Master of Business Administration-MBA Semester 3

MU0001 – Manpower Planning and Resourcing - 2 Credits

(Book ID: B0816)
Assignment Set- 1 (30 Marks)

Question.1 Elaborate on the Human Resource cost accounting method along with its

merits and limitations [10]

Answer 1:

Historical Cost Approach

This approach was developed by Brummet, Flamholtz and Pyle. According to this

approach, the actual cost incurred on recruiting, selecting, training, placing and

developing the human resources of an enterprise are capitalized and written off over the

expected useful life of human resources. The procedure followed for human resource

asset is the same as that of other physical assets. Any amount spent on training and

developing human resource increases its efficiency, hence capitalized. The amortization

of human resource assets is also done in the same way as that of other physical assets.

The asset is written off over its useful life. If the asset is liquidated prematurely, then it is

underwritten and the amount is charged to revenue account. On the other hand, if it has a

longer life than expected, its amortization is rescheduled.

Merits

This method has the following merits:

This method is simple to understand and easy to work out.

The traditional accounting concept of matching cost with revenue is followed in this

method. It can help a firm in finding out a return n human resource investment.
Limitations:

This method has the following limitations:

It is very difficult to estimate the number of years an employee will be with the firm.

It is difficult to determine the number of years over which the effect of investment on

employees will be realized. The extent to which the employee will utilize knowledge

acquired is also subjectively estimated.

It is also difficult to fix a rate of amortization. A number of methods have been derived to
write off depreciation on fixed assets but in the case of human asset, it will generally be
on a constant basis.

The value of an asset decreases with amortization. In case of human resources, the
situation is just the reverse. With the acquisition of experience and training in the course
of time, the utility of employees increases rather than decreasing.

It is easy to find out the total of human factor but it is difficult to see the contribution of
each person. Had there been one person in the organization, then his contribution to the
enterprise could be measured. But this is not the case. There are large numbers of people
working in different positions and their contribution cannot be measured separately. No
solution to this problem has been found so far.

Replacement Cost Approach

This approach was developed by Rensis Likert & Eric G. Flamholtz. The cost of
replacing employees is used as the measure of company’s human resources. The human
resources of a company are to be valued on the assumption as to what it will cost the
concern if existing human resources are required to be replaced with other persons of
equivalent experience and talent. This approach corresponds to the historical cost
approach mentioned earlier except that it allows for changes in the cost of acquiring and
developing employees in place of taking their historical cost.

In replacement cost approach, the costs of recruiting, selecting, training, developing, etc.
of new employees to reach the level of competence of the existing employees are
measured. Likert has suggested determination of value of total human organization on the
basis of assumption that a similar organization is to be created from scratch.
Merits

This method has the following merits:

This approach has the advantage of adjusting the human value of price trends in the
economy and thereby provides more realistic value in inflationary times.

It has the advantage of being present-oriented.

Limitations

This method has the following limitations:

It may not always be possible to obtain such a measure for a particular employee.

It is not always possible to find out the exact replacement of an employee.

This method does not reflect the knowledge, competence and loyalties concerning an
organization that an individual can build over time.

It is difficult to find out the cost of replacing human resources and different persons may
arrive at different estimates.
Question 2: Discuss the steps in Manpower Planning. [10]

Answer 2:

Process of Manpower Planning

The process of human resource planning is one of the most crucial, complex and
continuing managerial functions which, according to the Tata Electrical Locomotive
Company “embraces organization development, management development, career
planning and succession planning.” The process has gained importance in India with the
increase in the size of business enterprises, complex production technology and the
adoption of professional management technique. It may be rightly regarded as a multi-
step process, including various issues, such as:

a) Deciding goals or objectives

b) Estimating future organizational structure and manpower requirements

c) Auditing human resources

d) Planning job requirement and job descriptions and

e) Developing a human resource plan.

