Lecture 2 1 Human Resource Planning This lecture aims to achieve the following: Appreciate the importance of HR planning Explain the relationship between strategic HRM and HR planning Identify the key environmental influences on HR planning Understand the basic approaches to HR planning Describe the ways of forecasting HR requirements and availability Understand the requirements for effective HR planning Importance of human resource planning Human resource planning is the responsibility of all managers. It focuses on the demand and supply of labour and involves the acquisition, development and departure of people. This is recognised as a vital HR function as the success of an organisation depends on its employees. The purpose of HR planning is to ensure that a predetermined number of persons with the correct skills are available at a specified time in the future. Thus, HR planning systematically identifies what must be done to guarantee the availability of the human resources needed by an organisation to meet its strategic business objectives. To achieve this HR planning cannot be undertaken in isolation. It must be linked to the organisation s overall business strategy, and concentrate on the organisation s long-range human resource requirements. Cooperation between the HR function and line management is necessary for success. It allows the HR manager to anticipate and influence the future HR requirements of the organisation. Effective HR planning ensures a more effective and efficient use of human resources; more satisfied and better developed employees; more effective equal employment opportunity (EEO) and affirmative action (AA) planning; and reduced financial and legal costs. Strategic human resource management and human resource planning Effective HR planning considers both the internal and external environmental influences of an organisation, its objectives, culture, structure and HRM. This is because HR planning must reflect the environmental trends and issues that affect an organisation s management of its human resources. This includes consideration of globalisation, growth of Internet use, the economy, women in the work force, demographic changes, the casualisation of the work force, employee literacy, skill shortages, acquisitions, mergers and divestures, deregulation, flexible work schedules, telecommuting, outsourcing, quality of life expectations, pollution, income tax levels and union attitudes. Approaches to human resource planning To forecast the organisation s future HR requirements and determine from where they will be obtained. Three sets of forecasts are required: a forecast of the demand for human resources a forecast of the supply of external human resources a forecast of the supply of human resources available within the organisation Two approaches used in forecasting the demand for human resources are quantitative and qualitative. The quantitative approach: The quantitative approach to HR planning uses statistical and mathematical techniques. The focus of this approach is on forecasting HR shortages, surpluses and career blockages; its aim is to reconcile the supply and demand for human resources given
2 the organisation s objectives. Quantitative forecasting includes trend projection, econometric modelling and multiple predictive techniques. The qualitative approach: The qualitative approach to HR planning uses expert opinion (usually a line manager) to predict the future (for example, the marketing manager will be asked to estimate the future personnel requirements for the marketing department). The focus is on evaluations of employee performance and promotability as well as management and career development. Qualitative forecasting includes Delphi Technique and Nominal Group technique. Forecasting human resource availability The next step in human resource planning involves forecasting human resource availability. This involves an examination of the internal and external labour supply. Present employees who can be promoted, transferred, demoted or developed make up the internal supply. The external supply consists of people who do not currently work for the organisation. Forecasting the supply of internal human resources: Techniques for forecasting the internal supply of personnel include turnover analysis, skill inventories, replacement charts, Markov analysis and succession planning. Factors affecting the external supply of human resources: Not all vacancies can be filled from within the organisation. Consequently, the organisation must tap into the external labour market (local, regional, interstate or international). Thus, the HR manager needs to be alert to demographic changes. Changes occurring in the external labour market are the aging of the workforce, the increases in female participation rates, increases in school retention rates, changes in the rate of immigration, casualisation of the work force, outsourcing, and international employees. Requirements for effective HR planning Given that the success of an organisation ultimately depends on how well its human resources are managed, HR planning will continue to grow in importance. Successful HR planning requires the HR manager to ensure that: HR personnel understand the HR planning process top management is supportive the organisation does not start with an overly complex system the communications between HR personnel and line management are healthy the HR plan is integrated with the organisation s strategic business plan there is a balance between the quantitative and qualitative approaches to HR planning. Some questions for your concern: 1. What is HR planning? How does it relate to other HRM activities? The purpose of human resource planning 'is to assure that a certain desired number of persons with the correct skills are available at the specified time in the future'. Human resource planning thus identifies what must be done to ensure the availability of the human resources needed by an organisation to meet its objectives. The other HRM activities are then enacted to achieve the human resource plan that has been developed. 2. What are the differences between the quantitative and the qualitative approaches to HR planning?
