Chapter 2 – Human Resource Planning

Human resource planning is the process of assessing an organization’s HR needs in

relation to organizational goals and making plans to ensure that a competent,
stable workforce is employed.

Characteristics of HRP:

a) Goal achievement:
Human resource planning is directed towards achieving human resource
management goals. It is also directed towards achieving overall
organizational goals.

b) Future-oriented:
Human resource planning forecasts the type of human resources needed and
identifies the size and composition of human resources for future purposes.
HRP in this way is looking ahead or future-oriented.

c) Quantitative and qualitative analysis:

Human resource planning forecasts the number of manpower required. It
also ensures that the available manpower is trained, skilled and motivated.
So HRP estimates both quantity and quality estimation of manpower.

d) Determination of demand and supply of HR:

Human resource planning determines the demand for and supply of human
resources in an organization. It matches demand and supply and estimates
the optimum level of manpower.

e) Time horizon:
Human resource planning is prepared for the short term as well as long term
as per the need and requirement. It is also prepared for mid-term in case if it
is needed. Thus, it has a time horizon.

f) Part of acquisition function:

Human resource planning is a part of the acquisition function of HRM. It is
the starting point of HRM. It serves as the foundation for the management of
human resources effectively and efficiently.

g) Environmental effects:
Human resource planning is affected by environmental changes, hence it is
to be updated as per the change occupied in the external environment of
business.
Importance of HRP

a) Estimate future manpower requirement:

Human resource planning is significant because it helps to estimate the
future manpower needs of the organization. It maintains a balance between
demand and supply of manpower in the dynamic environment.

b) Coping with change:

Human resource planning enables an organization to cope with changes in
competitive forces, markets, technology, products and government
regulations.

c) Uncertainty reduction:
Globalization, new technologies, organizational restructuring, workforce
diversity, changes in business situations, products etc. create risk and
uncertainty and require necessary changes in quantity and quality of human
resources. Proper HRP avoids shortages and surpluses of employees in all the
departments and maintains balanced supply of workforce. Hence, it helps to
reduce risk and uncertainty.

d) Foundation for HRM function:

Human resource planning provides essential information for designing and
implementing HRM functions such as recruitment, selection, personnel
movement (transfers, promotions, layoffs) and training and development. It
provides better means for managing human resources.

e) Improve labor relations:

Human resource planning promotes awareness about the importance of
human resources at all levels of an organization. This ensures the
commitment of managers to human resource goals. This also assists in
collective bargaining with labor unions.

f) Acquisition, utilization, development and control of human resources

HRP Process

a) Knowledge of goal of organization:

The planning process is influenced by overall organizational goals and
environment of business. It implies that the objectives of the HR plan must
be derived from organizational objectives.

b) Assessment of current HR situation:

In this step, HR planners prepare inventory of staff present within the
organization. It helps to understand current human resources in terms of
quantity and quality.

c) Forecasting HR demand:
The next phase of an effective HR planning process is estimating not only
how many but what kinds of employees will be needed in the future. It is
done to meet the future HR requirements of the organization to achieve
desired level of output.

d) Forecasting HR supply:
Supply forecasting determines whether organization will be able to procure
the required number of personnel and also the sources of such procurement.

e) Matching demand and supply forecast:

After forecasting both demand and supply of future workers, these forecasts
are matched to determine any discrepancy. In case of shortage, an
organization has to hire a more required number of employees. Conversely,
in the case of overstaffing, it has to reduce the level of existing employment.

f) Preparation of HR action plan:

Action plans are prepared to deal with shortages and surplus of HR. They
specify time based specific activities for implementation purposes. The major
activities that are required to execute different HR plans are recruitment
plan, development plan, retention plan, promotion and succession plan.

Assessing current HR

a) HR inventory:
Human Resource Inventory (HRI) describes competencies currently available
in the organization. It consists of information regarding to different aspects
of the employees. This provides the potential of an individual employee. HRI
is developed from the information collected from application forms and bio-
data submitted by employees on the time of joining in an organization.
b) HRIS:
 HRIS is a database device for systematically tracking human resource
information of about the people and jobs they are doing. It is computer
based system developed from employees which can be updated and retrieved
when needed. HRIS helps in the preparation of HRI as well as helps in the
forecasting future HR requirements.

c) Succession plan:
It is an executive inventory report showing which individuals are ready to
move into higher positions in the company.

d) Job analysis:
It is a systematic exploration of the activities surrounding and within a job. It
helps in finding out the abilities or skills required to do the jobs efficiently.

HR demand forecasting techniques

a) Managerial judgment:
This technique consists estimates made by managers who are very familiar
with the products, process and jobs in the business. Managers of different
departments make estimates of future HR demand judgmentally. They
convert information on short-term future business activity into numbers and
type of employee needed. The top managers may prepare forecasts which
are reviewed by departmental heads and agreed upon or line managers may
submit their department proposals to top managers who arrive at company
forecasts, mixed approach may be taken.

b) Delphi technique:
This technique is used to accumulate an expert consensus on the future
demand for manpower. These experts work independently and avoid any sort
of face-to-face discussions. An intermediary establishes contacts with these
experts and accumulates their opinions. The main jobs of the intermediary
are to pool, summarize and feedback to the experts the information gathered
independently by all the other experts during the first round of forecasting.
This cycle is repeated until convergence is reached. Once all experts reach a
consensus, the final demand forecast will be made.

c) Nominal group technique:

In this method, each member of a group writes down and present the ideas
to the group and those idea are written on a board for the other participants
to see. After all ideas have been presented, the entire group discusses all
ideas simultaneously. The group members then individually and secretly vote
on each proposed solution, and the solution with the most individual votes
wins and proposed to the upper level.
 d) Simple linear regression analysis:
In it a projection of future demand is based on a past relationship. The
relationship can be between the organization’s employment level and variable
related to employment such as sales.. If a relationship can be established
between the sales and level of employment, predictions of future sales can
be used to make prediction of future employees.

e) Multiple linear regression analysis:

It is an extension of simple regression analysis where instead of one variable,
more than one variable e.g. sales volume, productivity, technical equipment
etc. are considered to determine future manpower demand.

f) Ratio-trend analysis:
The technique involves studying past ratios, say between the number of
workers and sales in an organization and forecasting future ratios, making
some allowance for changes in the organization or its method.

g) Work study:
Using this technique, one has to first calculate how much time an operation
or group of operation should take to complete and number of workers
required to complete the operation. After making necessary allowances,
productive hours per man year and number of direct labor required is
forecasted.

HR supply forecasting techniques

a) Replacement planning:
This technique makes use of a replacement chart in forecasting how the HR
needs may be fulfilled from the internal manpower supplies for a year.
Replacement charts show the profile of jobholders department-wise and
offers a snapshot of who will replace whom if there is a job opening.

b) Succession planning:
Under this, managers indicates what individuals are ready to move into
higher positions in the company so that no top management positions fall
vacant to disrupt company operations.

c) Markov analysis:
It models the movements of employees within or across organizational units.
This technique derives transition rates from the analysis of the past HR data
concerning promotions, transfers, demotion, quit, termination and perhaps
 recruitment. Based on these transitional events, estimates of future
manpower supply can be made.

d) Renewal analysis:
It derives future flow and internal availability of human resources on the
basis of vacancies created organization’s expansion, internal movements of
employees and manpower losses.

HRP practices/issues in Nepal

a) Lack of proper process and technology

b) No clear link between strategic plan and HR plan
c) Lack of comprehensive HR survey
d) Lack of assessment of current HR
e) Overstaffing in government and public enterprises