a) Deciding goals or objectives: Human resource planning fulfils individual,

organizational and national goals; but, according to Sikula, “The ultimate mission or
purpose is to relate future human resource to future enterprise needs so as to
maximize the future return on investment in human resources.” In effect, the main
purpose is one of matching or fitting employee abilities to enterprise requirements,
with an emphasis on the future instead of present arrangements. The objectives may
be laid down for a short-term (i,e, for one year). For example, the short-term objective
may be to hire 25 persons from schedule tribes or backward class for the purposes of
training. The long- term objective may be to start a new industry, to expand the
market, to produce a new product, to develop its own sales force rather than depend
on distributors, or to have minority group members eventually in position of middle
and upper management cadres.

b) Estimating the future organizational structure or forecasting

the manpower Requirements:

The management must estimate the structure of the organization at a given point in
time. For this estimate the number and type of employees needed must be determined.
Many environment factors affect this determination. They include business forecasts
expansion and growth, design and structural changes, management philosophy,
government policy, product and human skills mix and competition.
Forecasting provides the basic premises on which the manpower planning is built.
Forecasting is necessary for various reasons which have been stated below:

(a) The eventualities and contingencies of general economic business cycle (such as
inflation, wages, prices, costs and raw materials supplies) have an influence on the
short- range and long-run plans of all organizations.

(b)    An expansion following enlargement and growth in business involves the

use of additional machinery and personnel, and a re-allocation of facilities, all of
which call for advance planning of human resources.

(c)    Changes in management philosophies and leadership styles.

(d) The use of mechanical technology (such as the introduction of automatic

controls, or the mechanization of materials handling functions) necessitate
changes in the skills of workers, as well as a change in the number of employees
needed.

(e)    Very often, changes in the quantity or quality of products or services require

changes in the organization structure. Plans have to be made for this purpose as
well.

After estimating what the future organization structure should be, the next step is to
draw up the requirements of human resources, both for the existing department and
for new vacancies. For this purpose, a forecast of labour force is needed, and
requisition should be obtained from different departments, i,e., forecast has to be
made in returns of functional category; the members needed; and the levels at which
they are required. Vacancies, occurring in any department, should be notified in
writing by different department heads to the personnel department, stating clearly the
number of vacancies to be filled, job or category-wise types of personnel needed,
their technical qualification and experience and the reasons for acquisition (I.e.,
whether for replacement or addition); a statement of duties, type of jobs pay scales,
age, and previous experience should also be made. Requisitions should be based on
accurate job specifications by first line supervisor. They should, as for as possible,
state the exact demands of a job.

In determining the requirements of human resources, the expected losses which are
likely to occur through labour turnover- quits, retirements, death, transfers,
promotions, demotions, dismissals, disability, resignations, lay-off and other
separations- should be taken into account.

Changes in the human quality resulting from the experience gained in the jobs during
the period and the training achieved also need to be considered. The addition of new
lines of production and new projects also influence the demand estimates of human
resources. The basic fact to remember is that the human resource in an organization
constantly changes in terms of its present and future size.
Additional human resources are gained through new employment of personnel,
promotions, through transfers and demotions; but personnel is lost through voluntary
quits, death dismissals, termination and retirements.

After making adjustments for wastage, anticipated and expected losses and
separations, the real shortage or surplus may be found out. If a shortage is there,
efforts are made to meet it either by new recruitments or promotion from within, or
by developing the existing staff. If there is a surplus, it is to be decided how it will be
dealt with, i.e., whether there should be transfers, lay-offs, retrenchment or reduction
in the hours of work of all.

Underestimation of the quality and number of the employees required would lead to
shortfalls in performance, while overestimation would result in avoidable cost to the
organization. According to Dr. Ram Tarneja, “Management can ensure control of
labour costs by avoiding both shortages and surpluses of manpower through proper
manpower planning.”

It may be noted that for purposes of manpower planning, the main dimensions to be
taken into consideration are:

(i) The total number of personnel available: This could be obtained from the
pay-rolls and other personnel records, such as the applications for employment.
The total number has to be classified on some basis, such as manual workers
(i.e., daily-rated, weekly-rated or monthly-rated); clerical employees, ministerial
staff, managers and other executives; specialists and skilled and unskilled
workers; sex-wise distribution, etc.

(ii) The job-family: A detailed job-description for each position such as

stenographers who may belong to various departments, e.g. finance, marketing,
personnel, public relation, general administration, etc.

