Human Resource Planning

(HRP)
 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 Planning
Strategy 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

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Business Strategy & HRP
Business strategy
focus (Porter)
Cost leadership
Cost control
Stable business
environment
Efficiency & quality
Differentiation
Long term focus
Growth
Creativity in job behaviour
Decentralization
HR strategy
Job & employee
specialization
Employee efficiency
Long HR planning scope
Shorter HR planning scope
Hire HR capabilities
required
Flexible jobs & employees
HRP activities
Internal promotions
Emphasis on training
Hiring & training for
specific capabilities
External staffing
Hire & train for broad
competencies
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Business Strategy & HRP
Business strategy HR strategy HRP activities
focus (Miles &
Snow)
Defender
Finds change threatening Bureaucratic approach Build HR
Favors strategies which Planned & regularly Likely to emphasize
encourage continuity & maintained policies to training programs & internal
security provide for lean HR promotion
Prospector
Succeed on change Creative & flexible Acquire HR
Favors strategies of management style Likely to emphasize
product & / or market Have high quality HR recruitment, selection &
development Emphasize redeployment performance base
& flexibility of HR compensation
Little opportunity for long-
term HRP

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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.
 Gillette merger with P&G whereby decided to restructure & move from
business units based on geographic regions to global business units
based on product lines which resulted in redundancy of some
employees (Relocation to Singapore & VRS for others)

 MICRO HRP –

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

organization
 Eg.
 Wipro (a software giant in India) raising wages / short-listing students in
their 2nd yr. of college for future employment in India
 Genpact (an IT solution company in India) launching an associate
trainee program with Osmania University in India
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 JOB ANALYSIS

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Terminology commonly used in JA literature
 JOB – group of positions that have similar duties, tasks, &
responsibilities

 POSITION – set of duties & responsibilities performed by

one person
 A job is a general term, a position is more specific.

 Eg. as my job, I am a teacher. But to be specific, my position is

Elementary Gifted Specialist.
Eg. someone might work at the grocery store as their job, but
specifically, their position is produce assistant.

 JOB FAMILY – group of 2 / more jobs that have similar

duties / characteristics

 TASK – separate, distinct & identifiable work activity

 DUTY – several tasks that are performed by an individual

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 Terminology commonly used in JA literature
 RESPONSIBILITIES – obligations to perform certain tasks &
duties
 DUTY**BEHAVIOR SHOWING A PROPER REGARD / SENSE OF
OBLIGATION, JUSTICE MORALITY, OCCUPATION OR POSITION.
 RESPONSIBILITY**OBLIGATION,TO DO WHAT IS ASK,IF YOU SAY
YOUR GOING TO DO SOMEHTHING DO IT,TRUST,HONEST, TO
CARE FOR ANOTHER WHEN ONE

 JOB DESIGN – process to ensure that individuals have

meaningful work & one that fits in effectively with other jobs

 JOB DESCRIPTION – written summary of the content &

context of the job, outlining the tasks, duties, & responsibilities
of a job, as well as performance standards of each job

 JOB SPECIFICATION – written statement of the KSA & other

characteristics (human requirements) that are necessary for
performing the job effectively & satisfactorily
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 Information obtained from JA
 What is to be done? How is to be done?
(CONTENT)

 Under what conditions is the job to be done

(CONTEXT)

 What KSA & other characteristics are required to

perform the job (HUMAN REQUIREMENTS)

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 Information obtained from JA
 JOB CONTENT
 Duties & responsibilities
 Job demands
 Machines, tools, & equipment
 Performance standards

 JOB CONTEXT
 Physical, organizational & social context
 Work conditions, & work schedule

 HUMAN REQUIREMENTS
 KSA,
 Education, Experience & personal attributes (personality,
interests, etc.)

