shrm n ch05

CHAPTER 5:

HUMAN RESOURCE PLANNING

Copyright © 2005 South-Western. All rights reserved.

Copyright © 2005 South-Western. All rights reserved. 1–2

Human Resource Planning (HRP)Human Resource Planning (HRP)Human Resource Planning (HRP)Human Resource Planning (HRP)

• First component of HRM strategyFirst component of HRM strategy• All other functional HR activities are derived All other functional HR activities are derived

from & flow out of HRP processfrom & flow out of HRP process• Basis in considerations of future HR requirements Basis in considerations of future HR requirements

in light of present HR capabilities & capacitiesin light of present HR capabilities & capacities• Proactive in anticipating & preparing flexible Proactive in anticipating & preparing flexible

responses to changing HR requirementsresponses to changing HR requirements• Both internal & external focusBoth internal & external focus

• First component of HRM strategyFirst component of HRM strategy• All other functional HR activities are derived All other functional HR activities are derived

from & flow out of HRP processfrom & flow out of HRP process• Basis in considerations of future HR requirements Basis in considerations of future HR requirements

in light of present HR capabilities & capacitiesin light of present HR capabilities & capacities• Proactive in anticipating & preparing flexible Proactive in anticipating & preparing flexible

responses to changing HR requirementsresponses to changing HR requirements• Both internal & external focusBoth internal & external focus


Human Resource Planning (HRP)Human Resource Planning (HRP)Human Resource Planning (HRP)Human Resource Planning (HRP)

• Goes beyond simple hiring & firingGoes beyond simple hiring & firing• Involves planning for deployment of human Involves planning for deployment of human

capital in line with organization &/or business capital in line with organization &/or business unit strategyunit strategy

• May involve:May involve:– ReassignmentReassignment– Training & developmentTraining & development– OutsourcingOutsourcing– Using temporary help or outside contractorsUsing temporary help or outside contractors

• Needs as much flexibility as possibleNeeds as much flexibility as possible

• Goes beyond simple hiring & firingGoes beyond simple hiring & firing• Involves planning for deployment of human Involves planning for deployment of human

capital in line with organization &/or business capital in line with organization &/or business unit strategyunit strategy

• May involve:May involve:– ReassignmentReassignment– Training & developmentTraining & development– OutsourcingOutsourcing– Using temporary help or outside contractorsUsing temporary help or outside contractors

• Needs as much flexibility as possibleNeeds as much flexibility as possible


Key Objectives of HR PlanningKey Objectives of HR PlanningKey Objectives of HR PlanningKey Objectives of HR Planning

• Prevent overstaffing & understaffingPrevent overstaffing & understaffing

• Ensure organization has right employees Ensure organization has right employees with right skills in right places at right with right skills in right places at right timestimes

• Ensure organization is responsive to Ensure organization is responsive to changes in environmentchanges in environment

• Provide direction & coherence to all HR Provide direction & coherence to all HR activities & systemsactivities & systems

• Unite perspectives of line & staff managersUnite perspectives of line & staff managers

• Prevent overstaffing & understaffingPrevent overstaffing & understaffing

• Ensure organization has right employees Ensure organization has right employees with right skills in right places at right with right skills in right places at right timestimes

• Ensure organization is responsive to Ensure organization is responsive to changes in environmentchanges in environment

• Provide direction & coherence to all HR Provide direction & coherence to all HR activities & systemsactivities & systems

• Unite perspectives of line & staff managersUnite perspectives of line & staff managers


Types of PlanningTypes of PlanningTypes of PlanningTypes of Planning

• Aggregate PlanningAggregate Planning– Anticipating needs for groups of employees in Anticipating needs for groups of employees in

specific, usually lower level jobs & general skills specific, usually lower level jobs & general skills employees will need to ensure sustained high employees will need to ensure sustained high performanceperformance

• Succession PlanningSuccession Planning– Focuses on ensuring key critical management Focuses on ensuring key critical management

positions in organization remain filled with positions in organization remain filled with individuals who provide best fitindividuals who provide best fit

• Aggregate PlanningAggregate Planning– Anticipating needs for groups of employees in Anticipating needs for groups of employees in

specific, usually lower level jobs & general skills specific, usually lower level jobs & general skills employees will need to ensure sustained high employees will need to ensure sustained high performanceperformance

• Succession PlanningSuccession Planning– Focuses on ensuring key critical management Focuses on ensuring key critical management

positions in organization remain filled with positions in organization remain filled with individuals who provide best fitindividuals who provide best fit