(iii) Age distribution of the employees, available in the present departments, say
in the age-group 20-29 years; 30-45 years, 46 years and above.

(iv) Qualification and experience desire, such as a person with 5 years or 10

years experience in a particular branch/ job; and whether under-graduate, post-
graduate or MBAs or gradates in Science, Commerce, Arts, Engineering,
Professional Diploma- holders, etc; or with specialized knowledge in the field
of marketing, finance, computer programming or engineering work.

(v) The salary range etc.

c) Auditing Human Resources: Once the future human resource needs are
estimated, the next step is to determine the present supply of manpower resources.
This is done through what is called “Skills inventory.” A skills inventory contains
data about each employee’s skill abilities, work preference and other items of
information which indicate his overall value to the company. A sample
skill inventory proforma is been below:

Skill Inventory Performa

Personnel factors

Name    ………………………    Birth Place……………..…………..

Age………………………………    Occupation of parents……………..……

Sex………………………………    Present address …………………………

Dependants ……………………    Permanent address……………………..

Marital status …………………    Telephone number (if any) …….………

Education and Training

School …………………………………………………………………………..

Degrees/Diplomas obtained………………………………………………….

Training undergone……………………………………………………………

Experience and Skills

Job areas ………………………

Special skill (such as ability to speak write foreign languages)…………..

Job titles………………………….    Reasons for leaving ……………………

Supervisory responsibility……………………………………………………..

Job dates ………………………………………………………………………       �

 Additional Information

Salary ……………………………………    Test results ……………….……

Grade ……………………………………    Performance ratings ………….

Absenteeism record……………………    Location of relatives …………..

Disciplinary record ……….……………    Appraisal data………………    .

Career plans ……………………………    Any other information…………

The above facts are usably recorded by an employee in some forms from which the
information is fed into a computer. Other data pertaining to his performance ratings
and his superiors’ evaluation of his potential for promotion may also be fed into the
computer. The result may either be kept in a file (on tape or otherwise stored)
containing information as to the number of employees in the organization, and other
data about each employee, and an indication of his fitness for promotion. A specimen
employee information card is given below:

Employee Information Card

Employee No…………….     Address ………………Town…………………

Dept.……………….    `     Code.    …………………………….   �

Position…………………………..

Exp. Date…………………………

Employee status     :    Regular/ Part-time/Co-operative

Shift     :    1/2/3

Marital status     :    Married/Single/Widowed/

Separated/Divorced

No. of dependent children    :    1/2/3/4/5

Relatives in company    :    Yes/No. If yes, who?

Union membership    :    (which one)

Experience of skill    :    Clerical/mechanical/sales/supervisory/ others

Special training     :    Departmental/on-the /vestibule

 Accidents     :    Loss time

Hospitalization    :    Yes/No

Member of the credit union    :    Yes/No

Absenteeism        Days………….

Date……………

Operator………..

Some organizations do not compile a skills inventory but prepare organization charts
to determine how many people, at what level, in what position and what kind of
experience and training would be required to meet the objectives. These charts show a
person’s age, the number of years he has been in a particular position, and his fitness
for promotion. These charts or skill inventories help in determining and evaluating
the quantity and quality of the present human resources of an organization. They tell
us what exist in stock and what is needed to be added to that stock, taking into
account the capability qualification, experience a Manning table which into account
the employees. Some companies maintain a manning table which lists all the jobs in
the unit and the number of workers holding each job. Other companies also use
Replacement charts, which show the present performance of each position holder and
the promotional potential of possible replacements.

    d)    Planning job requirement and job descriptions

Once the present manpower resources are determined, the personnel department can
estimate what changes will occur in the present labour force in the next few years, say
5 years.

Job Analysis: After having decided how many persons would be needed, it is
necessary to prepare a job analysis, which records details of training, skills,
qualification, abilities, experience and responsibility, etc. which are needed for a job.
Job analysis includes the preparation of job descriptions and job specifications.

  e)    Developing a Human Resource Plan: This step refers to the development and
implementation of the human resource plan which consists in finding out the sources of
labour supply with a view to making an effective use of these sources. The first thing,
therefore, to decide on the policy is- whether the personnel should be hired from within
through promotional channels or should it be obtained from an outside source. The best
policy which is followed by most organizations is to fill up higher vacancies by
promotion and lower level position by recruitment from the labour market.
The labour market is a geographic area from which employers recruit their work force
and labour seeks employment. Here the force of demand and supply interact. A labour
market generally has the following characteristics:

(a) It highly unstructured and unorganized, for a majority of workers are illiterate and
ignorant and do not have any information about available job opportunities.

