Resource

• Factors impacting this decision include permanency of needs, availability of qualified recruits, and union contracts (if applicable)

• Permanent hires – Plans to be made to recruit, select, orient, and train needed personnel, in given time frame

• Contingency Hires – Advantages

• Allows accommodating swings in demand for human resources

• Lower cost of employment – Often do not have same benefits as permanent employees

• Temporary agencies - Often provide testing and training for employees before they are hired

• New perspectives due to varied experiences

• Outsourcing – Potential clients for outsourcing to be identified and evaluated

• Attractive because work can often be contracted outside at a cost savings

• Allows parent company to focus on its core business

5-28

Developing Action Plans – Reducing Human Resources

• If time is not of essence, natural attrition can be used

• Other methods include

• Downsizing – Reducing total number of employees

• Layoffs

• Terminations

• Early retirement inducements

• Voluntary resignation inducements

• Layoff, as opposed to a termination, assumes it is likely that employee will be recalled at some later date

• Most early retirement and voluntary resignation plans provide some financial inducement to retire early or to resign

5-29

Developing Action Plans – Reducing Human Resources

• Other approaches for reducing human resource costs

• Approaches that do not result in employees leaving organization include reclassification, transfer, and work sharing

• Reclassification

• Involves demoting an employee, downgrading job responsibilities, or a combination of the two

• Usually accompanied by a reduction in pay

• Transfer

• Involves moving employee to another part of the organization

• Work sharing

• Seeks to limit layoffs and terminations through proportional reduction of hours among employees (i.e., all employees in a department could be cut back to 35 hours per week instead of 40)

5-30

Synthesizing the HRP Process

• Organizational objectives are influenced by many historical and environmental factors

• Are then translated into divisional and departmental objectives

• Human resources needed to meet respective objectives are determined

• HR personnel assimilate these different requirements

• Determine total human resources demand for organization

• HR personnel determine additional (net) human resource requirements in light of available resources and anticipated changes

• If net requirements are positive – Recruitment, selection, training, and development is implemented

• If requirements are negative – Human resource costs are reduced via downsizing and other means

• As these changes take place, they should be reflected in the skills inventory

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Organizational and Human Resource Planning

5-32

Succession Planning

• Technique that identifies specific people to fill future

openings in key positions throughout the organization

• Organizational replacement chart – Shows both

incumbents and potential replacements for given

positions within an organization

• Periodically updated to reflect changes

• Individuals are initially identified as candidates to move up

after being nominated by management

• Performance appraisal data are reviewed, potential is

assessed, developmental programs are formulated, and

career paths are mapped out

• Sophisticated succession planning helps ensure that

qualified internal candidates are not overlooked

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Succession Planning – Drawbacks

• ―Crowned prince‖ syndrome

• Occurs when management considers for advancement only those who have managed to become visible to senior management

• Common especially informal plans and those for large organizations

• Requires computerization

• Difficult to track information manually

• Succession plan should be computerized using mostly data that are already available from human resources personnel

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Simple Organization Replacement Chart

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Commitment Manpower Planning (CMP)

• A systematic approach to human resource planning designed to get managers and their subordinates thinking about and involved in HRP

• Generates three reports that supply the following information

• The supply of employees and the promotability and placement status of each

• The organization‘s demand, arising from new positions and turnover and projected vacancies for each job title

• The balance or status of supply versus demand, including the name, job, and location of all those suitable for promotions

5-36

Ratio Analysis

• Tool used in human resource planning to measure organization‘s human resource vitality as indicated by presence of promotable personnel and existing backups

• Premises underlying ratio analysis as it applies to HRP include

• An organization is ―vital‖ in terms of its human resources – Employees have high potential to be promotable, and backups have been identified to replace them

• An organization is ―stagnant‖ – Employees are not promotable and no backups have been identified to replace incumbents

• Organizational vitality index (OVI)

• Index that results from ratio analysis

• Reflects organization‘s human resource vitality as measured by presence of promotable personnel and existing backups

• Calculated based on number of promotable personnel and number of existing backups within organization

