HUMAN RESOURCE PLANNING

(HRP)

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HRP: AN OVERVIEW

HRP is a process of analyzing & identifying the need for & availability of human resources (HR) so that organization can meet its objectives

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DEFINING HR PLANNINGStrategy Oriented DEFINITION– “A strategy for the acquisition, utilization, improvement &

retention of an organization’s human resources”– AIMS of HRP:

1. to ensure the optimum use of the people currently employed 2. to provide for the future staffing needs of the organization in

terms of skills, number, & ages of people– HRP establish control: planner work as a “policeman” who

checks whether staffing levels are optimum

Process Oriented DEFINITION– HRP is as a continuous process of analyzing an

organization’s HR needs under the changing conditions & developing the activities necessary to satisfy these needs like staffing, recruitment, selection, training, etc.

– Process aimed at assisting management to determine how the organization should move from its current staffing position to its desired staffing position

IMPORTANCE OF HRP Helps to determine the future personnel needs It is a part of strategic planning Creating highly talented personnel International strategies depend upon HRP HRP provides foundation for personnel functions Increasing investments made in human resources

is another compelling reason for HRP Helps in uniting the perspectives of line and staff

managers Better clarity and direction is possible in all

departments Attracting and retaining qualified outsiders Management succession between generations of

owners Family relationships and HR policies

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PERSPECTIVES OF HRP MACRO HRP –

Assessing & forecasting demand for & availability of skills at national / global level

Predict the kinds of skills that will be required in future & compare these with what is / will be available in the country

Eg. Microsoft going to cut 18000 jobs by June 2015 Recent budget allocations

MICRO HRP –

Process of forecasting demand for & supply of HR for specific organization

Eg.

Genpact (an IT solution company in India) has launched a “ Train the trainer program” to address the skills gap of students for members of the faculty at Management departments

INFOSYS going to ‘rehire ‘ performer ex employees + also plans to tackle its increasing attrition rates Quarterly promotion cycle , fast track career for performers

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HR PLANNING PROCESS

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BUSINESS STRATEGY & HRPBusiness

strategy focus (Porter)

HR strategy HRP activities

Cost leadershipCost controlStable business environmentEfficiency & quality

Job & employee specializationEmployee efficiencyLong HR planning scope

Internal promotionsEmphasis on trainingHiring & training for specific capabilities

DifferentiationLong term focusGrowthCreativity in job behaviourDecentralization

Shorter HR planning scopeHire HR capabilities requiredFlexible jobs & employees

External staffingHire & train for broad competencies

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BUSINESS STRATEGY & HRPBusiness

strategy focus HR strategy HRP activities

DefenderFinds change threateningFavors strategies which encourage continuity & security

Bureaucratic approachPlanned & regularly maintained policies to provide for lean HR

Build HRLikely to emphasize training programs & internal promotion

Prospector Highly innovative Favors strategies of product & / or market development

Creative & flexible management styleHave high quality HREmphasize redeployment & flexibility of HRLittle opportunity for long-term HRP

Acquire HRLikely to emphasize recruitment, selection & performance base compensation

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ENVIRONMENTAL SCANNING

Systematic process of studying & monitoring the external environment of the organization in order to pinpoint opportunities & threats

Involves long range analysis of employment

Factors include economic factors, competitive trends, technological changes, socio-cultural changes, politico-legal considerations, labour force composition & supply, & demographic trends

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ENVIRONMENTAL SCANNING Eg., competitive pressures are likely to increase resulting

in enhanced productivity requirements & HRP objective may be ‘to increase employee productivity by 5% in 2 yrs.’ which will require the firm to determine current employee productivity (output / employees)

Which jobs need to be filled (or vacated) during the next 12 months?

How & where will we get people to fill (or vacate) these jobs? What are skill sets required to increase the productivity

Demand & supply of labour in loose & tight labour market

Major impact of the shortage of skilled workforce (tight labour market) in India has been on staff cost (increased by 40%)

Fast growing sectors like retail, ITeS, telecom do not have historical talent to bank on & hence they are hiring from other sectors with skill sets that are relevant to their industries

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FORECASTING HR DEMAND

FORECASTING ‘makes use of information from the past & present to identify expected future conditions’.

Forecasts are not perfectly accurate & as the planning scope becomes shorter the accuracy of forecasts increases

HR demand forecasts may be internal / external

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HR Forecasting .

Mathematical models Trend analysis Regression analysis Simulation models Productivity factors Staffing ratios.

