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Chapter 2-Part A

Human Resource Planning

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TOPICS TO BE COVERED
Definition of HRP

Importance of HRP
Factors affecting HRP Human Resource Information Systems Process of HRP along with brief coverage of personnel demand

and supply forecasting techniques.

VRS, Outsourcing, Pink Slip/ termination/ retrenchment/

downsizing/ separation
Contracting and sub-contracting Promotions and transfers

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HR Planning Issues
How do we manage staffing in times of recession

or expansion?
What impact does technology change, mergers or

relocation have on staffing issues?

Do we always have the right people in the right

jobs at the right time?

How do we get our human resources: buy them or

make them or both?

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Introduction
process by which an organization ensures that it has the

right number & kind of people at the right place and at the right time, capable of effectively and efficiently completing those tasks that help the organization achieve its overall objectives. The process of forecasting an organisations future demand for, and supply of the right type of people in the right number. Estimating manpower needs and formulating plans to meet these needs.

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Definition of HRP
Acc to Stainer Strategy for acquisition, utilization

improvement and preservation of enterprises human resources

Beatty And Schneier define it as a sequential

process embodying the following five elements1. Imputs into HRP 2. Analysis of existing HR 3. Forecast of future HR needs 4. Implementing HR plan 5. Evaluation and redesign of the HR Plan

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Major Objectives of HRP

Preventing understaffing and overstaffing

Ensure the organisation has the right employees

with the right skills at the right place at the right time Ensure the organisation is responsive to changes in its environment Provide direction and coherence to all HR activities and systems

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Importance /Needs/ Features of HRP
Each Organisation needs personnel with necessary qualifications,
skills, knowledge, experience & aptitude .

Need for Replacement of Personnel - Replacing old, retired or

disabled personnel.

Meet manpower shortages due to labour turnover - Indian Airlines, Gas

Authority of India headless for 10 months.

Meet needs of expansion and downsizing - As a result of expansion of IT

companies the demand for IT professionals are increasing. PSUs offering VRS to employees to retrench staff and labour costs. DOT.COMs firing staff.

Nature of present workforce in relation with Changing

Environment - helps to cope with changes in competitive forces, markets, technology, products and government regulations.

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Protection of weaker sections Creating highly talented personnel:
Shift in demand from ERP to internet programming has increased internet programmers demand at Wipro, Infosys etc. ITI retrained its existing workforce in the new electronic telephone system.

Cater to Future Personnel Needs - Avoid surplus or

deficiency of labour.
75% of organisations are overstaffed. Redeployment of staff to other units.

Is proactive in anticipating and preparing flexible responses

to changing HR requirements.

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Factors Affecting HRP
External Factor Government Policies Level of economic development Business environment Information technology Level of technology Natural Factors International Factors Internal factors Strategies of the company Organisation Cycle HR Policy of the Company Job Analysis Time Horizons Type of Quality of Information Companys production operations policy Trade Unions

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Human Resource Information System
A HRIS, or Human resource information system, is a software for businesses.

HRIS is a software or online solution for data entry, data tracking and data information needs of the HR, payroll, management and accounting activities.
Keeps track of employees and information about them A HRIS generally should provide the capability to more effectively plan, control and manage HR costs; achieve improved efficiency and quality in HR

decision making; and improve employee and managerial productivity and effectiveness.

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Non-optimum HRIS Situation

Payroll Applicant Tracking
DATA DATA

Benefits Admin.
DATA

DATA

Training Mgmt.

Competency Modeling

DATA DATA

Job Evaluation

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Optimum Situation
Payroll Benefits Admin.

Applicant Tracking

HR DATA
Competency Competency Modeling Modeling Job Evaluation

Training Mgmt.

Integrated HR Systems and Data

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Objectives of HRIS
To provide accurate, relevant and timely information. Provide information about statutory provisions.

To supply information in most cost effective way.

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HRIS Application and Utilities

Personnel administration - It will encompass information

about each employee, such as name address, personal details etc.

Salary administration - Salary review procedure are important

function of HRM, a good HRIS system must be able to perform what if analysis and present the reports Of changes. Leave and absence recording - Essentially be able to provide comprehensive method of controlling leave/absences. Skill inventory - It is also used to store record of acquired skills and monitor the skill database both employee and organisational level

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Performance appraisal - The system should record individual

employee performance, appraisal data, such as due date of appraisal, scores etc. Human resource planning - HRIS should record details of the organisational requirements in terms of positions Recruitment - Record details of recruitment activities such as cost and method of recruitment and time to fill the position etc. Safety and Health HRIS can develop software and maintain records of various occupational diseases and safety measures at workplace Career planning - System must be able to provide with career plans cluding ireports to identify which employee will be retiring and helps identify the employee whose KSA matches with the position. Collective bargaining -A computer terminal can be positioned in the conference room linked to database. This will expedite negotiations by readily providing up to date data based on facts and figures and not feelings and fictions.

