Everything you need to know about the process of human resource planning. Human resource planning (HRP) is the foremost task in human resource management.
It enables organisation to have the right person, right number of person for the job, at right place and right time.
Human resource planning (HRP) begins with assessment of existing human resources with the organisation and thereafter provides a layout regarding the future requirement of human resources, design of programs related to hiring, placement and appraisal and development of personnel.
HRP requires to pass through different stages/processes. There is no specific / hard and fast HRP process that every organization needs to follow while preparing manpower planning.
But, some stages are definitely common to all organizations. HRP process/ stage variances occur due to influence of some factors like nature of product produced / services rendered, financial health of the organization, consumer’s market, international relations, global conflicts, legislation etc. HRP process is a very complex and multi-step process.
A: The process of human resource planning involves the following steps:-
1. Ascertaining Current Inventory 2. Estimating Human Resource Demand or Requirements 3. Projecting Supply of Human Resources 4. Comparing Forecast Demand with Projected Supply 5. Planning Employment Programme to Meet Human Resource Needs 6.Training and Development Programme and 7. Evaluation of Human Resource Planning Effectiveness.
B: A brief description of the process of human resource planning:-
1. Environmental Scanning 2. Business Plan 3. Forecasting Future HR Requirements 4. HR Audit and Forecasting the HR Supply 5. Job Analysis and 6. Development of Plans for Action.
C: The possible stages of human resource planning are:-
1. Analysing Company’s Mission, Objectives 2. Studying and Analysing of Corporate Plan 3. Forecasting HR Requirement 4. Supply Forecasting 5. Finding out Shortage / Excess of Human Resources 6. Preparing Action Plan to Deal with Surplus /Shortage of Human Resources and 7. Alteration / Modification of Corporate Plan, Strategic Approach.
D: The human resource planning process consists of numerous steps, and each step is a broad process in itself and they are:-
1. Organizational Environment Scanning 2. Formulation of Organizational Objectives and Policies 3. Demand Forecasting 4. Supply Forecasting 5. HR Programming 6. HRP Implementation and 7. HRP Controlling and Evaluation.
Process, Steps and Stages of Human Resource Planning (with notes and Examples )
Process of Human Resource Planning – 7 Steps Involved in the Process of Human Resource Planning
The process of human resource planning involves the following steps:
Step # 1. Ascertaining Current Inventory:
Analysis of current manpower supply may be undertaken by department, by function, or by occupation. Appropriate adjustments in these would need to be made in the light of any foreseeable changes in weekly hours of work, holidays, leave entitlements, etc. Assessment of demand for the operative personnel presents less problems of uncertainty and manpower supply can be adjusted accordingly.
But projection of manpower requirements for supervisory and managerial levels presents a complex problem. The required talents are not available at a short notice. This explains the need to ascertain the present manpower inventory in the enterprise. This will also help in drawing employment and training plans to meet the needs of certain skills of the future.
Step # 2. Estimating Human Resource Demand or Requirements:
Forecast of manpower requirements may be done by finding the total workload and then converting it into manpower required. Workload analysis proceeds with the projection of sales in the coming year. The budget of productive hours is compiled by the use of standard hours for direct labour.
The standard hours per unit of a product are then multiplied by the planned units of production to give the total planned hours for the period. This is divided by the number of actual working hours for an individual worker to show the number of workers required. This gives a crude estimate of manpower requirements. Allowance may have to be made for absenteeism, labour turnover and idle time to know the actual workforce required. This is known as ‘workforce analysis’.
The whole procedure of manpower forecasting has been illustrated in the following example:
(a) Planned output for a year = 50,000 units
(b) Standard man hours per unit = 4 hrs
(c) Planned hours for the year (a x b) = 2,00,000 hrs
(d) Productive hours per man per year = 2,000 hrs
(e) No. of direct workers required (c/d) = 100 workers
(f) Allowance for absenteeism, labour turnover and idle time = 25 workers
(g) No. of workers required (e + f) = 125 workers.
Step # 3. Projecting Supply of Human Resources:
It is necessary to estimate the number and kinds of employees that are expected to be with the organisation after one year, two years, three years and so on. Such projections should be based on careful assessment of organisation’s current human resources and consideration of employee movement through retirement, resignation, etc. in future.
Step # 4. Comparing Forecast Demand with Projected Supply:
The human resource planner must compare the forecast demand for human resources with the projected internal supply of human resources before coming to any conclusion. This exercise should be carried out department and skill wise to know the deficiencies or surplus of various types of personnel in future. The possibilities of transfer of personnel from one department to another and promotion of personnel to higher jobs must also be considered to determine net human resource requirements in the organisation as a whole.
Step # 5. Planning Employment Programme to Meet Human Resource Needs:
Long-term employment programme must be chalked out to deal with expected deficits of manpower. It will include steps like recruitment, selection, placement, performance appraisal, transfer and promotion. Recruitment, selection and placement.
