Human Resource Planning Chapter 5

McGraw-Hill/Irwin

Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter Overview • How HRP Relates to Organizational Planning • Time Frame of HRP • HRP: An Evolving Process • Steps in the HRP Process • Tools and Techniques of HRP • Human Resource Information Systems (HRIS)

• HR and the Internet • HR and the Intranets • Software as a Service • Summary of Learning Objectives 5-3

Human Resource Planning (HRP) • Process of determining human resource needs

of an organization and ensuring that the organization has the right number of qualified people in the right jobs at the right time • Also referred to as workforce planning or

personnel planning • It is ―the system of matching the supply of

people—internally (existing employees) and externally (those to be hired or searched for)—with openings the organization expects to have over a given time frame‖ • Need for HRP is due to significant lead time that

normally exists between recognition of need to fill a job and securing a qualified person to fill that need 5-4

How HRP Relates to Organizational Planning •

Any human resource plan must be derived from the strategic and operational plans of the organization • Strategic business planning seeks to identify various

factors critical to success of the organization • Focuses on how organization can become better

positioned and equipped to compete in its industry •

To accomplish this, the planning process should provide • A clear statement of the organization‘s mission • A commitment from staff members to the mission • An explicit statement of assumptions • A plan of action in light of available or acquirable

resources, including trained and talented people 5-5

How HRP Relates to Organizational Planning • Contributes significantly to strategic management

process by providing means to accomplish outcomes desired from planning process • Human resource demands and needs are

derived from strategic and operating planning and then compared with human resource availability • Commonly, an error occurs when human resource

planners focus on short-term replacement needs and fail to coordinate their plans with strategic and long-term plans of the organization • Nonintegrated approaches lead human

resource planners to concentrate on short-term crises 5-6

Strategy-Linked HRP • HRP is often approached as an afterthought • It is not a strictly human resource function • Role of human resource personnel is to assist

operating managers in developing their individual plans and integrating those different plans into an overall scheme • Strategy-linked HRP

• Encourages genuine cooperation and is

based on a close working relationship between human resource staff and line managers

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Linking HRP to the Business Strategy

5-8

Time Frame of HRP • Organizational plans are frequently classified as • Short-range (zero to two years) • Intermediate range (two to five years)

• Long-range (beyond five years)

5-9

Factors Affecting the Time Frame of HRP

5-10

HRP – An Evolving Process •

Five stages, or benchmarks, exist along the HRP continuum •

Stage 1 – Companies have no long-term business plans, and do little or no human resource planning

•

Stage 2 – Companies have a long-term business plan, but tend to be skeptical of HRP • They do realize to some degree that human resource

planning is important •

Stage 3 – Companies engage in some aspects of human resource planning, but these efforts are not integrated into long-range business plan

•

Stage 4 – Companies do a good deal of human resource planning, and their top managers are enthusiastic about the process • They have at least one human resource component

integrated into the long-range plan •

Stage 5 – Companies treat human resource planning as an important and vital part of their long-term business plan 5-11

Steps in HRP Process • Determining impact of organization‘s objectives

on specific organizational units • Defining skills, expertise, and total number of

employees (demand) required to achieve organizational and departmental objectives • Determining additional (net) human resource

requirements in light of organization‘s current human resources

• Developing action plans to meet anticipated

human resource needs

5-12

Steps in Human Resource Planning Process

5-13

Determining Organizational Objectives •

Organizational objectives • Statements of expected results that are designed

to give the organization and its members direction and purpose •

Long-term objectives and strategies are formulated based on organization‘s mission statement • Can then be used to establish short-term

performance objectives • Short-term performance objectives generally have

a time schedule and are expressed quantitatively •

Divisional and departmental objectives are then derived from the organization‘s short-term performance objectives 5-14

Determining Organizational Objectives •

Cascade approach • Objective-setting process designed to involve all

levels of management in the organizational planning process •

It is not a form of top-down planning • Ensures that the objectives are communicated

and coordinated through all levels of the organization •

Involves both operating managers and human resource personnel in overall planning process • In the early stages, human resource personnel

can influence objective setting by providing information about organization‘s human resources 5-15

