5-1

HUMAN RESOURCE
PLANNING
5-2

WHAT IS HUMAN RESOURCE

PLANNING
H.R.P—is concerned with the flow of people into, through,
and out of an organisation. HR planning involves anticipating
the need for labor and the supply of labour and then
planning the programs necessary to ensure that the
organisation will have the right mix of employees and skills
when and where they are needed.
HRP offers an estimate of the number of employees required with
matching skill requirements to meet organisational objectives. HRP is
a forward looking function as human resource estimates are made
well in advance. It is, of course, subject to revision.

Human Resource Planning

 Objective
The basic purpose of HRP is to decide what positions the
organisation will have to fill and how to fill them.

Objectives of human resource planning

Forecast personnel requirements
Cope with changes
Use existing manpower productively
Promote employees in a systematic way
Obtains and retains the quantity & quality
of human resources it needs at the right
time and place
Makes optimum utilization of these
resources
Human Resource Planning
Significance of HRP

 Competitive business environment

 Government legislations and regulations

 Labour market changes

 Productivity increases

 Knowledge economy and knowledge workers

 Technological advancements

 Growth of services economy

Human Resource Planning Model
 Collect information
A. From the external environment
 economy – general and specific industry
 technology
 competition
 Benchmarking & best practice information
 labor markets
 Demographic & social trends
 Government regulations
B. From inside the organization
 Strategy
 Business plans
 Current human resources
 Rates of turnover and mobility
 Forecast demand for human resources
 Short term and long term
 Aggregate and individual positions
 Forecast supply of human resources
 Internal supply
 External supply
 Plan & conduct needed programs
 Increase or reduce work force size
 Change skill mix
 Develop managerial succession plans
 Develop career plans
 Feedback on planning process
 Were forecasts accurate?
 Did programs meet needs?
 Importance

Organisations use HRP to meet future challenges, cut costs, and

achieve greater effectiveness

Importance of human resource

planning

Create a talent pool

Prepare people for future
Cope with organizational changes
Cut costs
Help succession planning

Human Resource Planning

 The Process Of HRP

The HRP is a four step process: demand forecasting, supply

forecasting, estimating manpower gaps and formulating HR plans.
The demand for human resources is influenced by several factors

Forecasting the demand for human

resources
External challenges
Economic developments
Political, legal, social, technological changes
Competition
Organisational decisions
Workforce factors

Human Resource Planning

 The Process Of HRP

External Challenges: Liberalisation, privatisation and globalisation

(LPG era) have created huge demand for people in software,
finance marketing, and manufacturing fields.
Organisational Decisions: Decisions such as expansion,
diversification, and relocation leading to demand for people
possessing requisite skills
Workforce Factors: Such as retirement, resignation, and
termination etc creating manpower gaps.

Human Resource Planning

 Forecasting Techniques

HR forecasts are an attempt to find out an organisation's future

demand for employees

Forecasting techniques
Expert forecasts
Trend analysis
Workforce analysis
Workload analysis
Demand forecasting method can be divided into two categories
•Judgmental
•Mathematical

Human Resource Planning

 Judgmental Method
 Bottom up forecasting
 Top down forecasting
 Delphi technique
 Simple Mathematical Method
 The productivity ratio is the average number of units produced per direct
labor employee per year. Suppose a company produces sofas & knows
from past history that the productivity ratio is about fifty sofas per furniture
assembler per year. If the marketing departmental expects to sell 10,000
sofas in the coming year, then the company needs 10,000/50= 200
furniture assemblers.
 Direct- to- indirect- labor staffing ratios are used to calculate the number
of individuals required in other jobs. For instance, if the sofa firm generally
has one supervisor for every fifteen assemblers, then about thirteen
supervisors will be needed for two hundred assemblers. Past experience
also may show that two shipping and receiving clerks are required for
every fifty assemblers. This means that the company needs a total of
eight clerks.
 Productivity & staffing ratios based on historical data may be modified
judgmentally if the ratios are expected to change. For instance, if the
union has negotiated a new contract requiring workdays that are thirty
minutes shorter and more paid holidays, the expected productivity ratio
should be adjusted downward. If an improved order- processing program
will be installed in the clerks’ computers, the staffing ratio may change,
with fewer clerks needed to service the same number of direct workers.
Complex mathematical method

 Some forecasting methods use more complicated statistical techniques.