Step # 6. Training and Development Programme:
The purpose of assessing the manpower inventory is to find out the training and development needs of the organisation. The operative employees must be given appropriate training so that they may learn the required skills. Appropriate development programmes should also be designed for the executives so that the required talents could be developed.
Step # 7. Evaluation of Human Resource Planning Effectiveness:
Human resource planning is closely linked to the goals of human resource management and those of the organisation. Shortage or surplus of human resources in any department or at any level should be minimized. Human resource planning programme will be effective if it can anticipate the deficiencies of various skills well in time so that steps are initiated for recruitment of required human resources. Similarly, if some types of personnel are surplus, they should be adjusted after giving them appropriate training. If it is not possible, they may be phased out through voluntary retirement scheme.
Process of Human Resource Planning – Brief Description of Human Resource Planning Process
HRP process entails working out HR demands and identification of the sources of supply to meet these demands, yet an HRP process is a very complex and multi-step process and embraces within its folds things such as determining objectives, going through business plan, forecasting future HR requirements, manpower auditing, carrying out job analysis and preparing an HR plan taking into consideration both internal and external sources.
A brief description of all process are given as under:
Environmental scanning is the first step in the process of HRP. In order to have an HR plan, the external environment which basically comprises economic factors, labour market, technological changes, demographic trends, socio-cultural-political factors and so on must be thoroughly studied and closely monitored. It is essential to scan changes in the external environment and align the business of the organisation and HR plans with the environmental demands.
Having determined the objectives of the organisation, the next important step in the process of HRP is to get involved in the business plan, that is, to arrive at the scale of business activity over a period of time to be able to estimate the structure and size of the organisation over a period of time. This is to be done keeping in view all the factors of internal and external environment.
Having estimated the structure and size of the organisation over a period of time, the next exercise to be done in the HRP process is forecasting the future manpower requirement. These days, a lot of forecasting techniques, many of which are highly mathematical, statistical and sophisticated, have been developed.
But these sophisticated forecasting techniques are of greater value in the case of big organisations. In smaller organisational units, even simpler methods can serve the purpose and often may be more effective.
In order to ensure that a forecast is effective and useful, the manpower estimates should be made as follows:
i. The Functional Category:
That is, the estimates should be made category-wise depending on the tasks that have to be carried out and the special qualifications, training or experience required. It serves no purpose anticipating that the organisation will need 100 personnel during the next five years unless we know whether we need them, say in the case of a sugar factory, mechanics, foremen, engineers, pan men, chemists and so on. In other words, forecast has to be in terms of functions, departments or divisions.
ii. The Number Required:
That is, simply to know whether we shall be needing mechanics, or foremen, or engineers or all of them is not enough. We shall have to estimate the number of each category of personnel that will be required in future.
iii. The Levels at which they are Required:
Again, simply to estimate the functional categories and number of personnel required in such categories for the organisation in future is not enough. We shall have to estimate the various levels at which these will be required. Suppose, it is estimated that the organisation will need 20 engineers in the next 5 years. This alone will not do, unless we also estimate how many of them should be of junior level, middle level and senior level. Only then a fruitful action can follow.
The aforementioned estimates have to be assessed under the following heads:
A. Growth of the Establishment:
It may be due to the following reasons:
a. Increase in the demand for goods and services due to increasing population,
b. Rise in the standard of living of people causing more demand for goods and services for the existing products as also new products,
c. Rate of growth of the enterprise,
d. Competition in the market, giving rise to large-scale production for reducing the cost of production and
e. Change in production techniques/technology.
It may be of two types:
a. Predictable – It may include retirement and so on.
b. Unpredictable – It may include quits, deaths, transfers, promotions, dismissals, demotions, disabilities, accidents, resignations, lay-offs and other factors. Unpredictable turnover should be assessed on the basis of past experience and the knowledge of environment.
Today, a number of techniques are available to organisations to forecast demand for manpower.
A brief account of main forecasting techniques is discussed further:
These methods are judgemental and comprise the following:
i. The Expert Estimate:
Based on his/her experience, guts, guesses, intuition and personal assessment of available economic and labour force indicators, an expert or a penal of experts can provide the organisation with estimates of HR requirements for future.
Estimates from experts may be combined in several ways:
a. Delphi Technique:
Since an individual’s ability has limitations, the experts estimate may not be accurate. Hence, in order to overcome the limitations, organisations may use the Delphi technique which was originally developed by the RAND Corporation. As per this technique, estimates are sought from a number of individuals in an interactive manner; estimates are then revised by each individual based on the knowledge of other individuals’ estimates, and in this way, a final estimate is worked out which is expected to be more accurate as compared to a single expert estimate.
b. Nominal Group Technique (NGT):
It is another method of forecasting HR requirement. In it, after individuals have generated estimates, there is a group brainstorming session in which all the individuals who have generated estimates interact and reach a group decision. Every individual enjoys equal opportunity to express opinions, thus eliminating domination by any individual in the group decision-making.