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Setting up of Organisation objectives

Workforce Analysis

Determine if workforce required Yes

No

Surplus - Restricted Hiring - VRS, Lay off, etc

Environmental Scanning: Technological change, Labour demand & supply, Changes in employment practices. Current Workforce Profile -Training & Development HR Supply and Demand Forecast: Staffing levels, Workforce Skills, Workforce Demographics, Employment trends, Attrition, Turnover patterns Estimating future trends & needs Shortage -Recruitment & Selection -Promotion & Transfers

Identify Staffing requirements (Vacancy Arises)

Prepare the Job Description & Person Specification

Job Description & Person Specification

Send the Personnel Requisition Form to the Hiring Dept.

Hiring

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Steps in HRP
Determine the impact of organisational objectives on specific organisational units.

Determine the skills required to meet the objectives

Determine additional human resource requirements in light of current requirements Develop action plans to meet the anticipated HR requirements.

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HR Demand Forecast
Demand analysis is the process of estimating future quantity and

quality of manpower required for an organisation.

Analysis that identifies the future workforce requirements needed

to maintain the organizations mission and goals External factors - competition, laws & regulation, economic climate, changes in technology and social factors Internal factors - budget constraints, production levels, new products & services, organisational structure & employee separations

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Factors that need to be considered when forecasting demand include the following:
Environmental scanning, including economic, legislative,

and competitive pressures

The organizations future strategic goals and plans Expected demand for products or services, including

expected sales (across the organization or at the business unit level)

Estimated productivity measures of workforce (can be

stable, increase, or decrease)

Organizational design or job design, including

technological advancements and administrative changes

Projected budgets or financial resource availability New products/processes/ventures that the organization will

be launching in the future

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Demand Forecasting Techniques

Quantitative Techniques Trend analysis Ratio analysis Regression analysis Qualitative Techniques Delphi method Nominal group technique Scenario analysis

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Trend analysis
Past trends and ratios can also be used to forecast HR demand

Trend analysis predicts the demand for labour based on projections of past relationship patterns over a number of years between an operational index (e.g., revenue per employee, productivity per employee) and the demand for labour (number of employees)
Eg: A hotel chain may select the number of rooms a housekeeper can clean in a set time frame to predict the number of housekeepers needed.

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Steps in Trend Analysis
the organization tracks the business index and the size of the

workforce over time

Typically, five years of historical data is sufficient in a trend

analysis, but this can vary based on organization history and industry. the planning team can calculate the average ratio of the business or operational index and the workforce size in the past Eg. a hotel determines that each housekeeper can clean 20 rooms a day (an operational index). The hotel has 1,000 rooms and is projected to be at 100% capacity in the summer season, but 80% capacity in the other seasons. In this example, the hotel would use trend analysis to determine that it will need 50 housekeepers for the summer season and 40 in the rest of the seasons (rooms occupied daily/index of 20 rooms per housekeeper per day).

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Ratio analysis
Analysis that determines future HR demand based on

ratios between assumed casual factors and the number of employees needed. Ratio analysis appears very similar to trend analysis, but the primary difference is that there is no requirement for significant historical data collection ratio analysis allows for multiple causal factors to be used to predict demand Ratio analysis is also useful in benchmarking organizational efforts with industry or competitive standards to help identify areas of strength or weakness in an organization.

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Regression Analysis
Regression analysis a method of estimating HR demand that

provides statistical projections using mathematical formulas to determine the correlation between multiple measureable output factors (independent variables) and an organizations employment level (dependent variable) Allows for adjustment of seasonal fluctuation, long-term trends, and random movement when forecasting. Useful in predicting the strength and direction of a linear relationship between two variables, but in situations of a nonlinear relationship, estimates would not be valid Regression analysis is most often used in large organizations

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For example, if the correlation between sales and the number of

employees is 0.897, then an organization can interpret that an increase in sales is accompanied by an increase in the number of employees. In contrast, a correlation between investment in technology and the number of employees of 0.713 suggests that an increase in technology investments in the company would decrease the number of employees in the organization. Similarly, a correlation level of 0.012 between productivity and the number of employees represents no significant relationship between the two variables.