Large organisations with a long history of HR planning are likely to
employ these methods. One such method, multiple regression, uses
several factors that correlate with labor demand to forecast future
demand. Examples of such factors include sales, profits, capital
investments, and gross national product (GNP). Historical data are used
to derive an equation describing the relationships of these factors to
employment levels then current or predicted values of the factors are
inserted into the equation to predict future demand. This method can be
applied only when sufficient historical data exist to allow for the
derivation of stable regression equations, when fairly strong
relationships exist between the factors and labor demand, and when no
dramatic changes in productivity or product mix are anticipated.
 A second forecasting method employs linear, or goal, programming to
determine optimal staffing levels given a set of constraints. Constraints
might include compensation budgets, minimum and maximum ratios
between various kinds of jobs, or minimum and maximum output
figures.
Supply Forecasting
 Internal supply of labour
(From HRPS)
 External supply of labour
 As they hire new workers, lay off or discharge others, and
lose current employees to other firms, organisations
continuously interact with external labor markets.
Therefore, to plan effectively, HR planners must
understand how to assess and adjust to the external supply
of labor.
 Labor Markets
 Demographic Trends in the Labor Supply
 Work Force Diversity
 The contingent work force
 Industry and occupational trends
 Planning for New Establishment: Opening the
Mirage
Planning for Shortages
Planning for surpluses
 If a Shortage of employees is
expected
 Recruit new full-time
employees
 Offer incentives for postponing
retirement
 Rehire retired employees part-
time
 Attempt to reduce turnover
 Work present staff overtime
 Subcontract work to another
firm
 Hire temporary employees
 Reengineer to reduce needs
 Outsource an entire function
 Use technology to improve
productivity
 If a surplus of employees is
expected
 Do not replace employees who
leave
 Offer incentives for early
retirement
 Transfer or reassign excess
employees
 Use slack time for employee
training or equipment
maintenance
 Reduce work hours
 Lay off employees
 Freeze hiring
 Forecasting techniques
Expert Forecasts: These are based on the judgements of those who
possess good knowledge of future human resource needs

Trend Analysis: This is based on the assumption that the future is

an extrapolation from the past. Human resource needs, as such, can
be estimated by examining pas trends.

An example of trend analysis

2001-02 Production of Units : 5,000
2002-03 No. of Workers : 100
Ratio : 100:5000
2003-04 Estimated Production : 8,000
No. of Workers required : 8000 × 1 0 0 = 160
5000
If supervisors have a span of 20 workers, 8 supervisors are also needed in
2003-04.

Human Resource Planning

5-9

Forecasting techniques

Workforce Analysis: All relevant factors in planning manpower flows

in a firm such as transfers, promotions, new recruitments, retirement,
resignation, dismissal etc are taken into account while estimating HR
needs
Manpower flows in a bank
P r o m o t io n s o u t
T ra n s fe rs In > > J o b H o p p in g
> T ra n s fe r s O u t
> R e t ir e m e n t
> V R S S c h e m e (G o ld e n h a n d s h a k e )
R e c r u it s I n > > D is c h a r g e o r D is m is s a l
> Te r m in a t io n s
> R e s ig n a tio n s
P r o m o t io n s I n > > R e tre n c h m e n t
> A t t r a c t i o n s in O t h e r B a n k s , e t c .

Human Resource Planning

 Forecasting techniques
Workload analysis: Based on the planned output, a firm tires to
calculate the number of persons required for various jobs.

An example of workload analysis

Planned output for the year 10,000 pieces
Standard hours per piece 3 hours
Planned hours required 30,000 hours
Productive hours per person per year 1,000 hours (estimated on annual basis)
(allowing for absenteeism, turnover, idle time etc.)
No. of workers required 30
If span of control in the unit is 10 per officer, then 3 officers are also required.