This method involves simple averaging of forecasts made by individual experts. The method has the advantage of taking into consideration diverse viewpoints. The main shortcoming of the method is that extreme views are marked when averaged.
ii. Sales Force Estimate:
This method is usually used when new products are introduced by the organisation. In it, sales personnel estimate the number of employees required based on their estimates of the demand of the product. The method has a plus point because the sales personnel who estimate the demand are familiar with the field. However, its major shortcomings are that the estimates are subjective and judgemental and there is always a possibility of bias.
iii. Managerial Judgement:
Initial forecasts made are likely to be impacted by factors like technological and administrative changes, causing enhanced productivity or decisions made to improve the quality of output or the decision made to penetrate into new markets and so on. As such, managerial judgement will come into power play to modify the initial forecasts.
iv. Unit-Demand Forecasting:
This is a bottom-up approach because normally it is the unit manager at the departmental level or the leader of the project team or any other group of personnel who analyses person-by-person, job-by-job needs in the present as well as the future. It is then followed by improving the estimates by an HR executive responsible for forecasting the HR requirement, in consultation with unit managers.
If there is any big difference between the forecasts made if both bottom-up and top-down approaches are made use of, the managers may reconcile by averaging the two total or by making use of the Delphi technique or NGT or simply averaging.
These methods involve the use of mathematical or statistical techniques and are as follows:
i. Trend Analysis and Projection:
This is based on past relationship between a business factor related to employment and employment level itself.
This relationship can be used in several ways as follows:
a. Simple Long-Run Trend Projection/Analysis:
This is the second top-down technique to forecast manpower requirements. It is the study of an organisations past employment levels over a period of years, say last five years or so, to forecast future manpower requirement. For example, in many organisations, sales levels are related to employment needs.
A table or a graph showing the past relationship between sales and employment can be developed which will be indicative of a trend in the past. Thus, this method extrapolates the past relationship between the volume of the business activity and employment levels into the future.
As such, the main advantage of this method is that it recognises the linkage between employment and business activity. This trend will be valuable as an initial estimate. However, employment levels may not solely depend on the passage of time. These may be affected by a number of other factors such as productivity and type of technology used.
Thus, it ignores multiplicity of factors influencing employment levels. Hence, trend projections may have to be modified accordingly. Besides, this method assumes that the volume of business activity of the organisation for the forecast period will continue at the same rate as previous years which in the real world may not happen.
b. Regression Analysis:
Regression is a statistical tool with the help of which we are in a position to estimate (or predict) the unknown values of one variable from known values of another variable. With the help of regression analysis, we are in a position to find out the average probable change in one variable given a certain amount of change in another.
ii. Simulation Models:
Simulation models use probabilities of future events to estimate future employment levels. The models make several assumptions about the future regarding both the internal and the external environment. However, it is a complicated method and involves a lot of cost.
iii. Workload Analysis:
This method makes use of information about the actual content of work based on a job analysis of the work. In it, HR requirements are based on expected output of the organisation, and productivity changes are also looked into. However, the method is a little bit difficult to apply. Besides, job analysis may also not be accurate.
iv. Markov Analysis:
This method uses historical rates of promotions, transfers and turnovers to estimate future availabilities in the workforce. Based on past probabilities, one can estimate the number of employees who will be in various positions with the organisation in future. The model gives good results in a stable environment, but normally the environment does not remain stable. Besides, the assumption of the model that the nature of jobs has not changed over time also appears to be unrealistic in the real world.
v. Ratio Analysis:
Ratio analysis is a forecasting technique for determining future manpower needs by using ratios between some causal factors (e.g., sales volume) and number of employees required. For example, suppose in an organisation a salesperson usually generates Rs.400,000 in sales and that in each of the last two years, eight salespersons were required to generate Rs.3,200,000 in sales.
If it is expected that the sales volume of the organisation in that year (i.e., third year), will be increased by 1,600,000, additional four salesperson will be needed to generate the extra sales volume. The technique works when we assume that other things like productivity will remain the same. If other factor(s) does/do not remain the same, then the estimate will have to be modified accordingly.
vi. Scatter Plot:
A scatter plot is a graphical method which is used to identify the relationship between two variables. For example, a 1,000-student school expects to become a 2,600-student school over the next four years. The principal of the school, in order to forecast the requirement of non-teaching staff for 2,600-student school, contacts the four similar schools of various sizes and gets the following figures –
Having fitted the line (see Figure 3.2), one can project how many people will be needed, given the projected volume of the organisation.
vii. Stochastic Method:
A significant statistical method as the stochastic method is, it refers to a process which develops in time, thereby suggesting that the future cannot be predicted with certainty. Only probabilities can be worked out because while projecting workforce requirements, two types of variables are present – (a) which are initiated by organisations and are usually certain and (b) which are initiated by individuals and are normally unpredictable (e.g., resignation by current employees). The stochastic method can handle both the certain and the unpredictable variables.
viii. Computerised Systems:
Computerised systems are also used to forecast manpower requirements through which the information required to develop a computerised forecast of manpower requirements is compiled by an HR specialist.
