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RESOURCE HUMAN PLANNING TEXT LECTURE AND STUDY NOTE*
Mondy (2008: 104) defines human resource planning (HRP) as "the systematic process of matching the internal and external supply of people with job openings anticipated in the organization over a specified period of time". Bohlander and Snell (2007) define HRP as "the process of anticipating and providing for the movement of people into, within, and out of an organization". Overall, the purpose of HRP is to help managers deploy the correct number and types of people, where and when they are needed, in order to accomplish the organization's goals. Forecasting is a critical element of planning. The three elements of the HR forecasting model are: (1) Forecasting demand, (2) Forecasting supply, and (3) Balancing supply and demand considerations Exhibit 2.1: HR Forecasting Model
FORECASTING DEM AND AND FORECASTING DEM Considerations Considerations Product/service dem Product/service dem and and Technology Technology Financial resources Financial resources Absenteeism Absenteeism /turnover /turnover Organizational grow Organizational grow th th M M anagem philosophy anagem ent philosophy ent Techniques Techniques Trend analysis Trend analysis M M anagerial estim anagerial estim ates ates Delphi technique Delphi technique BALANCING BALANCING SUPPLY AND DEM AND AND SUPPLY AND DEM Shortage Shortage
Creative Recruiting Creative Recruiting W W orkforce Structure orkforce Structure
Techniques Techniques Staffing tables Staffing tables M M arkov analysis arkov analysis Skills inventories Skills inventories M M anagem inventories anagem ent inventories ent Replacem charts Replacem ent charts ent Succession planning Succession planning
External Considerations External Considerations Dem Dem ographic changes ographic changes Education of the w Education of the w orkforce orkforce Labor m Labor m obility obility Governm policies Governm ent policies ent Unem Unem ploym rate ploym ent rate ent
Com Com pensation Incentives pensation Incentives Training Program Training Program s s Different Selection Standards Different Selection Standards
Full-tim Part-tim Contingent - e, Full- e, Part Full-tim Part-tim Contingent e, e,
Surplus Surplus Reduced Hours Reduced Hours Layoffs Layoffs
Term Term inations inations Dem Dem otions otions Early retirem Early retirem ent ent
FORECASTING SUPPLY FORECASTING SUPPLY
1. Forecasting demand (requirements forecast). A requirements forecast involves
determining the number and type of people needed to meet organizational objectives i.e., estimating in advance the number and types of people needed to meet the organization's objectives. A variety of factors, including competitive strategy, technology, structure, and productivity, can influence the demand for labor
2. Forecasting supply (availability forecast). An availability forecast involves determining
if the number and type of people needed to meet the organization's projected demand are available. In order to forecast availability, managers must look at both internal sources (present employees) and external sources (the labor market). Thus, forecasting supply involves determining if the numbers and types of people needed are available externally or internally. Demographic trends, including the changing makeup of the workforce, the demand for specific employee skills, population mobility, and global economics as well as government policies affect the external labor supply. Changes in the labor supply can limit a firm's strategies. A lack of talent in certain industries is posing serious problems for some
1
HUMAN RESOURCE PLANNING TEXT LECTURE AND STUDY NOTE*
firms. HR managers must constantly monitor the labor environment so as not to be caught off guard 3. An increasingly vital element of strategic planning for HR departments is determining if people are available, internally or externally, to execute an organization's strategy. Employment forecasts must be reconciled against the internal and the external supplies of labor the organization faces. If there is a labor shortage, the firm might have to reformulate its long- and short-term strategic plans. Below is a list of some other possible actions that a firm may try when faced with a labor shortage: a. Creative recruiting b. Workforce re-structuring c. Compensation incentives d. Training programs e. Different selection standards f. Recalls If there is a labor surplus, reduced hours, layoffs, terminations, demotions, and early retirement may be required to correct the situation
HR Planning should strive for a proper balance between the emphasis placed on demand considerations and that placed on supply considerations. Demand considerations are based on the forecast of trends in business activity. Supply considerations involve the determination of where and how candidates with the required qualifications are found to fill vacancies Forecasting Demand for Employees (Bohlander & Snell, 2007) There are two approaches to forecasting demand for employees: (1) Quantitative and (2) Qualitative. Regardless of the forecasting method used, the process is more an art than a science. This is due to the ever-changing environment in which the organization operates. When forecasting the demand for employees, managers must consider changes in technology, labor force demographics, and various organizational concerns such as the firm's financial position, administrative changes, and long- and short-term growth plans. 