After studying this chapter, students should be able to understand the following concepts:

We will examine the human resource planning process and some human resource forecasting techniques.

Next, we discuss forecasting human resource requirements and availability and describe what actions could

be taken should either a surplus or a shortage of workers exist.

To understand the Human Resource Planning First, we will see what is Planning? and why is it needed?

What is planning? Plans are methods for achieving a desired result. Goals or objectives are specific results

you want to achieve. Planning is thus “the process of establishing objectives and courses of action prior to

taking action.”

What is planning concerned with? Planning provides a sense of purpose and direction. It is a

comprehensive framework for making decisions in advance. It also facilitates the organizing, leading, and

controlling functions of management. Planning: allows you to make your decisions ahead of time, it helps

you to anticipate the consequences of various courses of action, it provides direction and a sense of

purpose, it provides a unifying framework against which to measure decisions, and thus helps you avoid

piecemeal decision making. Planning also helps identify potential opportunities and threats, and facilitates

control. It is concerned with the end (what is to be done) as well as with means (how it is to be done).

Is planning really needed? If… organizations… never faced changes in the environment, there would

have been no need for planning. Planning is one of the functional areas of HR.

Strategic planning: is the process by which top management determines overall organizational purposes

and objectives and how they are to be achieved.

Human resource planning (HRP): is the process of systematically reviewing human resource

requirements to ensure that the required number of employees, with the required skills, is available when

they are needed. After an organization’s strategic plans have been formulated, human resource planning can

be undertaken. Human resource planning has two components: requirements and availability. Forecasting

human resource requirements involves determining the number and type of employees needed by skill level

and location. In order to forecast availability, the human resource manager looks to both internal sources

(presently employed employees) and external sources (the labor market). When employee requirements and

availability have been analyzed, the firm can determine whether it will have a surplus or shortage of

employees. Ways must be found to reduce the number of employees if a surplus is projected. Some of these

methods include restricted hiring, reduced hours, early retirements, and layoffs. If a shortage is forecasted,

the firm must obtain the proper quantity and quality of workers from outside the organization. In this case,

external recruitment and selection is required.

The process of anticipating an organization’s future human resource needs and then developing action plans

for fulfilling identified needs. The systematic review of human resource requirements getting the right

people at the right place at the right time.

Enable organizations to anticipate their future HR needs to identify practices that will help them meet those

needs

• Helps in planning job assignments

• Helps cope with fluctuations in staffing

• Identifies recruiting needs

• Provides other useful information

Forecasting is carried out in two basic areas which are demand forecast of workforce for organization and

supply forecast for the organization

Following approaches are used to perform this function or activity:

• Statistical approaches

a) Trend analysis

b) Ratio analysis

c) Regression analysis

• Judgmental methods

a) Managerial judgment

• Monitoring current HR programs and personnel staffing levels

• Investigating future HR needs and concerns

A requirements forecast is an estimate of the numbers and kinds of employees the organization will need at

future dates in order to realize its goals. Several techniques of forecasting human resource requirements and

availability are currently being used by organizations.

This method uses the organization’s current level of employment as the starting point for determining

future staffing needs. The key to zero-base forecasting is a thorough analysis of human resource needs.

A forecasting method in which each successive level of the organization, starting with the lowest, and

forecasts its employee requirements in order to, ultimately, provide an aggregate forecast of employment

needs.

Mathematical models can assist in forecasting HR requirements. The relationship between sales demand and

the number of employees needed is a positive one.

It is a technique for experimenting with a real-world situation through a mathematical model representing

that situation. A model is an abstraction of the real world.

Determining whether the firm will be able to secure employees with the necessary skills and from what

sources these individuals may be obtained is called an availability forecast.

When a comparison of requirements and availability indicates a worker surplus will result, restricted hiring,

reduced hours, early retirements, or layoffs may be required to correct the situation.

a. Restricted Hiring

When a firm implements a restricted hiring policy, it reduces the workforce by not replacing employees who

leave.

b. Reduced Hours

Reaction to a declining demand can also be made by reducing the total number of hours worked. Instead of

continuing a 40-hour week, management may decide to cut each employee’s time to 30 hours.

c. Early Retirement

Early retirement of some present employees is another means of reducing the supply of workers.

d. Layoffs

At times, the firm has no choice but to actually lay off part of its workforce.

Faced with a shortage of workers, many organizations had to intensify their efforts to recruit the necessary

people to meet the needs of the firm. Some actions that were taken included:

a. Creative Recruiting

A shortage of personnel often means that new approaches to recruiting must be used. The organization may

have to recruit in different geographical areas than in the past, explore new methods, and seek different

kinds of candidates.

b. Compensation Incentives

Firms competing for workers in a high-demand situation may have to rely on compensation incentives.

Premium pay is one obvious method. However, this approach may trigger a bidding war that the

organization cannot sustain for an extended period. More subtle forms of rewards may be required to

attract employees to a firm, such as four-day workweeks, flexible working hours, telecommuting, part-time

employment, and child care centers.

c. Training Programs

Special training programs may be needed to prepare previously unemployable individuals for positions with

a firm. Remedial education and skills training are two types of programs that may help attract individuals to

a particular company.

d. Different Selection Standards

Another approach for dealing with shortages of workers is the lowering of employment standards. Selection

criteria that screen out certain workers may have to be altered to ensure that enough people are available to

fill jobs. For instance, instead of desiring extensive work experience, a firm may be willing to hire an

inexperienced worker and train him or her to do the job.

The process of ensuring that a qualified person is available to assume a managerial position once the

position is vacant.

b. Succession Development

The process of determining a comprehensive job profile of the key positions and then ensuring that key

prospects are properly developed to match these qualifications.

The goal of forecasting and planning is to keep a stable workforce that meets needs of the organization.

• Determine the impact of organizational objectives on specific organizational unit

• Define the skills required to meet objectives (demand for Human Resource)

• Determine additional human resource requirements in light of current HR (net HR

requirements)

• Develop action plan to meet the anticipated HR needs

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HRP has become more important in recent years for a number of reasons like:

• Globalisation of Business

• New Technologies

• The changing skill levels in the Workforce

• The changing demographics of the workforce

• Mergers and Acquisitions

• Legal developments

Successful HR planning requires:

• HR personnel understand the HR planning process

• Top management is supportive

• The communications between HR staff and line management are healthy

• The HR plan is integrated with the organization’s strategic business plan

Effective HR planning provides best options for supply of workforce of the organization and s stated in

earlier chapters if organization is able to have efficient and effective workforce it will be have competitive

advantage.

Plans Plans are methods for achieving a desired result.

Simulation A technique for experimenting with a real-world situation through a

mathematical model representing that situation. A model is an abstraction of

the real world.

Strategic planning is the process by which top management determines overall organizational

purposes and objectives and how they are to be achieved.

Layoffs At times, the firm has no choice but to actually lay off part of its workforce.