Chapter 05

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Human Resource Planning and Alignment

McGraw-Hill/IrwinHuman Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction

Success in business is dependent on: Reacting quickly to opportunities Rapid access to accurate information

Human resource planning (HR planning): How organizations assess the future supply of, and

demand for, human resources Provides mechanisms to eliminate gaps that may exist

between supply and demand Requires readjustment as labor market conditions

change

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Introduction

If effective utilization of human resources is not a significant goal for the organization:Employment planning is likely to be informal and

slipshod

If top management values stable growth:HR planning will be less important than if the goals

include rapid expansion or diversification

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Introduction

The U.S. Dept. of Labor projects that: Asians and Hispanics will join the labor force

at rates of 44 and 36 percent White non-Hispanics will increase by 9 percent Workers 55-64 will increase by 52 percent Workers 65 and older will increase by 30 percent

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Introduction

HR related government policies and regulations: Equal opportunity and promotion call for more HR

planning for women and minorities The age of mandatory retirement is being raised Organizations are encouraged to hire veterans and the

disabled

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Introduction

The types of people employed and the tasks they perform determine the kind of planning necessaryHR planning is critical for implementation of the

organization’s strategic planHR policies have direct effects on profitability

Strategic human resource management (SHRM) means acknowledging that HR policies/practices have critical links to an organization’s overall strategy

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The HR Planning Process

The four phases or stages of HR planning: Situation analysis or

environmental scanning Forecasting demand Analysis of the supply Development of action plans

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Situation Analysis & Environmental Scanning

The first stage of HR planning is the point at which HRM and strategic planning first interactThe strategic plan must adapt to environmental

circumstances HRM is one of the primary mechanisms an

organization can use during the adaptation process

Without a plan to support recruitment and selection, it is impossible to stay competitiveThe problems associated with changing environments

are greater today than ever beforeSuccess now depends on being a “global scanner”

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Forecasting Demand for Employees

This phase of the process involves estimating: How many employees will be needed What kinds of employees will be needed

Quantitative tools can help with forecasting, but it involves a great deal of human judgment The demand for employees is closely tied to the

strategic direction that the organization has chosen Growth ReengineeringReorganization

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Forecasting Demand for Employees

Techniques to help reduce the uncertainty inherent in HR planning:Expert estimates Trend projectionsStatistical modelingUnit-demand forecasting

Key to effective planning is accurately and freely sharing information

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The Expert Estimate

One or more “experts” provide the organization with demand estimates based on:ExperienceGuessesIntuitionSubjective assessments of

available economic and labor force indicatorsThis is the least mathematically sophisticated approach

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The Expert Estimate

The Delphi technique elicits expert estimates from a number of individuals in an iterative mannerDeveloped by the Rand CorporationEstimates are revised by each individual based on

knowledge of the other individuals’ estimates

With the nominal group technique (NGT), individual estimates are followed by group brainstorming The goal is to generate a group decision that is

preferred over any individual decision

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Trend Projection

This top-down technique:Develops a forecast based on a past

relationship between a factor related to employment and employment itself

Example: Sales levels are related to employment needs

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Modeling & Multiple-Predictive Techniques

This top-down approach uses the most sophisticated forecasting and modeling techniques Trend projections relate a single factor, such as sales,

to employment Environmental factors could be gross national

product or discretionary income Or, the organization may be mathematically modeled

so that simulations can be run

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Markov chain analysis involves:Developing a matrix to show the probability of an

employee’s moving from one position to another or leaving the organization

The process begins with an analysis of staffing levels from one period to another

Markov analysis can identify the probability of lower employee retention

It does not suggest a solution to the problem

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Regression analysis is a mathematical procedure:It predicts the dependent variable on the basis of

factors (independent variables)

With simple linear regression, one dependent and one independent variable are studied With multiple regression, more than one independent

variable is studied

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Unit Demand Forecasting

This is a bottom-up approachUnit managers analyze current and

future needs person-by-person and job-by-job

Headquarters totals the unit forecastsThe sum is the corporate employment forecast

If both bottom-up and top-down approaches are used, the forecasts may conflict This can be resolved by averaging the variances The Delphi technique or NGT could also be used

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Analyzing the Current Supply of Employees

This phase of HR planning should answer the question:

“How many and what kinds of employees do I currently have, in terms of the skills and training necessary for the future?”

