Human Resource Planning

2. HumanResourcePlanning Chapter 5

3. 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

4. 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

5. 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

6. 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

7. 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

8. Linking HRP to the Business Strategy 5-8

9. 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

10. Factors Affecting the Time Frame of HRP 5-10

11. 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

12. 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

13. Steps in Human Resource Planning Process 5-13

14. 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

15. 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

16. Cascade Approach to Setting Objectives 5-16

17. 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

18. 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

19. 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

20. 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

21. Statistical Modeling Techniques Used to Forecast Human Resource Needs 5-21

22. 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

23. 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

24. 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

25. Skills Inventory Form Used by PPG Industries 5-25

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. Organizational and Human Resource Planning 5-32

33. 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

34. 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

35. Simple Organization Replacement Chart 5-35

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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

43. 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

44. HR-Related Web Sites 5-44

45. 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

46. Intranet Uses 5-46

47. 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

48. 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