Based on typical data like labour hours to produce one unit of product and three sales projections minimum, maximum and probable for the product line in question, a typical programme generates a figure on ‘average staff levels required to meet product demands’ as well as separate forecasts for direct labour (such as assembly workers), indirect staff (such as secretaries) and exempt staff (such as secretaries). The estimate of projected productivity and sales levels so generated can be quickly translated into forecasts of manpower needs.
Having determined the HR needs of the organisation over a period of time, the next step in the process of HRP is to audit the existing HR in the organisation. (The primary objective of auditing the existing HR is to come to know the full details of what exists in the stock and what is needed to be added to that stock.)
In other words, it gives an indication of the gap that needs to be filled in through external sources. It is, therefore, very essential that human resource information system (HRIS), which is one of the most important ingredients of the HRP process, should be very effective so that every bit of information about the manpower could be gathered.
However, for cost consideration, we can do only with selective information. For this purpose, we can prepare ‘skill inventory’ or ‘organisation charts’.
A skill inventory may contain information about each employee such as personal factors (name, age, sex, place of birth), education and training (institutions/universities attended, examinations passed with years period, type and duration of training and so on), experience and skills (job areas, job titles, field of specialisation, any other expertise, knowledge of foreign languages and so on) and any other information (existing total emoluments, scale of pay, action taken in the past, integrity, behaviour towards colleagues and boss, confidential report or performance appraisal and so on).
From the information thus collected, we should prepare a ‘manning table’, clearly indicating- (a) the number of the employees in each category in the organisation and (b) each employee’s information card or a ‘personal inventory’ classifying personnel into different groups and also relevant information about each individual worker, which can be computerised, and necessary results, especially fitness for promotion, obtained to be utilised at the appropriate time.
Thus, auditing of existing manpower should result in classifying employees into different categories and in each category further classifying them according to their status, levels of skills and so on.
Having forecast the HR requirements and conducting manpower audit, the next step in the process of planning is to forecast the supply of human resources.
The forecast of the supply of human resources can be discussed under following two heads:
It is usually possible to meet, at least, a part of the demand predicted for HR requirements from internal sources. In this regard, qualifications or skill inventory can facilitate forecasting the supply of inside candidates.
Many organisations maintain such inventories separately for managerial and non-managerial personnel. The maintenance of such inventories tell us what kinds of abilities, skills, qualifications, experience and training the employees currently have. It helps in determining if a particular skill or ability will be available when it is needed by the organisation.
Such inventories are also instrumental in helping the organisation identify the employees who need training and what type of training or who needs grooming and of what type(s) of skills need to be developed.
Skill inventories also help an organisation identify what type of skills would be needed by the current employees to replace who stand retired or fired or have resigned or if any one or more than one has/have to be relocated, whether in their home country or abroad.
The contents of the skill inventories may differ from organisation to organisation and are usually tailored according to the requirements of the organisation concerned. Still, most such inventories contain details such as the name and designation of the employee, employee number, date of birth, date of joining, present location, job classification, educational qualifications, professional qualifications, expertise, foreign language(s) known, publications including research- oriented ones, patents, performance appraisal reports, career goals and objectives, geographical preferences, if any.
The contents of the skill inventory can be categorised under relevant heads such as the summary of the skills the employee possesses at present, summary of the potential of the employee which can be tapped for future requirements and so on. However, today’s skill inventories are highly sophisticated and include information on issues such as – ‘Do workers have necessary skills for developing and introducing new and innovative products?’ or ‘Who is available to become mentor for other employees?’ and so on.
The information to be included in the skill inventories can be collected through either getting the relevant ‘questionnaire’ filled in or ‘interviewing’ the personnel. The data so collected must be maintained in a planned manner and be updated monthly, bi-annually or annually according to the relevance of the same.
According to the size, status and complexity of the organisation, the data can be maintained through any of the following systems:
i. Manual Systems:
Any of the several types of manual system can be used to store data with regard to the employees’ qualifications, training undergone at the present company level, language the employee can speak and write, career preferences and so on, which can be made use of while determining the availability of current employees for filling projected openings.
ii. Personnel Replacement Charts:
These charts display the performance record of the employees and their promotability for each potential replacement for vital positions. They reflect clearly which internal employee can be promoted for which position.
iii. Position Replacement Cards:
Some companies develop position replacement cards. In this system, a card is developed for each position displaying possible replacements, current performances, potential for performance and whether any training will be required by each probable employee.
iv. Computerised Information Systems:
In case the size of the organisation is big employing hundreds or thousands of personnel, it is not possible to do with manual systems. In such cases, the data with regard to employees’ work experience, codes, formal education, foreign languages, expertise, training undergone, product knowledge, industry experiences, career and development interests, performance appraisals, relocation limits, if any, and so on are stored on disk and are utilised whenever needed.