Judgmental methods Rule of thumb Delphi technique Estimate Nominal groups

HR demand

and forecastin

g

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QUALITATIVE METHODS OF DEMAND FORECASTING

Method Advantages Disadvantages

Estimation People in position estimate the number of people the firm will require in the next yr.

Incorporates knowledge of corporate plans in making estimates

May be subjective

Expert opinion

Panel of experts forecast HR requirements for particular future business scenarios. For this method, there may be a single expert, or estimates of several experts may be pooled together

Delphi Experts go through several rounds of estimates with no face-to-face meeting

Incorporates future plans & knowledge of experts related to mkt., industry & technical development

Subjective, time consuming & may ignore data

Group brainstorming

Face-to-face discussion based on multiple assumptions about future business direction

Generates lot of ideas Does not lead to conclusion

Nominal group technique

Face-to-face discussion Group exchanges facilitate plans

Subjective which may ignore data

Simple averaging

Simple averaging of viewpoints

Diverse view points taken

Extremes views are masked when averaged

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QUANTITATIVE METHODS OF DEMAND FORECASTING

Method Advantages Disadvantages

Trend analysis & projection

Based on past relationship between a business factor related to employment & employment level itself

Simple long-run trend analysis

Extrapolates past relationship between volume of business activity & employment levels into the future

Recognizes linkage between employment & business activity

Assumes that volume of business activity of firm for forecast period will continue at same rate as previous yrsIgnores multiplicity of factors influencing employment levels

Regression analysis

Regresses employment needs onto key variables

Data drivenUses multiple business factors

Difficult to use & apply

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QUANTITATIVE METHODS OF DEMAND FORECASTING

Method Advantages Disadvantages

Simulation models

Uses probabilities of future events to estimate future employment levels

Makes several assumptions about the future regarding external & internal environmentSimultaneously examines several factors

Costly & complicated

Workload analysis

Based on actual content of work

HR requirements based on expected output of the firmProductivity changes taken into account

Job analysis may not be accurateDifficult to apply

Markov analysis

Probabilistic Based on past relationship between business factor related to employment & employment level itself

Data driven Assumes that nature of jobs has not changed over timeApplicable to stable environment

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METHODS OF DEMAND ESTIMATION

SIMPLE LONG-RANGE TREND ANALYSIS

• Extrapolates the volume of current business activity for the years for which the forecast is being made

• Since there is a correlation between volume of business activity & employment level, linear extrapolation would also indicate HR demand by job & skill category

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FORECASTING TECHNIQUESTrend Projection Forecasts:– Quickest forecasting techniques– Two simplest methods –

1. Extrapolation: involves extending past rates of change into future (if an avg of 200 production workers was hired each month for past 2 yrs, extrapolating that trend into future means that 240 production workers will be added during upcoming yr.)

2. Indexation: a method of estimating future employment needs by matching employment growth with an index, such as ratio of production employees to sales (eg., for each million $ increase in sales, production deptt. requires 10 new assemblers)

– Both are crude approximations in short run because they assume that causes of demand remain constant which is seldom the case – making it very inaccurate for long-range HR projections

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METHODS OF DEMAND ESTIMATION

RATIO ANALYSIS

• RATIO between output & manpower deployed to achieve that output is established at a given point of time

• Eg., revenue per employee, sales vol. per salesperson, service contract per engineer, units produced per employee, etc.,

• Historical ratio between:• Some causal factor (sales volume)

• No. of employees required (number of salesperson)

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METHODS OF DEMAND ESTIMATION

REGRESSION ANALYSIS

• Drawing a statistical comparison of past relationship among variables

• Statistical relationship between no. of patients (business factor) & employment level of nurses in a nursing home may be useful in forecasting the no. of employees that will be needed if the no. of patients increases by say 20%

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METHODS OF DEMAND ESTIMATIONLINEAR REGRESSION

ANALYSIS• Relationship between

two variables which is directly proportional

• Production output & manpower are the two variables & the relationship between these two is plotted on a graph by drawing a “line of best fit”

• Analysis aims at providing a measure of the extent to which changes in the values of two variables are correlated with one another

X

a

b Y

Manpow

er

Production level

x

x

x

x

x x

x

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METHODS OF DEMAND ESTIMATION

MARKOV ANALYSIS• Shows the percentage (& actual no.) of employee who

remain in each job from one yr. to the next, as also the proportion of those who are promoted or transferred or who exit the organization