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 Components of a JA
 JOB DESCRIPTION
 Statement of tasks, duties, responsibilities, &
context of the job

 JOB SPECIFICATION
 KSA required to perform the job satisfactorily

 JOB EVALUATION
 Comparison of relative value of jobs in organization
for making compensation decisions

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Methods of collecting information for JA
 Number of ways – may be used in combination or
in isolation

 METHODS:
 Interviews
 Questionnaires
 Observations
 Participant diary

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JA Process
 Determine purpose of JA
 Review organization chart
 OC shows the division of work in organization, how
the job in question related to other jobs, how the job
fits into the overall organization, who reports to
whom, & whom the incumbent reports to
 Select representative jobs for analysis
 Analyze jobs using data gathering methods
 Check information for accuracy
 Write JD & JS for use in HR activities

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Writing JDs
 Job title & identification
 Job summary
 Relationships
 Responsibilities & duties
 Standards of performance & working conditions
 Equipment & tools
 Working conditions

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HRP Process
 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

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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)

 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

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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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Qualitative Methods of Demand Forecasting
Method Advantages Disadvantages

Estimation People in position estimate the Incorporates knowledge of May be subjective

number of people the firm will corporate plans in making
require in the next yr. estimates

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

Delphi Experts go through several Incorporates future plans Subjective, time

rounds of estimates with no & knowledge of experts consuming & may
face-to-face meeting related to mkt., industry & ignore data
technical development

Group Face-to-face discussion based Generates lot of ideas Does not lead to
brainstor on multiple assumptions about conclusion
ming future business direction

Nominal Face-to-face discussion Group exchanges facilitate Subjective which may

group plans ignore data
technique

Simple Simple averaging of viewpoints Diverse view points taken Extremes views are
averaging masked when
averaged
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Quantitative Methods of Demand Forecasting
Method Advantages Disadvantages

Trend Based on past relationship between a business factor related to

analysis employment & employment level itself
&
projectio
n
Simple Extrapolates past Recognizes linkage Assumes that
long-run relationship between between employment volume of business
trend volume of business activity & business activity activity of firm for
analysis & employment levels into forecast period will
the future continue at same
rate as previous yrs
Ignores multiplicity
of factors
influencing
employment levels
Regressi Regresses employment Data driven Difficult to use &
on needs onto key variables Uses multiple business apply
analysis factors
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Quantitative Methods of Demand Forecasting
Method Advantages Disadvantages

Simulati Uses probabilities of future Makes several Costly &

on events to estimate future assumptions about the complicated
models employment levels future regarding
external & internal
environment
Simultaneously
examines several
factors
Workloa Based on actual content of HR requirements based Job analysis may
d work on expected output of not be accurate
analysis the firm Difficult to apply
Productivity changes
taken into account

Markov Probabilistic Data driven Assumes that

analysis Based on past relationship nature of jobs has
between business factor not changed over
related to employment & time
employment level itself Applicable to stable
environment
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Causes of Demand
EXTERNAL CHALLENGES:
– 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-à-vis IT field as a large
one employing millions of people directly / indirectly –
complicates HR, because it tends to reduce
23 employment in one dept. while increasing it in another)
Causes of Demand
ORGANIZATIONAL DECISIONS:
– 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
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Causes of Demand

WORKFORCE FACTORS (ATTRITION):

– Demand is modified by employee actions such as
 retirements,
 resignations,
 terminations,
 death, &
 leaves of absence

– Analysis Technique – Markov Analysis of Attrition

Rates

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Forecasting Techniques
Trend Projection Forecasts:
– Quickest forecasting techniques
– Two simplest methods –
1. 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.)
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
TREND ANALYSIS & PROJECTION
• Study of firm‟s 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. Determine & identify a business factor that relates to the number & type of
people employed
2. Identify historical trend of the relationship between this business factor & the
number of people employed
3. Determine the ratio of employees to the business factor, that is, the average
output per individual employee per year – labour productivity
4. Determine the labour productivity ratio for the past 5 yrs at least & calculate the
average annual rate of change in productivity
5. Calculate the human resource demand by dividing the business factor by the
productivity ratio
6. Project human resource demand for the target year.

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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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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 Estimation
LINEAR REGRESSION
ANALYSIS
• Relationship between two
variables which is directly
& precisely proportional x
• Production output & X
manpower are the two x x
variables & the
relationship between
these two is plotted on a a x x

graph by drawing a “line of

Manpower
x
best fit” 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 Y
Production level
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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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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 Supply

HR INVENTORY
• 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

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Methods of Forecasting Internal HR Supply
HR 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.
• 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
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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
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

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Methods of Forecasting Internal HR Supply
LABOUR 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 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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 Thank You

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