The quantitative approach to human resource planning uses statistical and mathematical techniques and is primarily used by theoreticians and professional human resource planners in larger organisations. The qualitative approach to human resource planning uses expert opinion to predict the future. The focus is on evaluations of employee performance and promotability as well as management and career development. Although not as sophisticated as the quantitative approaches, estimates based on expert opinion are popular among smaller firms because of their simplicity and speed. 3. What action can an organisation take to overcome skill shortages? The Skills Inventory will identify the skill, abilities, qualifications, etc. of employee within the organisation. If the HR manager identifies a skill shortage within the organisation they may choose one of two main options to rectify this problem or potential problem. (1) provide further training and development to existing employees to upgrade their skills and qualifications to meet new organisational needs, (2) undertake external recruitment targeting the specific needs of the organisation. 4. How can HR planning help an organisation achieve its EEO and AA goals? The Affirmative Action goals set by an organisation must be input to the human resource demand and supply requirements for that organisation. Affirmative Action goals probably are considered as numbers and skills as part of the requirements and inventory of human resources. The necessity for Affirmative Action goals is a reflection of some of the environmental influences on organisations. As part of the total planning process, human resource planning must consider the environmental influences on the organisation, its objectives, culture, structure and human resource management. This is because human resource planning must reflect the environmental trends and issues that impact on the organisation's management of its human resources. Government regulations relating to occupational health and safety, equal opportunity, affirmative action and superannuation, for example, must be integrated with the organisation's human resource management objectives and activities. Similarly, changes in the demographic composition of the population can affect the type and availability of labour. This in turn can have an impact on the organisation's Equal Employment Opportunity (EEO)/Affirmative Action (AA) objectives. The growing role of women in the workforce for example, is dependent on improved child-care facilities, availability of part-time work, job security after an absence for child-bearing, maternity leave and special parental leave. 5. What is the role of the HR manager in the HR planning process? The human resource manager needs to be able to forecast what the organisation's future human resource requirements will be and from where they will be obtained. Quantitative and qualitative approaches are used. To do this, three sets of forecasts are required: * a forecast of the demand for human resources * a forecast of the supply of external human resources * a forecast of the supply of human resources available within the organisation. Once the human resource manager has estimated the personnel needs of the organisation, the next challenge is to fill the projected vacancies. Present employees who can be promoted, transferred, demoted or developed make up the internal supply. The external supply in contrast consists of personnel who do not currently work for the organisation. Techniques for forecasting
4 the internal supply of personnel include turnover analysis, skill inventories, replacement charts and Markov analysis. For HR planning to be a success, the HR manager must ensure that: * human resource personnel understand the HR planning process * top management is supportive * the organisation does not start with an overly complex system * the communications between HR personnel and line management are good * the HR plan is integrated with the corporate plan * there is a balance between the quantitative and qualitative approaches to HR planning. 6. What is the relationship between HR planning and strategic management? As part of the strategic planning process, HR planning must consider the environmental influences on an organisation, its objectives, culture, structure and HRM. This is because HR planning must reflect the environmental trends and issues that affect an organisation s management of its human resources. Government regulations relating to conditions of employment, EEO, industrial relations and occupational health and safety, for example, must be integrated with an organisation s HRM strategies. Similarly, changes in social values and in the demographic composition of the population can affect the type and availability of labour. This, in turn, can have an impact on an organisation s EEO and AA objectives. 7. What is succession planning? What are its benefits? What are the characteristics of effective succession planning? Succession planning is concerned with the filling of management vacancies. It stresses the development of high potential employees and takes a long-term view of the organisation's human resource needs. Succession planning makes use of replacement charts but generally expands on these to include additional information on current performance, promotability, developmental needs and long-term growth potential. Traditionally, managers have developed their own replacements, but this approach is often found wanting because of its ad hoc and subjective nature. Effective development requires a systematic analysis of the manager's training and development needs; the identification of appropriate learning experiences via job assignments; special projects, and formal training programs. As a result, organisations increasingly use assessment centres in conjunction with line management input to identify future senior managers and assess their development needs. The human resource manager's role is to ensure that succession planning provides the organisation's future managers with the necessary preparation to successfully fill potential vacancies. This means having an effective performance appraisal system, needs-oriented training and development programs, and a corporate culture that fosters individual growth and promotion from within. Otherwise succession planning will become an academic exercise producing only static charts and unnecessary paperwork. 8. What major demographic changes are likely to affect organisations in the near future? How are these changes likely to affect organisations? How can HR planning help organisations successfully deal with these changes? Changes in social values and in the demographic composition of the population can affect the type and availability of labour. This, in turn, can have an impact on an organisation s EEO and AA objectives.