Cascade Approach to Setting Objectives

5-16

Environmental Factors Affecting Human Resource Needs •

Many external factors influence organization‘s objectives and human resource needs •

Government influences • Laws and regulations imposed by local, state, and federal

governments • Spending patterns of the various governments •

General economic conditions • Recession or economic boom • Interest rates and level of unemployment

•

Competition – Emergence or departure of • Direct competitors • Businesses that compete for same labor and other

resources •

Changes in workforce • Workforce composition and its work habits • Changes in technology 5-17

Determining Skills and Expertise Required (Demand) • Important to determine skills and abilities

required to meet objectives rather than look at skills and abilities of present employees • Starting point is to review current job

descriptions • Translate needed skills and abilities into types

and numbers of employees

5-18

Methods of Forecasting Human Resource Needs – Judgment Methods •

Managerial estimates – Calls on managers to make estimates of future staffing needs •

•

•

These estimates can flow top-down, vice-versa or a combination

Delphi technique – Uses a panel of experts to make initially independent estimates of future demand •

An intermediary then presents each expert‘s forecast and assumptions to the other members of the panel

•

Each expert is then allowed to revise his or her forecast as desired

•

This process continues until some consensus or composite emerges

Scenario analysis – Using workforce environmental scanning data to develop alternative workforce scenarios •

Developed in brainstorming sessions with line managers and HR managers

•

Encourages open, out-of-the-box thinking 5-19

Methods of Forecasting Human Resource Needs – Mathematically Based •

Include various statistical and modeling methods • With increasing proliferation of user-friendly

software and computers, it will probably be used more frequently •

Statistical methods • Uses historical data in some manner to project

future demand •

Modeling methods • Usually provide a simplified abstraction of the

human resource demands throughout the organization •

Changing the input data allows testing the human resource ramifications of different demand scenarios 5-20

Statistical Modeling Techniques Used to Forecast Human Resource Needs

5-21

Benchmarking • Thoroughly examining internal practices and

procedures and measuring them against the ways other successful organizations operate • In HRP, it involves learning what other

successful organizations in the industry are forecasting and how they are arriving at their forecasts • Consultants and professional organizations such

as industry associations can be employed to help with the benchmarking process • Advantage • It forces HR professionals to look at other

ways of doing things 5-22

Determining Additional (Net) Human Resource Requirements •

Skills inventory •

•

Consolidated list of biographical and other information on all employees in the organization

Information to be included •

Personal data – Age, sex, marital status

•

Skills – Education, job experience, training

•

Special qualifications – Membership in professional groups, special achievements

•

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 – Test scores on psychological and other tests, health information

•

Special preferences of the individual – Geographic location, type of job 5-23

Determining Additional (Net) Human Resource Requirements •

Popularity of skills inventory has increased by use of computers • Intranets have ability to conduct comprehensive skills

inventories and then slot employees into training to fit needs of organization •

Advantages • Furnishes a means to quickly and accurately evaluate

skills available within organization • Helps determine promotion and transfer decisions • Necessary for making other decisions, such as whether

to bid on a new contract or introduce a new product • Aids in planning future employee training and

management development programs • Aids in recruiting and selecting new employees 5-24

Skills Inventory Form Used by PPG Industries

5-25

Determining Additional (Net) Human Resource Requirements • Management inventory – Specialized, expanded

form of skills inventory for an organization‘s current management team • Contains basic types of information

• Usually includes a brief assessment of past

performance and potential for advancement

5-26

Anticipating Changes in Personnel •

Changes such as retirements – Forecasted from information in the skills inventory

•

Changes such as transfers and promotions – Estimated by taking into account • Age of individual in specific jobs • Requirements of organization

•

Individuals with potential for promotion can and should be identified

•

Deaths, resignations, and discharges, are more difficult to predict • Past experience and historical records

•

Planned training and development experiences to be considered when evaluating anticipated changes 5-27

Developing Action Plans – Adding Human Resource •

Factors impacting this decision include permanency of needs, availability of qualified recruits, and union contracts (if applicable) •