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Delphi Method
Delphi method A method of forecasting HR demand that involves a panel of experts using their judgements to

make estimates of short-term future demands

Experts use a variety of factors to make their judgements, including economical, demographical, technological, legal, and social conditions outside of the organization, as

well as production, sales, turnover, experiences, and education levels of the workforce within the organization.

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Steps in Delphi
First, experts must be identified to participate in this task.

Second, each expert is asked to submit HR demand forecasts,

including specification of sources of information and assumptions used to estimate demand. Next, each submission is gathered by the HR planning group, which then summarizes the results. The aggregated results are sent back to the experts, who are given an opportunity to adjust their forecasts based on the information provided in the summaries. These steps are repeated until the expert opinions converge, something that may occur after three to five rounds During the process, experts are not permitted to engage in direct face-to-face contact or communication

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Nominal Group Technique

A method of forecasting HR demand that involves multiple experts (usually line and department managers) meeting face to face to discuss independently formulated positions of an organizational issue, with the ultimate

aim of securing an accurate assessment of a given situation

NGT can be used to help forecast HR demand for an organization or can be used to solve other organizational

issues (e.g., decisions about launching new products or processes, managing change, establishing sales targets, etc.) Encourages face to face communication.

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Step 1: Generally five or six experts are solicited to participate in

the NGT. Each expert is asked the same specific question (e.g., What are your predictions for future HR demand in this branch/unit/department/organization for the next X number of years? What are the causes of any expected changes in demand?). Independently, each expert writes down their solutions to the issue or question. 2. Step 2: Experts then meet face to face (usually around a table) and are asked to individually present their solutions. These solutions are often recorded on flipcharts or blackboards to allow for comparisons in later steps. During this process, each member is encouraged to freely present their results, and interruption or discussion from other group members on the results is discouraged at this point. This allows for each member to present their ideas completely, without judgement or influence.

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. Step 3: After all experts have presented their results,

clarification questions are solicited. A facilitator should encourage questions on clarification of information so as to encourage group dialogue and discourage self-protectiveness about estimates. 4. Step 4: Each expert is asked to secretly rank estimates. Voting is anonymous and calculated using equal participation from team members. The facilitator then uses the estimate from step 1 that draws the highest ranking as the estimate used to forecast HR demands. In a case where there are two or more close high ranking estimates of future HR demand, steps 3 and 4 can be repeated, with only these estimates presented, to allow for further discussion and to build confidence in the results.

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Scenario Analysis
A method that provides multiple estimates of future HR

demand, contingent on a unique set of assumptions and circumstances for each scenario This method involves recognizing uncertainties about the future. For example, forecasts are contingent upon the overall economic outlook of the firms output. An organization could create three different estimates accordingly, one for a constant economic situation (e.g., zero growth), a second for some anticipated economic growth (e.g., five percent growth), and a third for the possibility of economic decline (e.g., five percent reduction).

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Supply Forecasting Techniques

To determine the number of employees in each job and their knowledge, skills, abilities, and other characteristics

(KSAOs).
Determines whether future HR supply is sufficient to match future HR demands. Forecasting HR supply involves an understanding of internal and external potential human resource supplies.

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Forecasting external HR supply
Supply and demand of jobs or skills

Educational attainment levels within a region

Compensation patterns based on experience, education, or

occupation
Immigration and emigration patterns within an area

Forecasts of economic growth or decline

Competition for talent Industry or occupational expected growth levels

Public policy, government, and legal changes

Trends in labour force participation (including entry and

exit)
Technological development patterns

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Forecasting Internal HR Supply
Trend analysis

A method of forecasting that assumes past trends and ratios in employee movement are stable and indicative of future trends and ratios in employee movement Competency/Skills Model A future-oriented model that first reviews competencies that are aligned with an organizations mission, vision, and strategy, and then aims to identify an ideal workforce in terms of these competencies

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Staffing table

A clear graphical view of all organizational jobs and the current number of employees at each job
Replacement chart

A chart used to estimate vacancies in higher level jobs and identify how potential HR supply can fill these vacancies via internal movements from lower levels jobs

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Present Performance E=Excellent S=Satisfactory N=Needs Improvement

1=Ready Now 2=Training Required 3=Questionable

P=Doctorate level M=Masters level or Professional certificate B=Bachelors level C=College or less

PRESIDENT/CEO Possible Replacements Ranvir K E/2/M Sharukh K S/2/P Anu M E/3/M Ajay D S/1/M

VICE PRESIDENT SALES & MARKETING Ranvir K Possible Replacements Amit* E/3/B Rahul N/1/P Sam S/2/M