Human Resource Planning

 Supply Forecasting

A) Internal labour supply: a manpower inventory in terms of

the size and quality of personnel available (their age, sex,
education, training, experience, job performance, etc) is usually
prepared by HR departments. Several techniques are used
while ascertaining the internal supply of manpower (a supply of
employees to fill projected vacancies can come from within the
firm or from new hires )

Human Resource Planning

 Estimated internal labour supply
for a given firm
S o u r c e s o f In flo w s T h e F ir m P r o je c t e d O u t f lo w s

 P r o m o t io n s

 T r a n s fe rs  Q u its
C u rr e n t S ta ffin g
 P r o m o t io n s Level  Te r m in a tio n s
E m p lo y e e s I n E m p lo y e e s O u t
 N e w R e c ru its  R e t ir e m e n t s

 R e c a ll s  D e a th s

 L a y o ffs

C u rre n t P r o je c t e d P r o je c t e d F i r m ’s in t e r n a l
s ta ffin g – o u tflo w s + in f lo w s = s u p p ly f o r t h is
le v e l t h is y e a r t h is y e a r tim e n e x t y e a r

Human Resource Planning

5-13

Supply Forecasting

Staffing table: Shows the number of employees in each job, how

they are utilised and the future employment needs for each type of
job.

Marcov analysis: Uses historical information from personnel

movements of the internal labour supply to predict what will happen
in the future

Human Resource Planning

5-14

Marcov analysis for a hypothetical

retail company
2 0 0 3 -2 0 0 4 S to re A s s t .  S to r e S e c tio n D e p t. S a le s E x it
M a n a g e rs M a n ag e rs H eads H eds E x e c u tiv e s

S to re M a n a g e rs 80% 20%
(n = 1 5 )
12 3

A s s t. S to re 11 % 83% 6%
M a n a g e rs
4 30 2
(n = 3 6 )
S e c t io n 15%
11 % 66% 8%
H eads
(n = 9 4 ) 11 63 8 14

D e p a rtm e n ta l
10% 72% 2% 16%
H eads
(n = 2 8 8 ) 29 207 6 46

S a le s
E x e c u tiv e s 6% 74% 20%
(n = 1 4 4 0 ) 86 1066 288

F o re c a s te d
S u p p ly 16 41 92 301 1072 353

F ig u r e s i n c ir c le s s h o w t h e t r a n s it io n p e r c e n t a g e s

Human Resource Planning

5-15

Supply Forecasting

Skills inventory: It is a summary of the skills and abilities of non

managerial employees used in forecasting supply.

Human Resource Planning

5-16

Skills inventory: an example

N a m e : A .K . S e n D a te p r in t e d : 1 -4 -2 0 0 4
N um ber : 429 D e p a r tm e n t : 41

K e y w o rd s W o rk e x p e rie n c e
W o rd D e s c r ip tio n A c t iv ity F ro m To
A c c o u n t in g Ta x S u p e r v is io n 1998 2000 Ta x c le r k ABC C om pany
a n d a n a ly s is
B o o k K e e p in g Ledger S u p e r v is io n 2000 2002 A c c o u n ta n t XYZ Co.
A u d itin g C o m p u te r A n a ly s is 2002 2003 C h ie f A c c o u n ts T T B a n k
re c o rd s O ffic e r

E d u c a tio n S p e c ia l Q u a li f ic a t i o n s M e m b e rs h ip s

D e g re e M a jo r Ye a r C o u rs e D a te 1 . A IM A

M BA F in a n c e 1998 D BF 1996 2 . IS T D
B .C o m A c c o u n ts 1995 R is k M a n a g e m e n t 1999 3 . IC A

C o m p u te r Languages P o s it io n L o c a tio n H o b b ie s
L ite r a c y p re fe re n c e c h o ic e

 Ta ll y F re n c h A c c o u n tin g K o lk a t a C hess
 B a n k in g A u d it in g D e lh i F o o t b a ll
S o ftw a r e B a n g a lo r e B o a t in g

E m p lo y e e s S ig n a tu r e _ _ _ _ _ _ _ _ _ _ H R D e p a rtm e n t_ _ _ _ _ _ _ _
D a te _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ D a te _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Human Resource Planning

5-17

Supply Forecasting

Replacement chart: It is a visual representation of who will replace

whom in the event of a job opening.

