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Unit No:- 01


Resource Planning (HRP)

Human Resource Planning

HRP is a process of analyzing & identifying the need & availability of human resources (HR) so that organization can meet its objectives. A strategy for the acquisition, utilization, improvement & retention of an organizations human resources

Definitions HRP

Definition 1: - Need, Availability, Supply=Demand

HRP includes estimation of how many qualified people are necessary to carry out the assigned activities, how many people will be available, and what, if anything, must be done to ensure personnel supply equals personnel demand at the appropriate point in the future.


Definition 2: - Right numbers, Capability, Organization Objectives

HRP is a Process, by which an organization ensures that it has the right number and right kind of people at the right place, at the right time, capable of effectively and efficiently completing those tasks that will help the organization achieve its overall objectives.


Definition 3: - Translation of objectives into HR numbers


is a process of translating organizational objectives and plans into the number of workers needed to meet those objectives.

What is it HRP ?

According to Geisler, Manpower planning is the process including forecasting, developing and controlling by which a firm ensures that it has

The right number of people, The right kind of people, At the right places, At the right time,
doing work for which they are economically and efficient.

General meaning of HRP

In simple words HRP is understood as the process of forecasting an organizations future demand and supply of the right type of people in the right numbers. It is only after HRP is done, that the company can initiate and plan the recruitment and selection process. HRP is a sub-system in the total organizational planning. HRP facilitates the realization of the companys objectives by providing right type and right number of personnel.

OBJECTIVES:1. Forecast personnel requirement 2. Cope with the changes 3. Use existing manpower productivity 4. Promote employee in systemic manner. Other objectives: 1.To recruit and retain the human resources of required quantity and quality. 2.To foresee the employee turnover and make the arrangements for minimizing turnover and filling up of consequent vacancies 3.To meet the needs of the program of expansion, diversification etc., & 4. To improve the standards skill , knowledge, ability, discipline etc.,

OBJECTIVE:5. To foresee the impact of technology on work, existing employees and future human resources requirements 6. To assess the surplus or shortage of human resources and take measures accordingly. 7. To maintain congenial industrial relations by maintaining optimum level and structure of human resources; 8. To minimize imbalances caused due to non-availability of human resources of right kind, right number in right time and right place; 9. To make the best use of its human resources; and to estimate the cost of human resources.

Building organizational capability, HR leadership, Improving the HR function, HR transformation, Managing the HR department, HR audits and benchmarking, HR planning,

Need Of HRP

Forecast future personnel needs

To avoid the situations of surplus or deficiency of manpower in future, it is important to plan your manpower in advance. For this purpose a proper forecasting of futures business needs helps you to ascertain our future manpower needs. From this angle, HRP plays an important role to predict the right size of manpower in the organization.

Cope with change

HRP enables an enterprise to cope with changes in competitive forces, markets, technology, products and government regulations. Such changes generate changes in job content, skills demands and number of human resources required.


Reservoir of talent

People with requisite skills are readily available to carry out the assigned tasks.


or contract

If the organization wants to expand its scale of operations, it can go ahead easily. Advance planning ensures a continuous supply of people with requisite skills who can handle challenging jobs easily.


Cut costs

Planning facilitates the preparations of an appropriate HR budgets for each departments or division. This, in turn, helps in controlling manpower costs by avoiding shortages / excesses in manpower supply.



Human resource planning, as a pointed out previously, prepares people for future challenges . the stars can be picked up & kept ready for future promotions whenever they arise.


Evolution Contributions

Frederick Winslow Taylor (1856-1915) Mary Parker Follett (1868-1933) Frank and Lillian Gilbreth (1868-1924 and 1878-1972) Henry L. Gantt (1861-1919) Max Weber (1864-1920)


EVOLUTION:The early part of the century saw a concern for improved efficiency through careful design of work. During the middle part of the century emphasis shifted to the employee's productivity. Recent decades have focused on increased concern for the quality of working life, total quality management and worker's participation in management. These three phases may be termed as welfare, development and empowerment.

HRP Process
1) Environmental scanning

2) Forecasting & analyzing demand for HR

3) Forecasting & analyzing supply of HR

4) Developing action plans to match HR demand & supply


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


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) Attempts to answer 2 questions:

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?