There is no fixed limit of the data elements in HRIS which can be 100 or even more. It depends on the size and complexity of the organisation. However, adequate steps should be taken to ensure employees’ right to privacy and identity thefts. Promotions, job posting and succession planning are some of the internal sources of candidates.
It is usually not always possible to get candidates through internal sources to fill up adequately the gap between the demand for and supply of human resources. Hence, the organisations have to look forward to outside candidates.
In order to forecast the supply of outside candidates, the organisations have to anticipate local market conditions, that is, what the status of local labour market and general economic conditions will be including the rate of unemployment as the later may affect the rate of supply of labour.
A lot of secondary data with regard to economic conditions are available through both government and private publications. Occupational market conditions will also have to be anticipated while making forecasts with regard to supply of outside candidates. At times, there is shortage of certain types of technical skills, while certain skills may be available in abundance. In this regard also, forecasts are available in various publications.
Once manpower auditing is done and forecasting of supply of human resources has been made, the list of future vacancies over a period of time is prepared, and sources of manpower supply are identified. It is essential to prepare a job analysis. Job analysis provides information about the nature of the job (job description) and the characteristics and qualifications that-are desirable in the job holder (job specification).
The job description is a source of basic information for the HRP.
The information provided by the job description and job specification—the two ingredients of job analysis—is essential for selection, training, workload, incentives and salary administration. Job analysis has been dealt with in detail separately.
Having analysed the demand for and supply of human capital in the stipulated future period, it is time to choose a course of action to fill up the gap between demand for and supply of human resources.
Here, there are two possibilities:
A. In Case of Shortage of Employees:
There are several options to meet the shortage of employees:
a. Regularising the part-time workers
b. Making the workers work overtime, of course, against payment and within the framework of current legislation
c. Recalling the laid-off employees
d. Using sub-contractors
e. Imparting the desired training
f. Promoting the deserving current employees
g. Using independent professionals in recruiting less skilled employees.
B. In Case Employees are in Surplus:
It has often been observed that in times of economic recession or because of economical or technological constraints, it may be unavoidable not to do away with surplus manpower.
Here also, several options are available to the employers, which are as follows:
a. Early retirement/voluntary retirement schemes
e. Not filling positions falling vacant due to resignations, retirements and so on.
However, in our country, there are legal constraints in retrenching and laying off the employees. The employer will, therefore, have to observe necessary formalities before taking any such step. Trade unions resist retrenchment and lay-off tooth and nail. Hence, there should be proper HRP so as to enable the organisation to run smoothly.
Experience has revealed that it is always better, if it is feasible, to procure the desired manpower from within the organisation even if it involves some expenditure on the training and development of personnel. It creates a sense of belongingness towards the organisation among the workers, and promotional opportunities serve the purpose of potential incentives and make the personnel feel involved in the affairs of the organisation.
Internal promotions are especially recommended for jobs of higher level involving great responsibilities. However, in the case of jobs of lower level, we can tap external sources as well.
Therefore, a thorough knowledge of and close liaison with the labour market are necessary requirements on the part of the HR manager because the labour market, especially in developing countries like India, is usually unorganised and highly unstructured, mostly dealing in illiterate, immobile and ignorant workers, varied rate of wages for the same job, various methods of recruitment of labour and so on.
Notes on the Process of Human Resource Planning – Possible Stages of Human Resource Planning
HRP requires to pass through different stages/processes. There is no specific / hard and fast HRP process that every organization needs to follow while preparing manpower planning. But, some stages are definitely common to all organizations. HRP process/ stage variances occur due to influence of some factors like nature of product produced / services rendered, financial health of the organization, consumer’s market, international relations, global conflicts, legislation etc.
The possible stages of HRP are discussed herein below:
Process # 1. Analysing Company’s Mission, Objectives:
This is a vital step of human resource planning. What the organization is thinking about its expansion, diversification, contraction / reduction of business, what strategic approach it intends to activate, what mission it holds for growth and development- all these are basic to the ascertainment of human resource requirement, as these factors influence HRP to a great extent.
When the company decides its mission, objectives, it takes into account some external environment (viz., country’s economic policy, foreign policy, relationship with foreign countries, global economy, market conditions and potentials etc.) and also internal environment like company’s culture, milieu etc.
So, top management gives stress on PEST factors (that is assessment of political, economic, social and technological environment) and also response factors to look how the organization responds and the corporate magnets ensure through SWOT analysis (revelation of strengths, weaknesses, opportunities and threats to organization) that the mission, objectives have pragmatic relevance / approach to achievement.