Aggregate PlanningAggregate PlanningAggregate PlanningAggregate Planning

• Forecasting demand Forecasting demand – Considers firm’s strategic plan’s effects on increases or Considers firm’s strategic plan’s effects on increases or

decreases in demand for products or servicesdecreases in demand for products or services– Assumptions on which forecast is predicated should be Assumptions on which forecast is predicated should be

written down & revisited when conditions changewritten down & revisited when conditions change– Unit forecastingUnit forecasting (bottom-up planning) involves “point of (bottom-up planning) involves “point of

contact” estimation of future demand for employeescontact” estimation of future demand for employees– Top-down forecastingTop-down forecasting involves senior managers allocating a involves senior managers allocating a

fixed payroll budget across organizational hierarchyfixed payroll budget across organizational hierarchy– Demand for employee skills requirements must also be Demand for employee skills requirements must also be

consideredconsidered

• Forecasting demand Forecasting demand – Considers firm’s strategic plan’s effects on increases or Considers firm’s strategic plan’s effects on increases or

decreases in demand for products or servicesdecreases in demand for products or services– Assumptions on which forecast is predicated should be Assumptions on which forecast is predicated should be

written down & revisited when conditions changewritten down & revisited when conditions change– Unit forecastingUnit forecasting (bottom-up planning) involves “point of (bottom-up planning) involves “point of

contact” estimation of future demand for employeescontact” estimation of future demand for employees– Top-down forecastingTop-down forecasting involves senior managers allocating a involves senior managers allocating a

fixed payroll budget across organizational hierarchyfixed payroll budget across organizational hierarchy– Demand for employee skills requirements must also be Demand for employee skills requirements must also be

consideredconsidered


Aggregate PlanningAggregate PlanningAggregate PlanningAggregate Planning

• Forecasting supply Forecasting supply – The level and quantities of abilities, skills & The level and quantities of abilities, skills &

experiences can be determined using experiences can be determined using Skills Skills InventoryInventory..

– Annually updated human resource information Annually updated human resource information system (HRIS) is dynamic source of HR informationsystem (HRIS) is dynamic source of HR information

– Markov analysis can be used to create transition Markov analysis can be used to create transition probability matrix that predicts mobility of employees probability matrix that predicts mobility of employees within organizationwithin organization

• Forecasting supply Forecasting supply – The level and quantities of abilities, skills & The level and quantities of abilities, skills &

experiences can be determined using experiences can be determined using Skills Skills InventoryInventory..

– Annually updated human resource information Annually updated human resource information system (HRIS) is dynamic source of HR informationsystem (HRIS) is dynamic source of HR information

– Markov analysis can be used to create transition Markov analysis can be used to create transition probability matrix that predicts mobility of employees probability matrix that predicts mobility of employees within organizationwithin organization


Exhibit 5-2Exhibit 5-2

Transition Probability Matrix for Transition Probability Matrix for RestaurantRestaurant


Transition Probability Matrix for Transition Probability Matrix for RestaurantRestaurant


Strategies for Managing Strategies for Managing ShortagesShortages

Strategies for Managing Strategies for Managing ShortagesShortages

• Recruit new Recruit new permanent employeespermanent employees

• Offer incentives to Offer incentives to postpone retirementpostpone retirement

• Rehire retirees part-Rehire retirees part-timetime

• Attempt to reduce Attempt to reduce turnoverturnover

• Recruit new Recruit new permanent employeespermanent employees

• Offer incentives to Offer incentives to postpone retirementpostpone retirement

• Rehire retirees part-Rehire retirees part-timetime

• Attempt to reduce Attempt to reduce turnoverturnover

• Work current staff Work current staff overtimeovertime

• Subcontract work outSubcontract work out• Hire temporary Hire temporary

employeesemployees• Redesign job Redesign job

processes so fewer processes so fewer employees are neededemployees are needed

• Work current staff Work current staff overtimeovertime

• Subcontract work outSubcontract work out• Hire temporary Hire temporary

employeesemployees• Redesign job Redesign job

processes so fewer processes so fewer employees are neededemployees are needed


Strategies for Managing SurplusesStrategies for Managing SurplusesStrategies for Managing SurplusesStrategies for Managing Surpluses

