HRM323 Information Sheet 3 Human Resource Planning

HUMAN RESOURCE
MANAGEMENT
BACHELOR OF SCIENE IN INFORMATION

Program :
SYSTEM
Course Code : HRM323
Course Title : HUMAN RESOURCE MANAGEMENT
Course Credit : 3 units/54 hours
BULACAN POLYTECHNIC COLLEGE

Bulihan, City of Malolos
Human Resource Management
MODULE MATERIALS
List of Modules
MODULE
No. MODULE TITLE
CODE
1 Human Resource Management: An Overview HRM323-1
The Environment of Human Resource Management
2 HRM323-2
in the Philippines
3 HUMAN RESOURCE PLANNING HRM323-3
4 The Recruitment Process HRM323-4
5 The Selection Process HRM323-5
6 Performance Management HRM323-6
7 The Training Process HRM323-7
8 The Compensation Program and How to Manage It HRM323-8
9 Employee Benefits HRM323-9
10 Promoting Health and Safety HRM323-10
11 Employee Relations and Discipline HRM323-11
Bachelor of Science in Bulacan Date Developed:

Information System January 2024
Polytechnic Date Revised: Page 2 of 14
Human Resource College
Management Document No. Developed by:
Melannie Bautista Revision # 00
HRM323 c/o Admin
HUMAN
RESOURCE
PLANNING

HRM323 c/o Admin
MODULE CONTENT
COURSE TITLE : HUMAN RESOURCE MANAGEMENT
MODULE TITLE : HUMAN RESOURCE PLANNING
NOMINAL DURATION : 4 Hours
SPECIFIC LEARNING OBJECTIVES:

At the end of this module, you MUST be able to:
1. Define human resource planning.
2. Discuss the importance of human resource planning.
3. Describe the human resource planning process.
4. Identify sources of manpower shortage and surplus.
5. Prescribe ways to address shortage or surplus.
TOPICS:
1. Definition of Human Resource Planning
2. The Importance of Human Resource Planning
3. The Human Resource Planning Process
4. The Sources of Manpower Shortage and Surplus
5. The Prescriptive Ways to Address Shortage or Surplus.
ASSESSMENT METHODS:
• Written examination
• Recitation
REFERENCE:
Supangco, V., Los Banos, J., & Ocampo, K. T. (2021). Human Resource
Management in the Philippine Context (1st ed.). University of the
Philippines Press. (Original work published 2021)

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INFORMATION SHEET 323-3
Human Resource Planning
Learning Objective/s:
At the end of this module, you SHOULD be able to:
1. Define human resource planning.
2. Discuss the importance of human resource planning.
3. Describe the human resource planning process.
4. Identify sources of manpower shortage and surplus.
5. Prescribe ways to address shortage or surplus.
Introduction
This chapter discusses human resources planning. Recruitment, as well
as decruitment, is costly to all organization that is why an organization should
make a thorough analysis of how many individuals with specific skills are
needed for it to deliver goods or services efficiently before recruiting for the job.
An organization cannot afford to end up not having enough individuals with
particular skills because it will not be able to meet its target. On the other
hand, it also cannot afford to have more than what it needs because it will
incur compensation and other costs in excess of what is necessary.
Why Human Resource Planning

Human resource planning is the process of identifying human resource
needs in terms of number and type of individuals to achieve the objectives of
the organization, and determining the necessary actions to ensure that the
right individuals are available when needed. It looks beyond the current need
because for some skills to be available in the future, individuals have to be
trained and developed or the acquisition of such skills has to be planned. It
also calls for an understanding of the organization’s business cycle so that it is
able to smoothen out the needs during high and low seasons. Human resource
planning is clearly tied to other functions of human resource management
because ensuring people are available when needed also relates to the way the
organization manages retention.
Thus, the success of human resource planning relies not only on the
accurately forecasting demand for and supply of manpower but also on