VICE PRESIDENT

VICE PRESIDENT OPERATIONS/DISTRIBUTI ON Anu M Possible Replacements S. Mayer* E/3/B Rajesh E/2/M N. Fernandez N/2/C VICE PRESIDENT HUMAN RESOURCES Ajay D Possible Replacements K. Nagra S/1/B J. Lee* S/2/M Victor E/1/M

FINANCE
Sharukh K Possible Replacements L. Anderson S/2/M Roy N/1/P R. Allen S/2/M

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Markov Analysis
Analysis that helps predict internal employee movement from one year to another (plan period) by identifying percentages of employees who remain in their jobs, get promoted or demoted, transfer, and exit out of the organization By tracking and predicting employment movement within an organization, the Markov analysis allows for the development of a transition matrix to forecast internal labour supply. This represents both a stock approach (quantities in a point of time) and a flow approach (comparing quantities that change over a period of time).

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Markov analysis of manufacturing firm

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Internal Supply
Inflows & Outflows - The number of losses & gains of staff is estimated. Turnover Rate - refers to rate of employees leaving. = ( No. of separations in a year / Avg no. of employees during the year ) x 100 Absenteeism - unauthorised absence from work. = ( total absentees in a year / Avg no. of employees x No. of working days) x 100 Productivity Level - = Output / Input. Change in productivity affects no. of persons per unit of output.

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Organisational Objectives & Policies
Downsizing / Expansion

Acquisition / Merger / Sell-out

Technology upgradation / Automation New Markets & New Products

External Vs Internal hiring

Training & Re-training Union Constraints

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External Supply
External recruitment, selection & placement -

Advertisements, Manpower Consultants, Campus Recruitment, Unsolicited Applications, Employee Referrals

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Human Resource Planning Model

FORECASTING DEMAND

Considerations

Techniques

Technology Trend analysis Financial resources Managerial Organizational growth estimates Delphi technique Mgmt. philosophy

BALANCING SUPPLY AND DEMAND

(Shortage) Recruitment
Full-time / Part-time

Techniques
HR inventories Markov analysis Skill inventories Replacement charts Succession Planning

External Considerations
Wkforce changes Mobility Govt policies Unemployment

(Surplus) Reductions
Layoffs Terminations Demotions Retirements

FORECASTING SUPPLY

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Voluntary Retirement Scheme (VRS)
The Voluntary Retirement Scheme (VRS) is the latest

mantra of many a corporate and Public sector units.

VRS is a scheme whereby the employee is offered to

voluntarily retire from his services before his retirement date. Subject to certain conditions the company offers VRS to its employees It is the golden route to cut the excess flab. The most humane technique to retrench the employees in the company today is the voluntary retirement scheme. It is the golden handshake for the employees and the only option today for the companies to downsize their headcount.

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Employers refer to VRS as 'golden handshake', trade unions call

it 'voluntary retrenchment scheme', and for the government, it is 'unstated exit policy' which means that an exit policy which may not exist on paper. neither compel the workers to accept it nor apply it selectively to certain individuals. whom one wants to offer VRS.

As the name suggests the VRS is strictly voluntary i.e. one can

One can however choose the levels, units and age groups among
The company can always accept or reject the application for the

VRS. But usually this is not done in practical circumstances as it sends wrong signals to the employees. It might imply that the VRS is not actually voluntary but a selective procedure of downsizing.

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Outsourcing
Outsourcing is defined as the shifting or delegating a companys day to day operations or business process to an external service provider, done in anticipation of a better quality, lower rates and in a sense of getting an edge over ones competitor

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Advantages of HRO

Reducing or eliminating fines and penalties by keeping pace with changing government regulations. Achieving measurable, bottom-line results by increasing efficiency and leveraging economies of scale of the company. Lowering infrastructure and facility costs by having the HR function administered off-site. Sharpening your business focus by eliminating interruptions caused by employer obligations, risks and liability. Improving employee retention and morale by providing timely answers to payroll and benefits questions.

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Advantages (contd..)