Permanent hires – Plans to be made to recruit, select, orient, and train needed personnel, in given time frame

•

Contingency Hires – Advantages • Allows accommodating swings in demand for human

resources • Lower cost of employment – Often do not have same

benefits as permanent employees • Temporary agencies - Often provide testing and training for

employees before they are hired • New perspectives due to varied experiences •

Outsourcing – Potential clients for outsourcing to be identified and evaluated • Attractive because work can often be contracted outside at a

cost savings • Allows parent company to focus on its core business 5-28

Developing Action Plans – Reducing Human Resources •

If time is not of essence, natural attrition can be used

•

Other methods include • Downsizing – Reducing total number of employees • Layoffs • Terminations • Early retirement inducements • Voluntary resignation inducements

• Layoff, as opposed to a termination, assumes it is likely

that employee will be recalled at some later date • Most early retirement and voluntary resignation plans

provide some financial inducement to retire early or to resign

5-29

Developing Action Plans – Reducing Human

Resources •

Other approaches for reducing human resource costs •

Approaches that do not result in employees leaving organization include reclassification, transfer, and work sharing

•

Reclassification • Involves demoting an employee, downgrading job

responsibilities, or a combination of the two • Usually accompanied by a reduction in pay •

Transfer • Involves moving employee to another part of the

organization •

Work sharing • Seeks to limit layoffs and terminations through

proportional reduction of hours among employees (i.e., all employees in a department could be cut back to 35 hours per week instead of 40) 5-30

Synthesizing the HRP Process •

Organizational objectives are influenced by many historical and environmental factors •

Are then translated into divisional and departmental objectives

•

Human resources needed to meet respective objectives are determined

•

HR personnel assimilate these different requirements • Determine total human resources demand for organization

•

HR personnel determine additional (net) human resource requirements in light of available resources and anticipated changes • If net requirements are positive – Recruitment, selection,

training, and development is implemented • If requirements are negative – Human resource costs are

reduced via downsizing and other means • As these changes take place, they should be reflected in the

skills inventory

5-31

Organizational and Human Resource Planning

5-32

Succession Planning •

Technique that identifies specific people to fill future openings in key positions throughout the organization • Organizational replacement chart – Shows both

incumbents and potential replacements for given positions within an organization • Periodically updated to reflect changes

•

Individuals are initially identified as candidates to move up after being nominated by management

•

Performance appraisal data are reviewed, potential is assessed, developmental programs are formulated, and career paths are mapped out

•

Sophisticated succession planning helps ensure that qualified internal candidates are not overlooked 5-33

Succession Planning – Drawbacks • ―Crowned prince‖ syndrome • Occurs when management considers for

advancement only those who have managed to become visible to senior management • Common especially informal plans and those

for large organizations • Requires computerization • Difficult to track information manually • Succession plan should be computerized

using mostly data that are already available from human resources personnel

5-34

Simple Organization Replacement Chart

5-35

Commitment Manpower Planning (CMP) • A systematic approach to human resource

planning designed to get managers and their subordinates thinking about and involved in HRP • Generates three reports that supply the following

information • The supply of employees and the

promotability and placement status of each • The organization‘s demand, arising from new

positions and turnover and projected vacancies for each job title • The balance or status of supply versus

demand, including the name, job, and location of all those suitable for promotions 5-36

Ratio Analysis •

Tool used in human resource planning to measure organization‘s human resource vitality as indicated by presence of promotable personnel and existing backups

•

Premises underlying ratio analysis as it applies to HRP include

•

•

An organization is ―vital‖ in terms of its human resources – Employees have high potential to be promotable, and backups have been identified to replace them

•

An organization is ―stagnant‖ – Employees are not promotable and no backups have been identified to replace incumbents

Organizational vitality index (OVI) •

Index that results from ratio analysis • Reflects organization‘s human resource vitality as

measured by presence of promotable personnel and existing backups • Calculated based on number of promotable personnel

and number of existing backups within organization 5-37

Human Resource Information Systems (HRIS) •

A database system that contains all relevant human resource information and provides facilities for maintaining and accessing these data