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Human Resource Information Systems (HRIS)

• A database system that contains all relevant human resource information and provides facilities for maintaining and accessing these data

• Advantages

• Its potential for producing more accurate and more timely information for operating, controlling, and planning purposes than manual or payroll-based systems can produce

• Gets rid of paper files usually maintained

• New software packages are much more user-friendly and, thus, require less training and time to implement

• Disadvantages

• Its financial cost and labor requirements for implementing system – these problems have greatly diminished as a result of new software

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Potential Application of HRIS

• Clerical applications

• Automating certain routine clerical tasks avoids use of additional staff, overtime, and temporary help

• Applicant search expenditures

• Easily stores a summary of applicant qualifications, and performs searches for candidates for certain positions; helps company avoid need for an employment agency

• Risk management

• Can be used to monitor and report discrepancies by jobholders regarding licenses, safety training, and even physical examinations

• Training management

• Can compare job training requirements with actual training experiences of individual jobholders to determine both individual and organizational training needs

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Potential Application of HRIS

• Training experiences

• Can provide organization-wide training development and delivery, especially for jobs using computers

• Financial planning

• HR managers can stimulate financial impact of salary and benefit changes to recommend changes in strategy that stay within an overall budget goal

• Turnover analysis

• Turnover can be closely monitored. Its characteristics can be identified and analyzed for probable causes

• Succession planning

• Can identify a logical progression path and steps required for advancement and individual progress can be monitored

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Potential Application of HRIS

• Flexible-benefits administration

• Can be used to easily administer a usually expensive to implement and administer flexible-benefits program

• Compliance with government regulations

• Can be used to keep up with current EEO and related government-required regulations

• Helps companies maintain compliance by thoroughly scanning job applicants meeting specific requirements and informing management

• Attendance reporting and analysis

• Can help in tracking documentation of sick days, vacation time, personal time, and tardiness

5-41

Potential Application of HRIS

• Accident reporting and prevention

• Can be used to record accident details and provide analyses to help prevent future accidents

• Strategic planning

• Today‘s client/server systems are transforming human resource people from simple administrators to strategic planners who can influence CEO decisions

• Human resource planning

• HRP can be greatly assisted by an information system that is capable of making projections based on current workforce

• An important indirect benefit of an HRIS is that it helps enable HR managers become more strategic

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HR and the Internet

• Internet is a global collection of independently operating, but interconnected, computers

• Frequently referred to as ―information superhighway,‖ it is actually a network of computer networks

• Growing number of HR managers are using the Internet to recruit personnel, conduct research, access electronic databases, send e-mail, conduct training, and network with colleagues

• Its real value to HR professionals is the information that it makes available

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HR-Related Web Sites

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HR and the Intranet

• Is a private computer network that uses Internet products and technologies to provide multimedia applications within organizations

• Connects people to people and information and knowledge within the organization

• Serves as an ―information hub‖ for the entire organization (example: eHR systems)

• Web portal enables other specific groups such as business partners, customers, or vendors to access an organization‘s intranet

• Similar to the Intranet

• A mix of intranet applications can now be purchases or leased out at reasonable rates

5-45

Intranet Uses

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Software as a Service

• Standard business applications that are delivered over the internet on a pay-as-you- go basis, usually for a monthly subscription fee

• Also called ‗on-demand software‘

• Benefits

• No large capital expenditure is required to buy and install equipment

• There are fewer hassles related to managing the systems

• Users can be up and running within days, or even hours of signing a contract, without spending too many dollars

• Because of these benefits, software as a service has particular appeal to HR applications

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Summary of Learning Objectives

• Define human resource planning (HRP)

• Summarize the relationship between HRP and organizational planning

• Explain strategy-linked HRP

• Identify the steps in the HRP process

• Describe the different methods used for forecasting human resource needs

• Discuss the purpose of a skills inventory

• Describe succession planning, commitment manpower planning, and ratio analysis

• Define a human resource information system (HRIS)

• Differentiate between the internet and the intranet

• Define the concept ―software as a service‖

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