The growing role of women in the work force, for example, depends on improved child-care facilities, availability of part-time work, job security after an absence for child bearing, maternity leave and special parental leave. The workforces of Australia, Hong Kong, Japan, Singapore, South Korea, Taiwan and the USA, for example, are all ageing. The ageing of the work force combined with a global shortage of skilled personnel will force employers to employ larger numbers of older workers. Fortunately, the use of technology will make work less physically demanding, permitting older people to work longer. An ageing work force, says one expert, will compel companies to rethink virtually every aspect of how they organise business in order to tap into the knowledge and experience of their older workers while keeping promotion opportunities open for younger employees. In response to these types of changes organisations might choose to introduce different work practices such as flexible work hours, job sharing, outsourcing, increased use of part-time and casual workers, tele-working, working from home. All of which will have an impact on a range of HR practices. 9. What can an organisation do when it is faced with (a) a surplus of human resources? (b) a shortage of human resources? (a) If a surplus of human resources exists an organisation can use one (or more) of the following options: stop recruiting, reduce casual and part-time employment, start early retirements, start retrenching or reduce work hours. (b) If a shortage of human resources exists an organisation can use one (or more) of the following options: increase overtime, increase casual and part-time employment, postpone retirements, start recruiting, accelerate training and development, and use outsourcing. 10. What can organisations do to better utilise older, unskilled workers? To make better use of older workers organisations could use a variety of different work practices including job sharing, and working from home. Mentoring would also be a valuable approach to ensure the transfer of knowledge or experience to younger employees. Better use can also be made of unskilled employees by introducing further training and development, multi-skilling, or mentoring. 11. How would you estimate the internal supply of academic staff in each department? Present employees who can be promoted, transferred, demoted or developed make up the internal supply. Techniques for forecasting the internal supply of personnel include turnover analysis, skill inventories, replacement charts and Markov analysis. The skills inventory is another method used to evaluate the internal supply of labour. This consolidates basic information on all employees within the organisation and permits the HR manager to: identify qualified employees for different jobs determine which skills are present or lacking in the organisation assess longer term recruitment, selection and training and development requirements. Information that can be listed in a skills inventory includes: personal data age, sex, marital status qualifications education, job experience, training special qualifications membership in professional associations, special achievements, awards skills languages, computer programs 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 scores on psychological and other tests, health information
special preferences of individual geographic location, type of job. 6 12. How would you predict the number of staff that will be needed in each department? The human resource manager needs to be able to forecast the organisation s future HR requirements and determine from where they will be obtained. Three sets of forecasts are required: a forecast of the demand for human resources a forecast of the supply of external human resources a forecast of the supply of human resources available within the organisation These forecasts are an attempt to predict changes in the organisation s needs for human resources. Sophisticated techniques have been developed, but HR forecasting is not an exact science and organisations use extremely varied forecasting techniques. Two approaches to HR planning can be identified quantitative and qualitative. Quantitative forecasting includes trend projection, econometric modelling and multiple predictive techniques. Such techniques require specialised know-how, so the HR manager may have to rely on staff experts or outside consultants. The qualitative approach to HR planning uses expert opinion (usually a line manager) to predict the future (for example, the marketing manager will be asked to estimate the future personnel requirements for the marketing department). 13. What HRM problems could be expected to arise in this merger? What would you recommend (and do) to prevent or overcome such problems? Clashes of culture. Resistance to change from both sides. Uncertainty of change resulting in lowered commitment. Possibly resulting in industrial dispute.