•

Advantages • Its potential for producing more accurate and more

timely information for operating, controlling, and planning purposes than manual or payroll-based systems can produce • Gets rid of paper files usually maintained • New software packages are much more user-friendly

and, thus, require less training and time to implement •

Disadvantages • Its financial cost and labor requirements for

implementing system – these problems have greatly diminished as a result of new software 5-38

Potential Application of HRIS •

Clerical applications •

•

Applicant search expenditures •

•

Easily stores a summary of applicant qualifications, and performs searches for candidates for certain positions; helps company avoid need for an employment agency

Risk management •

•

Automating certain routine clerical tasks avoids use of additional staff, overtime, and temporary help

Can be used to monitor and report discrepancies by jobholders regarding licenses, safety training, and even physical examinations

Training management •

Can compare job training requirements with actual training experiences of individual jobholders to determine both individual and organizational training needs 5-39

Potential Application of HRIS •

Training experiences • Can provide organization-wide training development

and delivery, especially for jobs using computers •

Financial planning • HR managers can stimulate financial impact of salary

and benefit changes to recommend changes in strategy that stay within an overall budget goal •

Turnover analysis • Turnover can be closely monitored. Its characteristics

can be identified and analyzed for probable causes •

Succession planning • Can identify a logical progression path and steps

required for advancement and individual progress can be monitored 5-40

Potential Application of HRIS •

Flexible-benefits administration • Can be used to easily administer a usually expensive

to implement and administer flexible-benefits program •

Compliance with government regulations • Can be used to keep up with current EEO and related

government-required regulations • Helps companies maintain compliance by

thoroughly scanning job applicants meeting specific requirements and informing management •

Attendance reporting and analysis • Can help in tracking documentation of sick days,

vacation time, personal time, and tardiness

5-41

Potential Application of HRIS •

Accident reporting and prevention • Can be used to record accident details and provide

analyses to help prevent future accidents •

Strategic planning • Today‘s client/server systems are transforming human

resource people from simple administrators to strategic planners who can influence CEO decisions •

Human resource planning • HRP can be greatly assisted by an information system

that is capable of making projections based on current workforce •

An important indirect benefit of an HRIS is that it helps enable HR managers become more strategic

5-42

HR and the Internet • Internet is a global collection of independently

operating, but interconnected, computers • Frequently referred to as ―information

superhighway,‖ it is actually a network of computer networks

• Growing number of HR managers are using the

Internet to recruit personnel, conduct research, access electronic databases, send e-mail, conduct training, and network with colleagues • Its real value to HR professionals is the

information that it makes available

5-43

HR-Related Web Sites

5-44

HR and the Intranet • Is a private computer network that uses Internet

products and technologies to provide multimedia applications within organizations • Connects people to people and information

and knowledge within the organization • Serves as an ―information hub‖ for the entire

organization (example: eHR systems) • Web portal enables other specific groups such

as business partners, customers, or vendors to access an organization‘s intranet • Similar to the Intranet

• A mix of intranet applications can now be

purchases or leased out at reasonable rates 5-45

Intranet Uses

5-46

Software as a Service •

Standard business applications that are delivered over the internet on a pay-as-you- go basis, usually for a monthly subscription fee • Also called ‗on-demand software‘

•

Benefits • No large capital expenditure is required to buy and

install equipment • There are fewer hassles related to managing the

systems • Users can be up and running within days, or even

hours of signing a contract, without spending too many dollars •

Because of these benefits, software as a service has particular appeal to HR applications

5-47

Summary of Learning Objectives •

Define human resource planning (HRP)

•

Summarize the relationship between HRP and organizational planning

•

Explain strategy-linked HRP

•

Identify the steps in the HRP process

•

Describe the different methods used for forecasting human resource needs

•

Discuss the purpose of a skills inventory

•

Describe succession planning, commitment manpower planning, and ratio analysis

•

Define a human resource information system (HRIS)

•

Differentiate between the internet and the intranet

•

Define the concept ―software as a service‖ 5-48