• Hiring freezesHiring freezes• Do not replace those Do not replace those

who leavewho leave• Offer early retirement Offer early retirement

incentivesincentives• Reduce work hoursReduce work hours• Voluntary severance Voluntary severance

leaves of absenceleaves of absence

• Hiring freezesHiring freezes• Do not replace those Do not replace those

who leavewho leave• Offer early retirement Offer early retirement

incentivesincentives• Reduce work hoursReduce work hours• Voluntary severance Voluntary severance

leaves of absenceleaves of absence

• Across-the-board pay Across-the-board pay cutscuts

• LayoffsLayoffs• Reduce outsourced Reduce outsourced

workwork• Employee trainingEmployee training• Switch to variable pay Switch to variable pay

planplan• Expand operationsExpand operations

• Across-the-board pay Across-the-board pay cutscuts

• LayoffsLayoffs• Reduce outsourced Reduce outsourced

workwork• Employee trainingEmployee training• Switch to variable pay Switch to variable pay

planplan• Expand operationsExpand operations


Succession PlanningSuccession PlanningSuccession PlanningSuccession Planning

• Involves identifying key management positions Involves identifying key management positions the organization cannot afford to have vacantthe organization cannot afford to have vacant

• Purposes of succession planningPurposes of succession planning– Facilitates transition when employee leavesFacilitates transition when employee leaves– Identifies development needs of high-potential employees & Identifies development needs of high-potential employees &

assists in career planningassists in career planning

• Many organizations fail to implement succession Many organizations fail to implement succession planning effectivelyplanning effectively

– Qualified successors may seek external career advancement Qualified successors may seek external career advancement opportunities if succession is not forthcomingopportunities if succession is not forthcoming

• Involves identifying key management positions Involves identifying key management positions the organization cannot afford to have vacantthe organization cannot afford to have vacant

• Purposes of succession planningPurposes of succession planning– Facilitates transition when employee leavesFacilitates transition when employee leaves– Identifies development needs of high-potential employees & Identifies development needs of high-potential employees &

assists in career planningassists in career planning

• Many organizations fail to implement succession Many organizations fail to implement succession planning effectivelyplanning effectively

– Qualified successors may seek external career advancement Qualified successors may seek external career advancement opportunities if succession is not forthcomingopportunities if succession is not forthcoming



Sample Replacement ChartSample Replacement ChartExhibit 5-4Exhibit 5-4

Sample Replacement ChartSample Replacement Chart



Pros & Cons of Disclosing Succession Pros & Cons of Disclosing Succession PlanningPlanning


Pros & Cons of Disclosing Succession Pros & Cons of Disclosing Succession PlanningPlanning


Reading 5.1Reading 5.1

Heirs UnapparentHeirs UnapparentReading 5.1Reading 5.1

Heirs UnapparentHeirs Unapparent

• Experts are looking more carefully at Experts are looking more carefully at leadership needs for 21st century, & leadership needs for 21st century, & warning of:warning of:– A shrinkage in pool of available managersA shrinkage in pool of available managers– Escalating costs in recruiting outside talentEscalating costs in recruiting outside talent– A lack of attention to developing leaders from withinA lack of attention to developing leaders from within

• Blame inattention to succession planning Blame inattention to succession planning on corporate world’s concentration on cost-on corporate world’s concentration on cost-cutting & downsizingcutting & downsizing

• Experts are looking more carefully at Experts are looking more carefully at leadership needs for 21st century, & leadership needs for 21st century, & warning of:warning of:– A shrinkage in pool of available managersA shrinkage in pool of available managers– Escalating costs in recruiting outside talentEscalating costs in recruiting outside talent– A lack of attention to developing leaders from withinA lack of attention to developing leaders from within

• Blame inattention to succession planning Blame inattention to succession planning on corporate world’s concentration on cost-on corporate world’s concentration on cost-cutting & downsizingcutting & downsizing



Heirs UnapparentHeirs UnapparentReading 5.1Reading 5.1

Heirs UnapparentHeirs Unapparent

• Old solutions to succession planning Old solutions to succession planning won’t work in increasingly complex won’t work in increasingly complex worldworld

• Essential to develop executives who Essential to develop executives who can cope with globalization & flourish can cope with globalization & flourish in new corporate climate buffeted by in new corporate climate buffeted by changeschanges

• Old solutions to succession planning Old solutions to succession planning won’t work in increasingly complex won’t work in increasingly complex worldworld

• Essential to develop executives who Essential to develop executives who can cope with globalization & flourish can cope with globalization & flourish in new corporate climate buffeted by in new corporate climate buffeted by changeschanges



Succession Planning Design ShiftsSuccession Planning Design ShiftsReading 5.2Reading 5.2

Succession Planning Design ShiftsSuccession Planning Design Shifts

• Key design shifts for succession systems:Key design shifts for succession systems:– Identify core strategic capabilities/competencies related to Identify core strategic capabilities/competencies related to

key positions & develop leadership modelkey positions & develop leadership model– Place initiative & responsibility for individual development in Place initiative & responsibility for individual development in

hands of candidate employeeshands of candidate employees– Development process that aligns mastery of competencies Development process that aligns mastery of competencies

with firm’s strategic goals & missionwith firm’s strategic goals & mission– Create succession process more open & less exclusive & Create succession process more open & less exclusive &

secretivesecretive– Design succession process for ongoing & frequent reviewDesign succession process for ongoing & frequent review

