Lesson 2. Acquiring and Preparing Human Resources ASSIGNMENT 5. The Process of Human Resource Planning. Forecasting

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1 Acquiring and Preparing Human Resources ASSIGNMENT 5 Read this assignment in your study guide. Then, read Chapter 5, Planning for and Recruiting Human Resources, on pages in your textbook. The Process of Human Resource Planning A basic function of an HRM department is implementing organizational strategies. To do that, it s necessary to forecast the company s demand for labor within the accessible labor force. The first step is forecasting the company s labor demand. Figure 5.1 on page 119 is an overview of the five-part human resource planning process. Forecasting In forecasting the demand for labor, HR professionals must get a good estimate of the kinds of jobs and numbers of employees required to fulfill organizational strategies. As a simple example, it might be forecast that the company will need three software designers to upgrade a sales-data program, eight people to install the upgrades in workstations, one project manager, and one assistant project manager. Of course, the big picture is likely to involve all kinds of jobs to fulfill the full set of company strategies. So, HR analysts will need to predict labor market trends. The most sophisticated approach to forecasting demand is trend analysis, which applies statistical models to determine labor-market trends. For example, the model may show that the company is likely to need 15 salespeople over the next six months. The key statistics applied in this sort of modeling are called leading indicators, which predict organizational demand. Lesson 2 43

2 Determining labor supply generally begins with determining a firm s internal human resources. The question will be, How many people with specified job-skills are already available within the company? Once that s determined, the next step is modifying the model by accounting for projected retirements, terminations, voluntary turnovers, promotions, and transfers. A statistical procedure that can be used for this purpose is called a transitional matrix. Table 5.1 on page 121 provides an example of a transitional matrix for an auto parts manufacturer, and can help you understand how such a matrix can be used to assess and predict internal labor supply over time. Determining labor surplus or shortage is a matter of contrasting labor demand and supply. Once again, you can use the text discussion in conjunction with Table 5.2 on page 123 to understand HR planning options in the event of either a projected surplus or shortage of desired workers in various job categories. Reducing a surplus may include such things as downsizing, pay reductions, and early retirement. Notice that the amount of suffering caused should be considered when reducing a surplus. Avoiding a shortage might be addressed by increasing overtime, outsourcing, and hiring externally. Goal Setting and Strategic Planning Here, the options in Table 5.2 are discussed in some detail. Downsizing strategies are strongly related to the corporate efforts to compete in the global economy. The main reasons companies engage in downsizing are Reducing costs: Labor costs are, as rule, the major cost of doing business. To reduce the number of employees is to reduce labor costs. Replacing labor with technology: Machines that automate work procedures tend to reduce labor costs. Mergers and acquisitions nearly always affect employees due to overlapping work positions. The sales force for two newly combined companies will probably end up with more salespeople than were needed before the merger or acquisition. 44 Human Resources Management

3 Moving to more economically advantageous locations: There have been two trends here: First, the United States has seen a steady migration of companies into the so-called Sunbelt states of the Southeast and Southwest mainly in search of lower wage demands and less impact from unions. Second, under free-trade agreements, many jobs have been offshored to countries such as Mexico and India. The discussion of the effects of downsizing should be considered carefully. The short-term gain for shareholders in mergers and acquisitions may not lead to long-term corporate profitability. Downsizing disrupts communities and can lead to lower long-term productivity and profits. Early-retirement programs tend to inflict less suffering on older employees. However, early retirees often include some of the company s irreplaceable talent. As a result, the costs of recruiting replacement workers may exceed the cost savings. Phased retirement programs may address this problem. In this arrangement, older key talent is phased out gradually, perhaps by reducing their hours. Temporary and contract workers: The most widespread approach to downsizing has involved hiring temporary workers, subletting work contractors, and outsourcing. Temporary workers reduce costs because they exclude benefits. Up to 40% of the pay package for a full-time employee is composed of health-care, retirement, vacation time, and other benefits. Benefits of equivalent value may be provided by the agency that provides temps. Contractors can be hired more cost efficiently than full-time employees. They can be hired for specific periods of time for specified jobs. Independent contractors may cover benefits for their employees. However, many contract workers are selfemployed individuals who may not have affordable access to things like health care or a retirement plan. Outsourcing basically aims at transferring functions to outside firms while retaining employees that serve a company s core competencies. For example, a tour guide company may find it best to outsource accounting and marketing to outside Lesson 2 45

4 companies. In that way the company can give its full attention to organizing and guiding trips. Here are some guidelines for outsourcing and offshoring: Seek out experienced providers with adequate resources. Don t offshore operations that are either proprietary or require stringent security measures. Start small and monitor progress. Look for opportunities to outsource work in areas that promote growth, such as organizations with expertise that can help a company tap new markets. Implementing and Evaluating the HR Plan Implementing and evaluating is the final stage of the human resource planning process. Here, the most obvious concern is determining whether or not the plan has successfully accommodated labor shortages or surpluses. In any case, one or more HR professionals should have the responsibility of providing timely reports to management. As an example, the Best Practices feature on pare 129 can help you think about a successful plan for attracting video game developers. Applying HR Planning to Affirmative Action Affirmative action adds another measure of complexity to challenges faced by human resources employees. A workforce utilization plan can address the diversity issue by showing to what extent minority percentages in job categories are consistent with percentages in the general population. Recruiting Human Resources Because it s difficult to fully determine future labor needs and market trends, HR professionals often accumulate a pool of potential hires. For example, based on forecasting, human resource departments may invite potential candidates to submit applications for short-term or long-term reference. In any case, the process of identifying and attracting potential 46 Human Resources Management