HRM323 c/o Admin
ensuring that several systems in the organization are in place. These include
metrics of the relationship between demand for goods and services and labor;
systems for tracking and analyzing movements, such as promotion,
retirements, and turnover; recruitment; retention; compensation; succession
planning; training and development; career management; and performance
management.
The process of human resource planning also involves other managers in

the organization. For example, sales managers provide the input on the
demand for the organization’s goods or services; production managers provide
input on the manpower requirements to produce goods and services. Within
the HR department, there needs to be close coordination among units to ensure
that accurate estimates of supply and demand are generated.
The Human Resource Planning Process

Human resource process follows five general steps. These are the
following:
1. Forecasting human resource demand.
2. Forecasting human resource supply.
3. Determining balance: surplus or shortage.
4. Determining what to do with either surplus or shortage.
5. Monitoring actions taken.
Forecasting Demand for Manpower and Supply and Demand

HR planning derives from the strategic planning process of the
organization. Once the organization has established its strategies and identifies
its strategies and identifies its target, one of the next steps it takes in the
planning stage is ascertaining the number of individuals with particular skill
set needed to achieve its objectives.
Forecasting the demand for manpower can range from simple ration
analysis to more sophisticated econometric models. Some methods are
subjective, based on expert judgement about how many people are needed to
operate a unit. Usually after a manager have set their targets in the planning
period, they are asked to estimate how many employees will be needed. For
example, in operation a coffee shop, the necessary overhead, regardless of
customer volume, is the store manager. In addition, other employees are
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needed. In a coffee shop that is purely self-service, like Starbucks, the number
of baristas depends on the size of the shop, the number of operating hours, the
estimated number of customers per hour, the average amount of time a barista
serves a customer, etc.
Trend analysis requires the use of statistical tools and an efficient data
collection. In other words, organizations that wishes to use this method must
also invest in collection time-series data for such a purpose. For instance,
using regression analysis, the number of salespeople may be determined as a
function of the number of old clients to be serviced, the number of new clients
to be added, and the amount of time for administrative reports. The
organization must find its own model because such relationship will only be
true to the organization. Once the model is established, all the organization has
to do is fill the numbers for each independent variables (such as the number of
old clients, the number of new clients, etc.) into the equation.
Another aspect of human resource planning is determining the supply of

labor with specific skills. This is done by taking an inventory of individuals
possessing the skills needed to achieve organizational objectives. This means
that the organization must keep track of all the developmental activities of each
employee in the organization. This is because an employee may have joined an
organization initially in the finance department, for instance, but has since
moved to production or marketing and has thus learned certain skills through
on-the-job training or short courses. In estimating supply of labor during a
time period, one also has to consider estimate of movements within that
period—how many will be promoted, how many will retire, and how many will
probably leave the organization. As such, the organization must keep data of
these movements.
A useful tool to estimate supply of labor within a period is the transition

matrix. The transition matrix describes where the proportion of position
considered in the matrix goes after the period under consideration and the
proportion where each position comes from. The sum of each row equal 1, the
sum of each column is also 1. An organization may create a detailed or a very
general transition matrix. What is important is that the matrix defines the
period under consideration—say, from 2009 to 2013. The columns and rows
identify the positions under consideration. Table 4.1 is a hypothetical
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transition matric. Columns indicate the sources of manpower of a given
position. For example, 85 percent of plant managers in the particular
organization came from existing plan managers, 10 percent from production
managers, and 5 percent from outside the organization. On the other hand, the
rows indicate where individuals in a particular position moved. For example,
10 percent of the production managements were promoted to plan managers,
80 percent stayed at the same level, and another 10 percent left the
organization.
It is also important to estimate future needs because skills may not be

available when needed. At this point, the organization identifies its goals and
targets in the next years. From these future targets, the organization identifies
the core skills and knowledge needed to achieve those targets. This information
forms part of the bases from development plans of the organization. On the
supply side, the organization should take an inventory of where an employee is
willing to move in order to determine the potential supply that may be provided
by training and development. The organization also needs to keep track of the
positions that are difficult to fill from the inside as well as from the outside.
Thus, in addition to internal availability of labor, external labor supply

also needs to be analyzed, because when a skill is not readily available in the
market, the organization must be prepared to develop its own employees so
that they are ready for the organization’s future needs.
Assessing Supply and Demand Gaps