(b) The procedures by which companies recruit workers and the methods by which
workers go about getting jobs are highly variable.

(c) A great range of wage rates for the same occupation exits in the labour market
depending upon the attitude of the management towards wage levels, the employer’s
ability to pay and the productivity of labour.

(d) Labour is mostly not mobile either because it has incomplete or inaccurate
knowledge of job opportunities and available wages or because of lack of job
security.

(e) The supply of labour fluctuates and is influenced by the population in the labour
market the attractiveness of job (benefits, service wage, rates, and the reputation of a
company), the extent of unemployment and the particular skills that are in demand.

(f) Manual labour for unskilled jobs has been replaced by activities that require skills,
scientific knowledge, technical acumen and professional training.

Various external factors influence the outflow and inflow of manpower resources. A few
such factors that operate at local level are:

(i) Population density at various distances from the factory or work place:

(ii) Local unemployment level, particularly of the categories which are relevant for
the operation of the organizations

(iii) Availability of part time labour

(iv) Current competition for similar categories of manpower from other

organizations:

(v) Output from the educational system (general as well as technical);

(vi) Pattern of in-migration and out-migration within the area and between it and

(vii) Transport facilities and communication pattern.

At the corporate level, other factors operate, viz.,

(i) Trends in the growth of the working population;

(ii) Government training schemes and system of technical, vocational, professional,

and general education, and their out-turn;

(iii) Impact of social security measures on manpower supply;

(iv)Mobility of the products of the technical, professional and vocational

institutions;

(v) Cultural factors and customs, social norms, affecting school leaving age, labour
force participation of women, children and young persons.

The personnel manager should have a thorough knowledge of the labour market. Which
particular source in the labour market will be tapped depends upon the policy of a firm,
the position of labour supply, the arrangement with labour unions, and Government
regulations. However, it is always safe for the personnel manager to be in close liaison
with these different sources and use them as and when the need arises.

 
Question: 3 Healwell Pharma Company has been functioning for the last 15 years. The
company decided to computerize the office 7 years ago. Now it has decided to use the
application of information system in HRM.

Suggest how and in what activities they could use the information system.

Answer 3:
Information System Applications in Human Resource Management

A unified data model provides a single, accurate view of HR activities ranging from
recruitment, employment, training, performance management, compensation
management and real time management. Oracle human resource leverage workflow and
internet-based processes optimize various HRM activities. The system maintains global
HR data in case of Trans-national companies and total organizational human resource
data in case of national companies in a single location for accurate and easy availability.

The system of applications of Information Technology (IT) in HRM is referred to as

Human Resource Module. HRIS merges some of HRM functions with the IT field,
wherein the planning and programming of data processing systems have evolved into
standardized routines and packages of Enterprise Resource Planning (ERP) software.
ERP integrates the human resource module with finance, production, and sales and
administration modules.

Generally, traditional HRM functions are common to all organizations. They consist of
tracking data regarding personal histories, family details, skills, capabilities, experiences,
pay, benefits and grievances. Performance of these functions are increasingly complex,
must be performed at the lowest possible cost and also at a fast rate, which pose increased
challenges for HR professionals. Organizations have started to automate these functions
by introducing HRIS technology.

Development of client -server HRIS enables HR executives to assume responsibility and

ownership of their systems compared to client-server architecture, which came largely in
the form of mainframe computers and necessitated heavy capital investment to purchase
program proprietary software. HRIS is developed around six main areas of human
resource management viz., e-recruitment/applicant tracking, e-training, e- payroll,
e-benefits, e-self service and e-time and labour management.