After coming to know organizational strategic objective, mission of the company HR planer studies corporate plan and starts with analysing it into segmental plans like production plan, sales plan, technological plan, financial plan etc. This analysis helps the HR planner to make effective estimate of HR requirement for different departments, sections of an organization.
In terms of corporate goals, planning process starts to find out the HR requirement at unit levels and accordingly programmes are formulated to ascertain present strength of human resources skill wise, job wise, experience wise. Job analysis is made to assess the scope of designing / redesigning the job.
In this process workload study is undertaken to see whether, services of the existing human resources are best utilized. If, they are underutilized workload ascertainment is made a fresh. Forecasting is made looking to both qualitative and quantitative aspects of human resources. So, for preparation of HR requirement estimation (demand forecasting) careful study / examination of the following areas/aspects is required to be made.
i. Annual budget
ii. Organizational plan including segmental plans
iii. In respect of different departments/sections.
iv. Number of workers-direct, indirect (skill wise, experience wise)
v. Standard hours for production of a unit
vii. Introduction of technology
viii. Product market development
ix. Production methods.
The following techniques are used to estimate demand for human resources in the organizations:
i. Managerial judgement
ii. Delphi technique
iii. Work study work load method
iv. Ratio analysis
v. Scatter plot.
Process # 4. Supply Forecasting:
This process ascertains the sources-internal and external-to supply human resources as per requirement. For supply of skilled / experienced workforce from internal sources technique like job rotation, intra region / inter region transfer, inter departmental transfer, promotion, constant training are initiated.
The planner studies the cases of superannuation, absenteeism, sabbaticals, layoff, dismissal, resignation, death etc., while forecasting supply. If, internal supply strength is not adequate or it meets the demand for higher position, the company needs to hire at the lower level.
The supply of human resources through internal and external sources is affected by several factors. Migratory situations, number of voluntary retirees, ex- servicemen, laid off, retrenched employees, local unemployed youths, influence external labour market. HR skill inventory, employee profile, succession planning chart, gives the position of internal source of human resources.
This process forecasts the balance of human resources that is, whether supply of human resources is more than the demand for human resources or vice versa. The supply and demand forecasting of human resources is considered both from qualitative and quantitative point of view that means, skill wise/grade wise human resource requirement is decided.
If surplus human resources are available, the planner requires to draw up a scheme to deal with the issue. It happens when some departments have excess staff / workers while other departments suffer due to understaff. In such a case, excess staff is redeployed through transfer (interdepartmental) process, but where such possibility is not present or only to some extent redeployment is possible, then problem of dealing with the remaining staff exists.
Hence, action plan is prepared to deal with the excess human resource in the following manner-
i. Staff reduction activities –
a. Identification of surplus human resources for lay off, retrenchment.
b. Introduction of voluntary retirement scheme (VRS) with the offer of attractive gratuity package and other benefits so that the people at work specially surplus human resources accept VR.
ii. Granting of sabbatical leave for a specific period during which no salary/wages and other allowances can be given to sabbatical leave optees.
iii. Formulating programme for job sharing between two employees.
iv. Outplacement service – Formulation of programme for providing service to the redundant employees through the career counselling, training, guidance, enrichment of knowledge to help them in getting employment.
v. Formulating scheme for reduction of working hours and payment of wages as per reduced hours of work.
vi. Preparation of detailed procedure for banning fresh appointment in place of vacant posts arising out of retirement, resignation, dismissal, retrenchment, lay off, superannuation.
HR planner needs to prepare action plan to provide human resources where deficit is forecasted. In such eventuality, it is examined whether deficit of human resources of one department can be met up through supply from surplus departments, and if such possibility arises then suitable programme is prepared in respect of transfer, promotion, training, OD intervention and above all human resource development.
However, if HR supply from internal sources is not possible in future then fresh appointment is needed. In such case, external source for supply of right kind of people is explored, suitable measure is chosen for the job in the organization. That means recruitment process is programmed, steps for selecting the candidates are identified.
Such steps include:
i. Process for collecting information about candidates
ii. Application of Test techniques
iii. Use of experiential technique to find out the level/ extent of knowledge, competence the candidates possess.
iv. Application of behavioural techniques to measure technical skill, human skill, decision-making ability as also the perceptible areas / mind set about the prospective job, organization and their own expectation desire, need, willingness, intentions etc.
After selection process is completed measures are chosen for induction and orientation programmes.
In case of deficit or shortage of human resources Michael Armstrong (2000) has suggested that action plan should be made in the following areas:
i. An overall plan as required to deal with shortage arising if there are demographic pressures
ii. A human resource development plan
iii. A recruitment plan
iv. A retention plan
v. A plan to achieve greater flexibility
vi. A productivity plan.
After the action plan is implemented it becomes essential to review, examine, and control such plans.
Sometime, it happens that future supply of human resources from external sources falls short of demand as forecasted by planner. HR planner suggests the organization if such eventuality arises.
i. To alter or modify the organizational plan for some period till the required manpower is available.
ii. To continue the activities in the affected department/s without taking cognizance of the forecasted man power requirement temporary.