Expanding scope and level of service. Your HR department cant be subject experts in all areas our staff of more than 65 HR professionals can. Implementing organizational initiatives that link to your overall business plan: HR becomes strategic, not tactical. Overall, companies tend to outsource to alleviate administrative burdens and focus on strategic areas

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Factors hampering HRO

Cost fa ct or & Con fiden t ia lit y
Th e fea r of losin g jobs Loss of sen sit ive in for m a t ion t o pu blic/com pet it ion E t h ics a n d qu a lit y of ou t sou r cin g ven dor s P ossibilit y of secu r it y br ea ch es Cost -ben efit equ a t ion n ot clea r La ck of psych ologica l a ccept a n ce

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Ou ts o u rc e a c tiv itie s th a t

Re ta in a c tiv itie s th a t

H a ve h igh volu m es Ar e r epet it ive a n d r ou t in e Reflect con sist en t cu st om er n eeds H a ve oppor t u n it ies t o lever a ge Ar e ser vice a n d efficien cy dr iven Ar e ea sily m ea su r a ble in t er m s of per for m a n ce

Su ppor t key bu sin ess pr ocesses Get in flu en ced by ext er n a l for ces Requ ir e h igh con t en t exper t ise Ar e a d-h oc, per iodic fu t u r e or ien t ed pr oject s Ar e difficu lt t o m ea su r e H a ve h igh im pa ct on or ga n iza t ion a s a r esu lt of n on per for m a n ce, fa ilu r e or m ist a ke

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Are a s w h e re HRO w ill w o rk

Reloca t ion Recr u it in g/St a ffin g Com pet en ce Developm en t Sa la r y Adm in ist r a t ion Con su lt in g a n d Tr a in in g

H R In for m a t ion Syst em s Disciplin a r y Issu es H R Su r veys H R Resea r ch St a ff Loa n s a n d P er ks Ma n power a n d Ca r eer P la n n in g

Eg: HUL Outsources recruitment and onboarding operation process to Accenture, Mumbai Coca Cola India, Thomson Electronics, Madura Garments, Alstom group and a major Healthcare recruiter in the UK have outsourced to Mafoi consultants

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Pink Slip
Refers to the American practice to notify the worker of his or her

termination of employment or layoff.

Pink slip is a term given to an act by an employer 'Pink Slip' is a term originated from US and became popular in

mid-2000 when over 80,000 jobs were lost in one day and the nomenclature pink slip was used. The letter of discharge along with full and final payment to those workers/employees was handed over in an envelope which was Pink in colour. Thus the practice of discharging someone's services in US is known as handing over a 'Pink Slip'. Eg: KFA set to issue pink slips shortly TCS pink slip to techies with fudged CVs

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Termination
Is the end of an employees duration with an employer.

The decision of termination may be made by the employee, employer or mutually agreed upon by both.

Circumstances which shall stand to terminate an employee: Upon employee attaining the age of 65 yrs Employee death or disability Employees work or conduct is not found satisfactory Breach of any terms and conditions Employee remains absent for more than 6 days.. Employee shall have the right to terminate his appointment at any time after the commitment period.

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Retrenchment
It is governed by the Industrial Disputes Act (IDA)1947 Retrenchment means termination of the contract of

service of the employees in a redundancy situation which arise from several factors such as closure of business, restructuring, reduction in production, mergers, technological changes, take-over, economic downturn and others.

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Downsizing
Downsizing is reducing the number of employees on the operating payroll.

Downsizing intended to be a permanent reduction and a layoff intended to be a temporary reduction in which employees may later be rehired.
Eg: a company may decide to shut down an entire division; a car company, for example, might decide to stop making Sedans altogether, thus cutting an entire department

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Separations
Employee Separation is the process of ensuring that an employee who quits the company is exited in a

structured and orderly manner.

Employee separation can be voluntary as well as involuntary.

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Contracting and Sub-Contracting
Contracting
Contracting is an agreement

Subcontracting
Subcontracting refers to the

whereby the contractor undertakes to complete a piece of work or perform a service for the commissioning party, organizing his or her own resources and managing the work at his or her own risk, in return for a financial payment.

process of entering a contractual agreement with an outside person or company to perform a certain amount of work. subcontractor, but may also be called a free-lance employee, independent contractor, or vendor For example, a small business might use an outside firm to prepare its payroll, an accountant to help with its record keeping and tax compliance, or a free-lance worker to handle a special project.

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Promotions
Promotion refers to upward movement of an employee from

current job to another that is higher in pay, responsibility and/or organizational level.
Promotion has in-built motivational value It inspires employees to compete and get ahead of others

It forces an employee to use his knowledge, skills and abilities

fully and become eligible for vertical growth

It encourages them to remain royal and committed to their jobs

and the organization

The organization would be able to utilize the skills and abilities

of its personnel more effectively.

Types Merit based promotions and Seniority based

Promotions

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Transfers
A transfer implies horizontal movement of an employee to another job at same level.

Voluntary Transfer: Transfer requests may be granted at any time, subject to the availability of positions and the qualifications of the applicant.
Involuntary Transfer: initiated by the company It can be temporary or permanent. Also known as Lateral Shift.