• Key design shifts for succession systems:Key design shifts for succession systems:– Identify core strategic capabilities/competencies related to Identify core strategic capabilities/competencies related to

key positions & develop leadership modelkey positions & develop leadership model– Place initiative & responsibility for individual development in Place initiative & responsibility for individual development in

hands of candidate employeeshands of candidate employees– Development process that aligns mastery of competencies Development process that aligns mastery of competencies

with firm’s strategic goals & missionwith firm’s strategic goals & mission– Create succession process more open & less exclusive & Create succession process more open & less exclusive &

secretivesecretive– Design succession process for ongoing & frequent reviewDesign succession process for ongoing & frequent review



Succession Planning Design ShiftsSuccession Planning Design ShiftsReading 5.2Reading 5.2

Succession Planning Design ShiftsSuccession Planning Design Shifts

• A succession system must:A succession system must:– Make sense for & be usable by different business units, each Make sense for & be usable by different business units, each

having unique needshaving unique needs– Process to focus & guide development of executives to meet Process to focus & guide development of executives to meet

strategic purposesstrategic purposes– Be aligned with other HR processes also in transitionBe aligned with other HR processes also in transition– Assure pool of potential leaders is being prepared for Assure pool of potential leaders is being prepared for

executive positionsexecutive positions– Be owned by senior managementBe owned by senior management– Deal with diversity issues & changing demographicsDeal with diversity issues & changing demographics– Measurably add value & contribute to business successMeasurably add value & contribute to business success

• A succession system must:A succession system must:– Make sense for & be usable by different business units, each Make sense for & be usable by different business units, each

having unique needshaving unique needs– Process to focus & guide development of executives to meet Process to focus & guide development of executives to meet

strategic purposesstrategic purposes– Be aligned with other HR processes also in transitionBe aligned with other HR processes also in transition– Assure pool of potential leaders is being prepared for Assure pool of potential leaders is being prepared for

executive positionsexecutive positions– Be owned by senior managementBe owned by senior management– Deal with diversity issues & changing demographicsDeal with diversity issues & changing demographics– Measurably add value & contribute to business successMeasurably add value & contribute to business success



Strategic Levels of HRStrategic Levels of HRReading 5.3Reading 5.3

Strategic Levels of HRStrategic Levels of HR

• Long-termLong-term– Is activity conceptualized Is activity conceptualized

as long-term value?as long-term value?

• ComprehensiveComprehensive– Does it cover entire Does it cover entire

organization or isolated organization or isolated components?components?

• PlannedPlanned– Is it thought out ahead of Is it thought out ahead of

time & is it well time & is it well documented?documented?

• Long-termLong-term– Is activity conceptualized Is activity conceptualized

as long-term value?as long-term value?

• ComprehensiveComprehensive– Does it cover entire Does it cover entire

organization or isolated organization or isolated components?components?

• PlannedPlanned– Is it thought out ahead of Is it thought out ahead of

time & is it well time & is it well documented?documented?

• IntegratedIntegrated– Does it provide basis for Does it provide basis for

integrating multifaceted integrating multifaceted activities that might activities that might otherwise be fragmented otherwise be fragmented & disconnected?& disconnected?

• High value-addedHigh value-added– Does it focus on critical Does it focus on critical

business success issues business success issues or on things that must be or on things that must be done but are not critical?done but are not critical?

• IntegratedIntegrated– Does it provide basis for Does it provide basis for

integrating multifaceted integrating multifaceted activities that might activities that might otherwise be fragmented otherwise be fragmented & disconnected?& disconnected?

• High value-addedHigh value-added– Does it focus on critical Does it focus on critical

business success issues business success issues or on things that must be or on things that must be done but are not critical?done but are not critical?