• Internal mobility among different job classifications can be forecast based upon past movement patterns – past patterns of employee movements (transitions) used to project future patterns

• Pattern is used to establish transitional probabilities & to develop a transition matrix

• Transitional probabilities:• Indicate what will happen to the initial staffing levels in

each job category / probability that employee from one job category will move into another job category

• Determine the forecasted employee levels at the end of the yr

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A TRANSITION MATRIX / MARKOV MATRIX

EXIT MANAGER

SUPERVISOR

LINE WORKER

MANAGER .15 .85 .00 .00

SUOERVISOR

.10 .15 .70 .05

LINE WORKER

.20 .00 .15 .65

Named after the Russian mathematician Andrei Andreyevich Markov

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Forecasting &

Analyzing HR Supply

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FORECASTING & ANALYZING HR SUPPLY

Internal supply forecasts relate to conditions inside the org. such as age distribution of workforce, terminations, retirements, etc.

External supply forecasts relate to external labour market conditions & estimates of supply of labour to be available to the firm in the future in different categories

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METHODS OF FORECASTING EXTERNAL HR SUPPLY

INTERRELATED FACTORS THAT MUST BE CONSIDERED IN PROJECTING EXTERNAL HR SUPPLY

• Government estimates of population available for work• Net migration into and out of the area• Numbers entering the workplace• Numbers leaving the workplace• Numbers graduating from schools / colleges• Changing workforce composition• Technological shifts• Industrial shifts• Trends in the industry (actions of competing employers)• Economic forecasts• Government regulations & pressures such as job reservations

for certain groups

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METHODS OF FORECASTING INTERNAL HR SUPPLY

HR INVENTORY• Obtains & stores information about each employee of the org. in

a manner that is easily accessible because it is necessary for HRP

• Employee information stored in the inventory relates to KSA, experience, & career aspirations of the present workforce of the firm

• Contents of HR Inventory• Personal identification information• Biographical information• Educational achievements• Employment history• Information about present job• Present skills, abilities, & competencies• Future focused data• Specific actions (like training needed for achieving career goals)

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METHODS OF FORECASTING INTERNAL HR SUPPLYHR INVENTORY- types

• Skills inventory: describes the skills & knowledge of non-managerial employees & is used primarily for making placement & promotion decisions

• Management inventory: contains the same information as in skills inventory, but only for managerial employees which describes the work history, strengths, weaknesses, promotion potential, career goals

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METHODS OF FORECASTING INTERNAL HR SUPPLYHR INVENTORY• Can be used to develop employee

replacement charts• Replacement charts – lists current

jobholders & identifies possible replacements should there be a vacancy for reasons such as resignations, transfers, promotions, etc.

• They include information on possible replacements like current job performance, potential for promotion, training experience required by replacement to be ready for the key position

• Chart also details ‘when’ a replacement is needed for a ‘job’ – short term forecasts in nature

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REPLACEMENT CHARTS List the critical jobs in a company , the

employees currently positioned in those roles , their competencies , the current vacancies and facilitates in future planning.

groups employees into four Employees ready for promotion Employees who would be ready for promotion,

but with training Employees performing satisfactorily but needs

motivation and further improvements Employees who are not fit to be on

employment and need to be replaced.

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METHODS OF FORECASTING INTERNAL HR SUPPLY

SUCCESSION ANALYSIS & PLANNING

• A systematic & deliberate process of identifying, developing & tracking key individuals within the firm to prepare them for assuming senior & top-level positions in future.

• Eg., SAIL poaching from global players & preparing a ‘defence system’ wherein 2nd & 3rd line of command is being prepared; IBM, ExxonMobil, GE, etc., have

• Eg., Godrej, Marico (fly. owned business) in India have ‘drop dead’ succession plan which keeps the wheel moving where a promoter of the fly-owned firm may always be around to guide the company

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METHODS OF FORECASTING INTERNAL HR SUPPLYLABOUR WASTAGE ANALYSIS

• Traditionally LW is measured by the employee turnover index (% wastage index)

• (No. of empls leave in mth / avg. empls) x 100

• Turnover classified into:• Avoidable separations (resignations &

dismissal)

• Unavoidable separations (retirement, death, & marriage)

• Turnover rate = [(S-US) / M] x 100

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METHODS OF FORECASTING INTERNAL HR SUPPLYABSENTEEISM RATE

No. of man-days lost due to absence from work during the periodAR = --------------------------------------- x 100 Avg. number of Total number empls. during this pd. of days

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