Notes on the Process of Human Resource Planning – 7 Step Process of Human Resource Planning
The HRP process is the heart of human resource practices, as it includes activities such as analyzing the human resource needs of the organization and formulating human resource plans. An efficient HRP process ensures that the human resource practices and procedures have been, implemented for the proposed purpose in the desired way. The HRP process consists of numerous steps, and each step is a broad process in itself.
The steps involved in the HRP process are as follows:
1. Organizational environment scanning
2. Formulation of organizational objectives and policies
3. Demand forecasting
4. Supply forecasting
5. HR programming
6. HRP implementation
7. HRP controlling and evaluation
Let’s discuss each of these steps in detail:
Process # 1. Organizational Environment Scanning:
Organizational environment scanning involves methodical monitoring of the external factors that affect an organization. Human resource managers can predict the influence of these factors on HRP by assessing and inspecting the ever-changing organizational environment and making appropriate adjustments and modifications to the human resource of the organization on time.
The process of environmental scanning scrutinizes various external factors, which are as follows:
i. Economic Factors – Include the general, local, and regional economic conditions determined by the economic structure adopted (capitalistic, mixed or socialistic economy) and economic policies implemented, such as monetary and fiscal policies. In addition, these factors are determined by various economic indices, such as national income, rate and growth of Gross National Product (GNP), and Gross Domestic Product (GDP).
ii. Technological Factors – Include technological changes, automation, and technology obsolescence.
iii. Demographic Factors – Include age, educational level, gender, income level, religion, ethnicity, and population size and distribution.
iv. Political and Legal Factors – Include laws of the country, common law, and administrative judgment.
v. Social and Cultural Factors – Include educational, childcare, and recreation facilities.
Process # 2. Formulation of Organizational Objectives and Policies:
The effectiveness of HRP process is ensured only when human resource plans are formulated in alignment with the organizational objectives and policies. In other words, it is necessary that the objectives of the human resource plans should be derived from the organizational objectives. HRP ensures that the availability of human resource is adequate in quality and quantity to accomplish the organizational objectives.
The top management formulates and communicates organizational objectives to the employees of the organization. It is the responsibility of the human resource division of an organization to define human resource objectives in the light of human resource utilization in the organization. The development of human resource objectives leads to the formulation of related policies so that the decisions can be made on various human resource issues.
The following are the examples of some important human resource objectives:
i. Deciding the source of recruitment; whether internal or external
ii. Determining the ways to maintain continuous availability of adaptable and flexible human resource
iii. Identifying the modes to downsize the organization to ensure its competitiveness
iv. Finding out the means to enrich the jobs of employees
v. Deciding the course of action for routine or monotonous jobs, whether they should be eliminated or continued
vi. Determining the ways to integrate training and development objectives with the human resource objectives.
These issues help establish organizational objectives; therefore, need to be addressed by formulating specific policies. After framing the organizational objectives and policies, the requirement of workforce is determined through the demand forecasting process.
Process # 3. Demand Forecasting:
Demand forecasting is the process of predicting the demand of human resource in adequate quality and quantity. The forecast should be based on available capital and long-term organizational plans. Relevant external and internal factors must be considered while forecasting human resource demand.
Some examples of these factors include budgetary constraints, organizational structure and design, rate of employee separation, production level, introduction of new products and services, competition (foreign and domestic), prevailing economic conditions, laws and judicial systems, technological status, rate of change in technology, and social factors.
Demand forecasting is performed for numerous reasons.
In addition to estimating the future demand for human resource, demand forecasting is intended to:
i. Identify the number of jobs required for the production of the given number of products or services
ii. Ascertain what employee mix would be required in future
iii. Evaluate the adequate staffing levels in different departments and divisions of the organization
iv. Avoid the scarcity of human resource
v. Monitor the adherence of legislative requirements with respect to reservations in jobs
The demand for human resource of an organization is anticipated by using various techniques of forecasting. These techniques could be based on the qualitative or quantitative approach.
Process # 4. Supply Forecasting:
Supply forecasting is the process of estimating the future supply of human resource in specific quantity and quality that is likely to be available from within and outside the organization. It reflects the capability of the human resource department to procure the required number of employees whenever needed. The supply forecasting process estimates the future availability of the human resource by considering absenteeism, internal movements, promotions, wastage, and changes in work hours or other work conditions.
Supply forecasting is performed for numerous reasons.
However, supply forecasting is principally meant to anticipate the future availability of appropriate persons, as well as to:
i. Identify the number of jobs and people likely to be available in future so that the organization can accomplish its objectives and realize its plans
ii. Ascertain what employee mix would be available in future
iii. Evaluate the existing staffing levels in different departments and divisions of the organization
iv. Prevent the scarcity of human resource
v. Ensure adherence of legislative requirements with respect to job reservations.