• Operationally reactive HROperationally reactive HR– Focuses on implementing day-to-day demands for HRFocuses on implementing day-to-day demands for HR

• Operationally proactive HROperationally proactive HR– Improves upon design & delivery of existing HR basics Improves upon design & delivery of existing HR basics

before problems set inbefore problems set in

• Strategically reactive HRStrategically reactive HR– Focuses on supporting successful implementation of Focuses on supporting successful implementation of

business strategybusiness strategy

• Strategically proactive HRStrategically proactive HR– Focuses on creating strategic alternativesFocuses on creating strategic alternatives

• Operationally reactive HROperationally reactive HR– Focuses on implementing day-to-day demands for HRFocuses on implementing day-to-day demands for HR

• Operationally proactive HROperationally proactive HR– Improves upon design & delivery of existing HR basics Improves upon design & delivery of existing HR basics

before problems set inbefore problems set in

• Strategically reactive HRStrategically reactive HR– Focuses on supporting successful implementation of Focuses on supporting successful implementation of

business strategybusiness strategy

• Strategically proactive HRStrategically proactive HR– Focuses on creating strategic alternativesFocuses on creating strategic alternatives





• HR becomes strategically reactive in HR becomes strategically reactive in business strategy implementation through:business strategy implementation through:– Supporting execution of tactics that drive long-term Supporting execution of tactics that drive long-term

strategiesstrategies– Developing cultural & technical capabilities Developing cultural & technical capabilities

necessary for long-term successnecessary for long-term success– By providing change management support for By providing change management support for

tactical activitiestactical activities

• HR becomes strategically reactive in HR becomes strategically reactive in business strategy implementation through:business strategy implementation through:– Supporting execution of tactics that drive long-term Supporting execution of tactics that drive long-term

strategiesstrategies– Developing cultural & technical capabilities Developing cultural & technical capabilities

necessary for long-term successnecessary for long-term success– By providing change management support for By providing change management support for

tactical activitiestactical activities





1.1. Define business unit for which HR practices are Define business unit for which HR practices are being designedbeing designed

2.2. Specify key trends in external business Specify key trends in external business environmentenvironment

3.3. Identify & prioritize firm’s sources of competitive Identify & prioritize firm’s sources of competitive advantageadvantage

4.4. Define required culture & technical knowledge & Define required culture & technical knowledge & skill areas required to support the sources of skill areas required to support the sources of competitive advantagecompetitive advantage

1.1. Define business unit for which HR practices are Define business unit for which HR practices are being designedbeing designed

2.2. Specify key trends in external business Specify key trends in external business environmentenvironment

3.3. Identify & prioritize firm’s sources of competitive Identify & prioritize firm’s sources of competitive advantageadvantage

4.4. Define required culture & technical knowledge & Define required culture & technical knowledge & skill areas required to support the sources of skill areas required to support the sources of competitive advantagecompetitive advantage





5.5. Identify cultural characteristics that firm should Identify cultural characteristics that firm should reduce or eliminate if it is to optimize competitive reduce or eliminate if it is to optimize competitive advantageadvantage

6.6. Design HR practices that will have greatest impact Design HR practices that will have greatest impact on creating desired cultureon creating desired culture

7.7. With these decisions made, firm should establish With these decisions made, firm should establish action plans for detailed design of HR processesaction plans for detailed design of HR processes

8.8. Final step specifies means by which effectiveness Final step specifies means by which effectiveness of entire process is measuredof entire process is measured

5.5. Identify cultural characteristics that firm should Identify cultural characteristics that firm should reduce or eliminate if it is to optimize competitive reduce or eliminate if it is to optimize competitive advantageadvantage

6.6. Design HR practices that will have greatest impact Design HR practices that will have greatest impact on creating desired cultureon creating desired culture

7.7. With these decisions made, firm should establish With these decisions made, firm should establish action plans for detailed design of HR processesaction plans for detailed design of HR processes

8.8. Final step specifies means by which effectiveness Final step specifies means by which effectiveness of entire process is measuredof entire process is measured





• Become proactive by:Become proactive by:– Learning enough about other functional areas to allow HR to Learning enough about other functional areas to allow HR to

contribute to businesscontribute to business– Expanding/enriching parameters of HR agendas through Expanding/enriching parameters of HR agendas through

which strategic alternatives are define & createdwhich strategic alternatives are define & created

• Creates culture of of creativity & innovationCreates culture of of creativity & innovation• Involved in full breadth of mergers & acquisition Involved in full breadth of mergers & acquisition

activitiesactivities• Creates internal capabilities based on future Creates internal capabilities based on future

external environmental requirementsexternal environmental requirements

• Become proactive by:Become proactive by:– Learning enough about other functional areas to allow HR to Learning enough about other functional areas to allow HR to

contribute to businesscontribute to business– Expanding/enriching parameters of HR agendas through Expanding/enriching parameters of HR agendas through

which strategic alternatives are define & createdwhich strategic alternatives are define & created

• Creates culture of of creativity & innovationCreates culture of of creativity & innovation• Involved in full breadth of mergers & acquisition Involved in full breadth of mergers & acquisition

activitiesactivities• Creates internal capabilities based on future Creates internal capabilities based on future

external environmental requirementsexternal environmental requirements

shrm n ch05

Leadership & Management