E-recruitment / Applicant Tracking

E-recruitment manages job descriptions and job vacancies, search for candidates and the
interview process. It is also referred to as an applicant-tracking system; this is a web-
based application that enables the electronic handling of organizational employment
needs.
These activities include posting job advertisement on web sites to stimulate and attract
candidates, known as job boards. Job boards allow candidates to apply on-line and the
candidates’ data are stored on a database that allows searching, screening and filtering of
applications. The application tracking system shortlists the candidates and arranges for
interview and recruitment-related activities.

E-recruitment maintains profiles, searches for and refers jobs to colleagues and follows
the recruitment process. It integrates resume extraction capabilities using the
Magnaware / Mohomine extraction engine to search for potential candidates. It uses
event-driven applicant tracking and manages positions on multiple external websites. E-
recruitment/applicant tracking system reduce administrative tasks, cost and time required
to perform recruitment activities.

E-training

E-training provides a complete, scalable and open infrastructure that allows organizations
to manage, deliver, and track employee training participation in on-line or classroom-
based environments. Trainees interact with content and/or trainers at their own pace.
Managers set the business flow from order processing to delivery and performance
management to training output automatically. E-training systems deploy content to global
learners; make use of mixed media and multiple discrete sites on a single instance of the
application, define competencies attained by trainees, and update the trainees’
competency profiles. It aims to ensure that HRM provides the right resources, competent
and experienced trainers, and consolidate training initiatives on a scalable and cost
effective basis. In addition, it aims to measure training effectiveness.

E-training, provides learning opportunities not only to employees, but to customer and all
other stakeholders by providing one-stop administration, automated catalogue
distribution and enrollment and collaborative sites with other strategic partners.

E-payroll

E-payroll models automatically collect data regarding employee attendance and work
record for the purpose of evaluating work performance, they calculate various deductions
including tax, and generate periodic pay cheques and tax reports. Payroll modules in turn
send data and accounting information to the general ledger for posting and subsequent
operations and they frequently integrate e-payroll with e-finance management.

Payroll systems can define standard rules for automatically assigning and changing
employee salary by using simple formulae. They are able to control processing rules and
calculations using fast formula and use logic for complex cases. They can manage global
compensation with one application by implementing a core payroll engine and installing
local extensions to add the necessary functionality, reporting and process for individual
countries.
E-payroll is able to process from data, simultaneously, fully reconciled results and
multiple employee groups. By preparing paperless online pay slips, the system is able to
reduce administrative costs and time for the total operations. Employees too can view
their exclusive data and get personalized reports.

E-benefits

E-benefits administration models enable HR professionals to track and administer diverse

and complex benefit plans, employee benefit programs which may involve transpiration
medical and health care, insurance, pension, profit-sharing, and stock option benefits.
Such modules, through internet-based automation, can enable HR to improve benefits
support and analysis whilst reducing time and costs involved in the administration, while
increasing the consistency decisions on compliance issues at various levels across the
organization.

E-self service human resource

E-self service HR modules collect process and manage all other kinds of data and
information. For example, employees’ demography profiles and addresses recruitment,
selection training, development, promotions, capabilities, skill mapping and
compensation planning. Such a module would allow individual employees to update and
use employee-specific information, personalized to an individual’s role, experience, work
content, language and information needs. Thus, individual employee and managers are
empowered to update information in order to streamline business processes, reduce costs
and errors, increase speed, and enhance service.

This module helps employees in managing everything from profiles including skills,
resumes, contact details, self-appraisal data, bank data, learning, benefits and payroll. It
empowers managers to operate transfers, employee training enrollment, performance
appraisals, competency mapping, career planning and development and terminations.

E-time and labour

E-time and labour automates entire time and attendance records keeping process and
operations through an automatically generated virtual time card. It provides an intuitive,
web-based interface. The time and labour management module, by interacting with
information technology, collects and evaluates time and work information. This module
provides broad flexibility in data collection methods, human resource distribution
capabilities and data analysis, and helps in establishing organizational cost accounting
capabilities. This module allows entering time via web browser, mobile device and time
card. It defines rotation plans based on shifts and work plans and employee mobility
among departments or units. It supports policies for holidays, over-time, and rounding. It
improves reporting, extracting, and processing with a single database of employee time-
related information. This module is integrated automatically with other modules of
human resource management like payroll and benefits.