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 35% in 2005) Fast growing sectors like retail, ITeS, telecom are new & do not have historical talent to bank on & hence they are hiring from other sectors with skill sets that are relevant to their industries

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


Qualitative Methods of Demand Forecasting

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 Delphi

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 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 brainstor ming

Nominal group technique Simple averaging

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

Face-to-face discussion

Generates lot of ideas

Does not lead to conclusion

Subjective which may ignore data Extremes views are masked when 21 averaged

Group exchanges facilitate plans Diverse view points taken

Simple averaging of viewpoints

Quantitative Methods of Demand Forecasting

Trend analysis & projectio n



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 yrs Ignores multiplicity of factors influencing employment levels
Difficult to use & apply

Regressi on analysis

Regresses employment needs onto key variables

Data driven Uses multiple business factors

Quantitative Methods of Demand Forecasting

Simulati on models Uses probabilities of future events to estimate future employment levels

Makes several assumptions about the future regarding external & internal environment Simultaneously examines several factors HR requirements based on expected output of the firm Productivity changes taken into account Data driven

Costly & complicated

Workloa d analysis

Based on actual content of work

Job analysis may not be accurate Difficult to apply

Markov analysis

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

Assumes that nature of jobs has not changed over time Applicable to stable environment 23

Causes of Demand

Economic developments noticeable effect but are difficult to estimate (Inflation, unemployment, & changing workforce patterns) Social, political & legal challenges easier to predict, but their implications are not very clear (Implication of abolishing mandatory retirement age in US may not be known until a generation has lived without 65 & out tradition) Technology changes difficult to predict & assess but may radically alter strategic & HR plans (PC would cause mass unemployment vis--vis IT field as a large one employing millions of people directly / indirectly complicates HR, because it tends to reduce employment in one dept. while 24 increasing it in another)

Causes of Demand

As orgs. respond to changes in their environment, decisions are made to modify the strategic plan, which commits firm to long-range objectives growth rates & new products, markets / services & these objectives dictate number & types of employees needed in future To achieve long-term objectives, HR specialists must develop long-range HR plans that accommodate strategic plan In short run, planners find strategic plans become operational in form of budgets Sales & production forecasts are less exact than budgets but may provide even quicker notice of short-run changes in demand for HR New ventures means changing HR demands when a new venture is begun internally from scratch, lead time may allow planners to develop short-run & long-run employment plans merging HR group with Corporate Planning staff

Causes of Demand

Demand is modified by employee actions such as

retirements, resignations, terminations, death, & leaves of absence

Analysis Technique Markov Analysis of Attrition Rates


Forecasting Techniques
Trend Projection Forecasts:

Quickest forecasting techniques

Two simplest methods


Extrapolation: involves extending past rates of change into future (if an avg of 20 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.)


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 longrange HR projections

Methods of Demand Estimation


Study of firms past employment needs over a period of yrs. to predict future needs Appropriate business factor that relates significantly to employment levels differs across industries (University student enrollment, Sales firm sales volume, Manufacturing firm total units produced) Steps:
1. 2. 3. 4. 5. 6.

Determine & identify a business factor that relates to the number & type of people employed Identify historical trend of the relationship between this business factor & the number of people employed Determine the ratio of employees to the business factor, that is, the average output per individual employee per year labour productivity Determine the labour productivity ratio for the past 5 yrs at least & calculate the average annual rate of change in productivity Calculate the human resource demand by dividing the business factor by the productivity ratio Project human resource demand for the target year.

Methods of Demand Estimation


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

Methods of Demand Estimation


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)

Methods of Demand Estimation


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%

Methods of Demand Estimation


Relationship between two variables which is directly & precisely 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

x x

x x

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

b Production level


Methods of Demand Estimation


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


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

Methods of Forecasting 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

Methods of Forecasting Internal HR Supply


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)

Methods of Forecasting Internal HR Supply


2 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


Methods of Forecasting Internal HR Supply


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.

Replacement charts include the following 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

Methods of Forecasting Internal HR Supply


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 already hired its CEO for 2010 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

Methods of Forecasting Internal HR Supply


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


Methods of Forecasting Internal HR Supply

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


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