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Chapter 2 Human Resource Planning

Learning Objectives
 Appreciate the importance of HR planning
 Explain the relationship between strategic HRM and HR planning
 Identify the key environmental influences on HR planning
 Understand the basic approaches to HR planning
 Describe the ways of forecasting HR requirements and availability
 Understand the requirements for effective HR planning

Chapter Outline
Chapter 2 of the text is divided into four sections, each of which is designed to provide a valuable
introduction to human resource planning and how human resource planning is/can be undertaken.
The first section introduces the concept of human resource planning (HRP) and its purpose.
Section two highlights the need for organisations to consider environmental trends and issues in
developing strategic human resource planning. The different approaches to forecasting the
demand and supply of human resources (quantitative and qualitative) are presented in section
three. The fourth, and final section, examines what is required for human resource planning to be
effective.

Importance of human resource planning

Human resource planning is the responsibility of all managers. It focuses on the demand and
supply of labour and involves the acquisition, development and departure of people. This is
recognised as a vital HR function as the success of an organisation depends on its employees.

The purpose of HR planning is to ensure that a predetermined number of persons with the correct
skills are available at a specified time in the future. Thus, HR planning systematically identifies
what must be done to guarantee the availability of the human resources needed by an
organisation to meet its strategic business objectives. To achieve this HR planning cannot be
undertaken in isolation. It must be linked to the organisation’s overall business strategy, and
concentrate on the organisation’s long-range human resource requirements.

Cooperation between the HR function and line management is necessary for success. It allows the
HR manager to anticipate and influence the future HR requirements of the organisation. Effective
HR planning ensures a more effective and efficient use of human resources; more satisfied and
better developed employees; more effective equal employment opportunity (EEO) and affirmative
action (AA) planning; and reduced financial and legal costs.

Strategic human resource management and human resource planning

Effective HR planning considers both the internal and external environmental influences of an
organisation, its objectives, culture, structure and HRM. This is because HR planning must reflect
the environmental trends and issues that affect an organisation’s management of its human
resources. This includes consideration of globalisation, growth of Internet use, the economy,
women in the work force, demographic changes, the casualisation of the work force, employee
literacy, skill shortages, acquisitions, mergers and divestures, deregulation, flexible work
schedules, telecommuting, outsourcing, quality of life expectations, pollution, income tax levels
and union attitudes.

Approaches to human resource planning

To forecast the organisation’s future HR requirements and determine from where they will be
obtained. Three sets of forecasts are required:
 2

 a forecast of the demand for human resources

 a forecast of the supply of external human resources
 a forecast of the supply of human resources available within the organisation

Two approaches used in forecasting the demand for human resources are — quantitative and
qualitative.

The quantitative approach: The quantitative approach to HR planning uses statistical and
mathematical techniques. The focus of this approach is on forecasting HR shortages,
surpluses and career blockages; its aim is to reconcile the supply and demand for human
resources given the organisation’s objectives. Quantitative forecasting includes trend
projection, econometric modelling and multiple predictive techniques.

The qualitative approach: The qualitative approach to HR planning uses expert opinion (usually
a line manager) to predict the future (for example, the marketing manager will be asked to
estimate the future personnel requirements for the marketing department). The focus is on
evaluations of employee performance and promotability as well as management and career
development. Qualitative forecasting includes Delphi Technique and Nominal Group
technique.

Forecasting human resource availability

The next step in human resource planning involves forecasting human resource availability. This
involves an examination of the internal and external labour supply. Present employees who can be
promoted, transferred, demoted or developed make up the internal supply. The external supply
consists of people who do not currently work for the organisation.

Forecasting the supply of internal human resources: Techniques for forecasting the internal
supply of personnel include turnover analysis, skill inventories, replacement charts, Markov
analysis and succession planning.

Factors affecting the external supply of human resources: Not all vacancies can be filled from
within the organisation. Consequently, the organisation must tap into the external labour
market (local, regional, interstate or international). Thus, the HR manager needs to be alert to
demographic changes. Changes occurring in the external labour market are the aging of the
workforce, the increases in female participation rates, increases in school retention rates,
changes in the rate of immigration, casualisation of the work force, outsourcing, and
international employees.

Requirements for effective HR planning

Given that the success of an organisation ultimately depends on how well its human resources are
managed, HR planning will continue to grow in importance.
Successful HR planning requires the HR manager to ensure that:

 HR personnel understand the HR planning process

 top management is supportive
 the organisation does not start with an overly complex system
 the communications between HR personnel and line management are healthy
 the HR plan is integrated with the organisation’s strategic business plan
 there is a balance between the quantitative and qualitative approaches to HR planning.