Process # 5. HR Programming:
HR programming holds a significant place in the HRP process. It is the fifth step that is performed after forecasting the demand and supply of human resource for an organization. Usually, this step deals with the reconciliation (as shown in Table-1) of demand and supply of human resource for an organization to identify the existing human resource gaps. HR programming provides the basis for preparing human resource plans by estimating the gap between the demand and supply of human resource.
Table-1 depicts how demand and supply forecasts can be related for a particular year:
Table-1 represents the determination of possible human resource gaps by reconciling the demand and supply of human resource for a particular year. The total number of employees needed at the end of the year is compared with the total number of employees available at the end of the year. If both the numbers are equal, no human resource gap exists. If the human resource gap is found, it implies that there is a shortage or surplus of employees in the organization. Therefore, HR programming is also termed as Human Resource Gap Analysis.
Some of the questions to be answered while formulating human resource plans are as follows:
i. Which new skills and competencies will be required in future?
ii. Which new job positions will be needed in future by the organization?
iii. Does the existing workforce have the required skills and competencies?
iv. Does the organization have adequate managers or supervisors?
v. Are the present HRM practices adequate to accomplish the organizational objectives?
vi. Are right employees recruited in the right jobs so that their skills and competencies can be appropriately utilized?
A detailed concrete human resource plan, supported by various human resource policies, programs, and strategies, is formulated based on the data of employees. The human resource plan is a brief document that proposes the key assumptions and resulting strategies as well as states who has the responsibility to implement these strategies.
Some of the commonly identified human resource plans are:
i. Recruitment Plan – Represents the quantity and quality of the employees required during a period of time. The recruitment plan also determines suitable recruitment programs to be performed to acquire the human resource.
ii. Training Plan – Represents the number of existing employees who need training or retraining. The training plan also includes training schedule, required number of new trainees, and the program for recruiting and training them.
iii. Redeployment Plan – Denotes the programs required to be performed to retrain the existing employees or transfer them to new job locations.
iv. Redundancy Plan – Represents the surplus employees; the plans for retraining them if possible; and the plans for retrenchment, lay-off, and Voluntary Retirement Scheme (VRS).
v. Retention Plan – Indicates the reasons for the labor turnover and proposes strategies to reduce the attrition rate of employees. The examples of retention strategies are motivating employees and improving compensation policies and work conditions.
These plans are implemented through various appropriate strategies, programs, and policies that are covered in the HRP implementation stage.
Process # 6. HRP Implementation:
HRP implementation involves the execution of the human resource plans that have been formulated during the HR programming stage. The human resource plans are executed by performing recruitment, selection, and placement; training and development; and retraining and redeployment functions. It also involves the implementation of the retention, redundancy, and succession plans.
The recruitment, selection, and placement plans are brought into action by performing the recruitment, selection, and placement and induction functions, respectively. It is implemented by identifying the recruitment sources to search suitable candidates, select the appropriate candidates; and place the right people in the right jobs.
The training plan formulated in the HR programming stage is put into action through the training and development programs. These programs are usually aligned with the organizational plans so that the organization can achieve its long-term goals. Training and development programs involve training and developing the existing and new employees to make them competent and proficient so that they can perform their jobs more efficiently. It is also necessary to update and improve the training and development programs periodically as per the need of changing business environment and budget allocated for them.
Retraining and redeployment functions involve retraining the existing employees to equip them with the new skills and knowledge to keep pace with the changing technology and business practices. For example, in case of suspension of a product line, the employees associated with that product line may be retrained and redeployed to other departments or divisions in an organization.
The retention program is developed to reduce the attrition of the talented employees. Moreover, the program implements strategies to attract, motivate, and retain employees. The competent employees can be retained and motivated by a number of factors, such as attractive remuneration, improved pay structure, performance-linked incentives, performance appraisals, training and development programs, better career opportunities, and succession planning.
The redundancy plan is implemented by means of downsizing the number of employees. It involves trimming or downscaling the existing or expected future surplus employees. It is very difficult for an organization to deal with the surplus employees; therefore, it is intricate for an organization to decide whom to retain. In addition, the redundancy plan specifies whom to make redundant, from which department, and through which strategy. There are various strategies, such as VRS, laying-off, outplacement, and retrenchment, adopted by organizations to handle surplus employees.
Process # 7. HRP Controlling and Evaluation:
HRP controlling and evaluation is the final step of the HRP process. In this step, human resource plans are monitored and controlled to ensure their proper execution. Human resource plans should be developed considering the budget, time limits, targets, and established standards. In addition, these plans should clearly state who would bear the responsibilities for the implementation, control, and evaluation of plans.
It also lays down reporting procedure standards that provide a layout of established standards against which the actual performance of HRP process is measured. The comparison of actual with standard performance helps in identifying the deficiencies that exist in the HRP process. Further, corrective actions can be taken to remove these deficiencies deviations from the actual performance.