1. Quantitative Approaches. Quantitative approaches to forecasting, or top-down approaches, involve the use of or statistical mathematical techniques; they are the approaches used by theoreticians and professional planners. One example is trend analysis, which forecasts employment needs based on a business factor, such as sales revenue, and a ratio of labor productivity. Trend analysis is one of the most commonly used approaches for projecting HR demand. Trend analysis is typically done in the following steps: A. Select an appropriate business factor. This should be the best predictor of human resources needs. Frequently, sales or value added (selling price minus costs of materials and supplies) is used as a predictor in trend analysis B. Plot a historical trend of the business factor in relation to the number of employees. The ratio of employees to the business factor will provide a labor productivity ratio (for example, sales per employee) C. Compute the productivity ratio for at least the past five years D. Calculate human resources demand by multiplying the business factor by the productivity ratio E. Project human resources demand out to the target year
2
HUMAN RESOURCE PLANNING TEXT LECTURE AND STUDY NOTE*
This procedure is illustrated below in Exhibit 2.2 for a hypothetical organization
3
HUMAN RESOURCE PLANNING TEXT LECTURE AND STUDY NOTE*
Exhibit 2.2: Example of Trend Analysis of HR Demand
BUSINESS FACTOR
YEAR
LABOR PRODUCTIVITY
(SALES/EMPLOYEE)
=
HUMAN RESOURCES DEMAND
(NUMBER OF EMPLOYEES)
(SALES IN THOUSANDS)
2000 2001 2002 2003 2004 2005 2006 2007* 2008* 2009*
$2,351 $2,613 $2,935 $3,306 $3,613 $3,748 $3,880 $4,095 $4,283 $4,446
14.33 11.12 8.34 10.02 11.12 11.12 12.52 12.52 12.52 12.52
164 235 352 330 325 337 310 327 342 355
*Projected figures
2. Qualitative Approaches. The second forecasting technique is the qualitative, or bottomup, approach. This approach is less statistical and attempts to reconcile the interests, abilities, and aspirations of individual employees with the current and future staffing needs of the organization. Management forecasts and the Delphi technique are examples of the qualitative approach to forecasting demand for employees Management forecasts are the opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization's future employment needs Delphi technique attempts to decrease subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals. The final forecast thus represents a composite group judgment. The Delphi technique requires a great deal of coordination and cooperation in order to ensure satisfactory forecasts. This method works best in organizations in which dynamic technological changes affect staffing levels Forecasting Supply of Employees (Bohlander & Snell, 2007)
Supply analysis is concerned with determining if the numbers and types of employees needed are available to staff projected vacancies. Supply analysis starts with an internal evaluation of the firm's existing supply of employees. If employees are not currently available, an external evaluation of the human resources supply will be made. As with demand forecasts, the process involves both tracking current levels and making future predictions An internal supply analysis may begin with the preparation of staffing tables. Staffing tables are pictorial (graphic) representations of all the organization's jobs, along with the numbers of employees currently holding those jobs (and perhaps also future employment requirements derived from demand forecasts). Another technique, called a Markov analysis, shows the percentage (and actual number) of employees who remain in each job from one year to the next, as well as the proportion of those who are promoted, demoted, or transferred, or exit the organization. As shown below in Exhibit 2.3, Markov analysis can be used to track the pattern of employee movements through various jobs and to develop a transition matrix for forecasting labor supply
4
HUMAN RESOURCE PLANNING TEXT LECTURE AND STUDY NOTE*
Exhibit 2.3: Hypothetical Markov Analysis for Retail Company A
While staffing tables, Markov analysis, turnover rates, and the like tend to focus on the number of employees in particular jobs, other techniques are more oriented toward the types of employees and their skills, knowledge, and experiences. Skill inventories can be prepared that list each employee's education, past work experience, vocational interests, specific abilities and skills, compensation history, and job tenure. Skill inventories may allow an organization to quickly match forthcoming job openings with employee backgrounds. Skill inventories and management inventories (i.e., those inventories kept on management employees) broadly referred to as talent inventories can be used to develop employee replacement charts, which list current jobholders and identify possible replacements should openings occur. Replacement charts provide information on the current job performance and promotability of possible replacements (see Exhibit 2.4 below). As such, it can be used side by side with other pieces of information for succession planning the process of identifying, developing, and tracking key individuals so that they may eventually assume top-level positions Exhibit 2.4: An Executive Replacement Chart
5
HUMAN RESOURCE PLANNING TEXT LECTURE AND STUDY NOTE*
*REFERENCES Bohlander & Snell, 2007. Strategy and Human Resources Planning. Managing Human Resources, 14th Edition, Chapter 2: 49-88. Mason, OH: Thompson Mondy, R.W. 2008. Human Resource Management. Prentice Hall: Upper Saddle, NJ
6

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