5 employees (recruiting) involves three areas: Personnel policies, recruitment sources, and the characteristics of the recruiter. In Figure 5.2 on page 131, recruiter traits and behaviors are important in both job vacancy characteristics and applicant characteristics. Personnel Policies Any organization s personnel policies amounts to its decisions how to carry out HRM, including recruiting. Personnel policies relevant to recruiting include Internal versus external recruiting: Some companies prefer to recruit within the organization, especially those concerned with maintaining a tight corporate culture. Also, internal recruiting fosters access to successive promotions. That can be a powerful motivator for careerminded employees. Lead-the-market pay strategies: Offer pay levels that are higher than average within an industry can attract top talent and compensate workers for high-stress jobs that may also be hazardous. Employment-at-will policies: In accordance with differences in state laws, companies may adopt employment-at-will policies, in which workers can be summarily terminated at the discretion of an employer. Alternatively, due-process policies lay out specific procedures that allow an employee to contest or appeal termination. Employees tend to prefer due-process policies because they offer a measure of job security. Image advertising: Brand-image advertising attracts potential employees, especially if the ad themes and content suggest personality traits the potential candidate can identify with. The second purpose of image advertising is creating a positive corporate image to consumers. Lesson 2 47

6 Recruitment Sources Internal Sources Internal sources for recruitment offer several advantages: The applicants are well known to the organization. The applicants are familiar with the company and have accurate information about what a job entails. Recruiting internally is generally cheaper and faster than external recruiting. External Sources External sources may be best for recruiting People with special talents or experience, especially for upper-level positions Entry-level applicants, mainly to begin grooming them for integration into the company s culture Outsiders, who may have new ways of looking at things and can spur innovation Direct applicants and referrals make up the largest percentage of new hires. About 25% of new hires are from referrals. Direct applicants make up about 21% of new hires. In Figure 5.3 on page 134, notice the relatively low percentage of hires from college recruiting and how seldom temps get hired as full-time employees. Advertisements in Newspapers and Magazines Clearly, many companies need to advertise job openings. However, HRM specialists should remember these things: Companies advertise because they can seldom fill all their employment needs from direct applicants and referrals. Job advertising is relatively expensive. The quality of applicants tends to be low. 48 Human Resources Management

7 Electronic Recruiting The Internet has had an enormous effect on recruiting. Newsprint ads are still around, but increasingly, people are looking for jobs online. Consider some highlights: Company Web sites allow job seekers to research a company online. Computer-literate people in search of a job tend to be better informed about what they might expect from a company. Most company Web sites offer a link to employment opportunities. Often, such links permit an applicant to post a résumé and application to the company s HR department. Smaller companies can post job openings to job-posting sites like Monster.com, Yahoo HotJobs, and Career Builder. Meanwhile, many industries maintain Web sites with links to particular companies. Under the Social Security Act of 1935, people getting unemployment compensation must be registered with a local state public employment agency. The agencies make an effort to place unemployed clients in jobs. Organizations can post job openings with these agencies. While government employment agencies mainly serve bluecollar workers, private employment agencies tend to serve white-collar workers. People can sign on to one of these private agencies regardless of whether or not they re currently employed. Some of these agencies actively represent upper-level managerial types, such as CEOs, CFOs, and COOs. Colleges and universities generally have their own placement services. Beyond campus interviewing, many companies provide internship programs and job fairs. Currently, the companies most active in campus recruiting are in search of potential talent for hi-tech electronic, engineering, aerospace, defense-related, and science-based industries in genetic research and biochemistry. Lesson 2 49

8 Evaluating the Quality of a Source HR professionals need to evaluate the relative yield of their mix of recruitment sources. A yield ratio gives the percentage of applicants who successfully move from one stage of the recruitment process to the next. Yield ratios tell which sources are most productive. Another measure of recruitment success is the cost per hire, which is calculated by dividing the total cost of a source by number of people hired to fill the job vacancy. A low cost per hire indicates an efficient recruitment source. Table 5.3 on page 140 shows the results of a hypothetical recruiting effort. Recruiter Traits and Behaviors In the recruiting process, the recruiter enters the scene relatively late. At that point, the applicant will probably have decided for or against the job and may have gathered a lot of information about both the job and the company. Thus, a candidate may be somewhat skeptical of the recruiter. The characteristics of the recruiter, though, make a difference. In particular, applicants tend to respond positively to recruiters who show a positive attitude and provide information. On the other hand, the behavior of the recruiter appears to have an uncertain relationship to whether or not an applicant accepts a job offer. Studies suggest that the realistic job preview approach produces mixed results. What seems to be most important is the organization s pay, security, and opportunities for advancement. Here are some basic guidelines for enhancing the recruiter s impact: Provide timely feedback. Avoid offensive behavior. Consider using recruiter teams that include both HR professionals and job experts. 50 Human Resources Management

9 Self-Check 5 Questions 1 4: Indicate whether each of the following statements is True or False. 1. In a study of 52 Fortune 500 companies, most of the firms that announced a downsizing campaign showed better performance in the following years. 2. In spite of the advantages of internal recruiting, most new hiring is from external sources, and the most common source is referrals. 3. Research indicates that realistic job interviews have a weak or inconsistent relationship to job turnover. 4. Many companies are replacing early-retirement programs with phased-retirement plans that allow older workers to stay in the job at reduced hours. Questions 5 8: Provide the missing term or terms for each statement. 5. Under the Security Act of 1935, anyone receiving unemployment benefits must be registered with a local state employment office and must be actively seeking work. 6. The percentage of applicants who successfully move from one recruitment stage to the next stage relative to the recruitment source is the ratio. 7. In the process of human resource planning, the first stage, labor demand, is followed by determining labor. 8. In general, all companies must make decisions on three areas of recruiting, including policies, recruitment sources, and the behavior of the. Check your answers with those on page 152. Lesson 2 51

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