Human Resource Planning

5-18

Replacement chart
G e n e ra l M a n a g e r Key
V. K . G a rg N a m e s g iv e n a r e r e p la c e m e n t
A /2 c a n d id a te s
P A to A . P r o m o t a b le n o w
G e n e ra l M a n a g e r B . N e e d in g d e v e lo p m e n t
L . M a th e w s C . N o t s u ita b le t o p o s it io n
B /1 1 . S u p e rio r p e rfo rm a n c e
2 . A b o v e A v e ra g e p e rfo rm a n c e
A s s is ta n t G e n e r a l M a n a g e r 3 . A c c e p ta b le p e rfo rm a n c e
R .K . A ro ra A /2 4 . P o o r p e rfo rm a n c e
B .K . N e h ru B /3

D iv is io n : D iv is io n : D iv is io n :
A c c o u n t in g & P la n n in g M a n a g e r Te c h n ic a l A d v is o r
H R M anager
Ta x a t io n M a n a g e r A .N . G u p ta A /1 N .R . M u rth y B /3
C .P. T h a k u r A /1
A .T. R o y C /2 K . P. R a o B /1

N o r t h e r n R e g io n C e n t r a l R e g io n S o u t h e r n R e g io n M a n a g e r E a s te r n R e g io n
M anager M anager A . S u b ra m a n y a m B /2 M anager
L . C . S r iv a t s a v A / 2 S .P. K u m a r A /1 B .K . M e n o n B /1 R . K r is h n a B /3
A. Thapar C /4 R . P andey B /3

Human Resource Planning

5-19

Supply Forecasting

B) External Labour supply: External hires need to be contacted

when suitable internal replacements are not available. A growing
number of firms are now using computerised human resource
information systems to track the qualifications of hundreds or
thousands of employees. HRIS can provide managers with a
listing of candidates with required qualifications after scanning the
data base.

Human Resource Planning

5-20

Important barometers of labour

supply
1. Net migration into and out of the area
2. Education levels of workforce
3. Demographic changes in population
4. Technological developments and shifts
5. Population Mobility
6. Demand for specific skills
7. National, regional unemployment rates
8. Actions of competing employers
9. Government policies, regulations, pressures
10. Economic Forecasts for the next few years
11. The attractiveness of an area
12. The attractiveness of an industry in a particular place

Human Resource Planning

5-21

Manpower Gap Analysis

This is used to reconcile the forecasts of labour demand and supply.

This process identifies potential skill shortages or surpluses of
employees, skills and jobs

Estimating manpower requirements

Ye a r
1 2 3

1. N u m b e r r e q u i r e d a t t h e b e g i n n in g o f t h e y e a r
2. C h a n g e s t o r e q u ir e m e n t s f o r e c a s t d u r i n g t h e y e a r DEM AND
3. To t a l r e q u ir e m e n t s a t t h e e n d o f t h e y e a r ( 1 + 2 ) ------- ------
4. N u m b e r a v a ila b le a t t h e b e g in n in g o f t h e y e a r
5. A d d i t io n s ( t r a n s f e r s , p r o m o t io n s ) S U P P LY
6. S e p a r a t io n s ( r e t ir e m e n t , w a s t a g e , p r o m o t io n s o u t a n d o t h e r lo s s e s )
7. T o t a l a v a ila b le a t t h e e n d o f y e a r ( 4 + 5 + 6 ) --------------------
8. D e f ic it o r s u r p lu s ( 3 - 7 ) R E C O N C IL IA T IO N
9. L o s s e s o f t h o s e r e c r u it e d d u r in g t h e y e a r O F THE ABO VE
10. A d d it io n a l n u m b e r s n e e d e d d u r in g t h e y e a r ( 8 + 9 ) M ANPOW ER NEEDED

Human Resource Planning

5-22

Formulating HR Plans

Once supply and demand for labour is known adjustments can be

made formulating requisite HR plans

A variety of HR plans
 Recruitment plan
 Redeployment plan
 Redundancy plan
 Training plan
 Productivity plan
 Retention plan

Human Resource Planning

5-23

Responsibility For Human Resource

Planning
HRP is a top management job. HR plans are usually made by the
HR division in consultation with other corporate heads. Any
deviations from the formulated plans and their causes must be
looked into, from time to time in order to assess whether the plans
require revision or modification.

Human Resource Planning

5-24

Limitations Of Human Resource

Planning
HR professionals are basically confronted with three problems while
preparing and administering HR plans: accuracy, inadequate top
management support, lopsided focus on quantitative aspects.

Human Resource Planning

5-25

Effective Human Resource Planning

HR plans must fit in with overall objectives of a firm. They must get
consistent support from top management. Computerised human resource
information systems must be used for applicant tracking, succession
planning, building skills inventories etc. The whole exercise must be
carried out in coordination with operating managers.

Human Resource Planning