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McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Human Resource Planning
Chapter 5
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
5-7
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
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
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
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
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
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
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
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
• Automating certain routine clerical tasks avoids use of additional staff, overtime, and temporary help
• 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
• 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 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
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