This involves more than simply counting current employeesThe smaller and more centralized the organization,

the easier it is to conduct a skills inventory

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The Skills Inventory

Both a skills inventory and a management inventory:Identify the skills, abilities, experiences, and training

employees currently haveAre useful for career planning, management

development, and related activities

In its simplest form, a skills inventory is a list of:NamesCharacteristicsSkills

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The Skills Inventory

Skills inventories vary greatly in their sophistication Some are as simple as a file drawer of index cards Others involve expensive and complex computer

databases

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Contents of the Skills Inventory

The only data available to the organization for later use is what was designed into the system

Name Employee number

Present location Date of birth

Date of employment Job classification

Skills, knowledge, education Foreign language skill

Professional qualifications Publications

Licenses and patents Hobbies

Supervisory evaluations Salary range

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Contents of the Skills Inventory

Often omitted, but increasingly important, are:Employees’ stated career goalsGeographical preferencesIntended retirement date

The main categories within a skills inventory:Data summarizing the employee’s past Data summarizing present skills Data that focus on the future

Today, many skills inventories are more complex

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Maintaining the Skills Inventory

The two principal methods for gathering data: the interview and the questionnaire The questionnaire is faster and cheaper, but can be

inaccurate Some contend that a trained interviewer can complete

questionnaires more quickly and accurately

Plans for keeping files updated must be made The more often changes are made and the data is

used, the more often updates should be performed

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Maintaining the Skills Inventory

Should data be stored in a manual system or on a computer? How much does the computer system cost?How frequently the data will be used?A computer allows comparative analysis over time

Skills inventories are useful only if management uses the data to make significant decisions Before accessing the data, managers must be trained

to avoid abuse of the system

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Action Decisions in HR Planning

After the supply of and demand for workers has been analyzed, the two forecasts must be comparedWhenever there is a gap between the two estimates, a

course of action must be chosen

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If the supply of workers is less than the demand: It can be filled with present employees who are

willing to work overtime

If there is a shortage of skilled employees: Train and/or promote present employees Recruit less-skilled employees Recall employees who were previously laid off

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Organizations are using more:Part-time workersSubcontractorsIndependent professionals

This is in response to: Intense global competition Rapid technological change Fears caused by recent workforce reductions

Over 5 million U.S. citizens are contingent workers

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Possible solutions to an employee surplus:AttritionEarly retirementsDemotionsLayoffsTerminations

Employees who are considered surplus are seldom responsible for the conditions leading to the surplus

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Most organizations avoid layoffs by using attrition, early retirement, creation of work, and so on Attrition can be accelerated by encouraging

employees to leave early

Drawbacks to losing workers over the age of 50: They tend to be healthier than younger workersThey have fewer work-related injuriesThey are less likely to change jobsThey take critical skills and experience with them

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By 2010, the median age of the U.S. workforce will be 40.6 years Over half the workforce will be

protected by the Age Discrimination in Employment Act

Promises should not be made that can’t be keptOnce promised, it may be illegal to change them

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If voluntary reductions don’t eliminate the gap between supply and demand, layoffs may be necessary Corporations too frequently and quickly turn to

layoffsThey fail to consider the consequences About one-third lay off too many workers Poorly designed workforce reductions can kill morale

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Human Resource Information Systems

Information is the key to successful HR planningA human resource information system (HRIS) is an

integrated way to acquire, store, analyze, and control information flow through an organization

A highly developed HRIS can increase the efficiency and response times of:Tracking applicantsSkills inventoryCareer planningEmployee service programs

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Computer technology makes it possible to integrate multiple HR needs into a single system:Enrolling in benefits programsProcessing employee transactions (pay increases)Using learning modules

An HRIS developed for use by upper-level executives is called an executive information system (EISs)Computerized HRISs have allowed organizations to

broaden their view of succession planning

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Factors that make succession planning for executive level positions more important than ever: Large numbers of aging executives Increasingly popular early retirement

Fortune 500 companies anticipate 33 percent turnover among their executives over the next five years

Many companies now realize the critical need for a comprehensive retention planThis plan may include consulting and part-time

assignments

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Employee Privacy, Identity Theft, & HRIS

HRIS makes it easier to invade employee privacy Danger lies both within and outside the organizationThe friendlier the system, the easier it can be for

unauthorized access

Identity theft occurs when:Someone uses another’s name, address, social

security number, or other information:Without the person’s knowledgeWith the intent to commit fraud or other crimes

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Identity theft is fast becoming a national problem Complaints from U.S. victims rose from 1,380 in

1999 to over 210,000 in 2003 Identify theft is a felony under the Identity Theft and

Assumption Deterrence Act of 1998 The problem will continue to escalate

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The costs of identify theft to the employee are numerous:Average 175 researching and tracking the crime 23 months correcting credit reports $800 in out-of-pocket expenses to restore financial

health and standing

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Safeguards to minimize privacy risks in an HRIS: Determine the best way to collect data Limit the information collected to what is relevant Tell employees what information is kept on file and

how it is used Let employees inspect and correct their information Keep sensitive information separateLimit internal use of personal information Only disclose personal information to outsiders with

employee consent

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Organizations should carefully evaluate their policies regarding access to HRIS data to determine:How much information, legally

and ethically, should be disclosed How much control employees

should have over the release of personal information

No federal legislation guarantees employees the right to inspect and amend data in an HRIS

The greatest threat to privacy is when employees don’t retain the right to authorize the release

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Chapter 05