After forecasting demand for and supply of manpower, the next step is to
compare whether or not the organization has enough manpower with the given
skill set needed to achieve its objectives. This pertains to both current and
future needs. The assessment enables the organization to address manpower
shortage or surplus.
Addressing Manpower Surplus or Shortage

In order to address manpower shortage or surplus, the planner must go
beyond numbers and analyze what is causing such shortage or surplus. Such
an analysis also tells the organization whether or not the surplus or shortage is
for the short, medium, or long term, and thus solutions can be adjusted
accordingly.
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An HR planner needs to analyze the reasons for manpower surplus.
Inasmuch as labor is a derived demand, one obvious reason for a surplus is a
decline in the demand for an organization’s goods or services. It could be a
result of external factors, such as general decline in consumer spending or
declining market share. It could also be a result of internal factors, such as
mergers and acquisition, or technological changes. The latter in itself could
also generate surplus labor because some technologies require less labor. In
fact, when labor cost is high, organization opt for technologies that do not
require more labor (see box 4.2). strategies to address surplus also depend on
the nature of the surplus whether it is temporary, or something expected to
last in the long run. Again, the organization needs to identify the criteria with
which to make decisions on the options to take, in addition to whether or not
the surplus is only temporary or for the long haul. Strategies to address
manpower surplus include downsizing, retraining, redeployment of employees,
early retirement, natural attrition and freeze hiring.
1. Downsizing, Downsizing is descaling the number of employees in the
organization. This is usual response to a long-term downturn of business
prospects. There are several approaches to downsizing. One is to offer
incentives for early retirement. Inasmuch as this is voluntary, it will
cause less pain to the employees. Another approach is to identify
individuals who need to be retrenched. Just and acceptable bases for
identifying the individuals who will be asked to leave the organization
must be reached. This approach will cause tremendous suffering not
only for those who are asked to leave but also for those who are left
because they will always think that they may be next. While the two
foregoing approached target individuals, a third approach is to undertake
a redundancy program wherein the organization identifies a job as
redundant. Redundancy exists when there are more employees than are
needed by the organization. This can result from reorganization; change
in strategic direction, including discontinuing a product line or service
resulting in more employees than are necessary to run the business; and
outsourcing (DOLE 2016). Thus, employees performing jobs affected by
these changes can be terminated by the organization. Again, this can
cause tremendous suffering to employees whose jobs are rendered
redundantly.

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While organizations are prone to resorting to downsizing when faced with
labor surplus, the outcomes are mixed. Some downsizing efforts fail
when done haphazardly and used as a stopgap measure rather than as a
potent strategy to increase competitiveness (Schmitt, Nantes, and
Borzillo 2011). Once consequence of downsizing is the loss of knowledge
and organizational memory, especially when such are not managed well
in the organization. It also affects social capital because the social
interactions are disrupted when some of the members of the unit leave
(Fisher and White 2000). Even as the voluntary approach to downsizing
lessens human suffering, it can also do harm to the organization,
especially, when those who leave possess, the skills sorely needed by the
organization (Fisher and White 2000; Guther and Datta 2008).
2. Redeployment. If surpluses of employees occur in some units and there
are shortages of employees in others, these surplus employees may be
trained and redeployed in the units experiencing shortages.
3. Restricting overtime. When the outlook for employee surplus is short term
or a result of seasonal decline in demand for labor, organizations may
restrict overtime work.
In addressing manpower shortages, the organization has to diagnose the

reasons for shortages. Interventions should address the cause of such a
shortage. Common reasons shortage includes an increase in the demand of
product or services, whether such increase is seasonal or long-term. Labor is
derived demand for goods and services such that when there is an increase in
the demand for and organization’s goods or services, demand for labor also
increases. In cased where demand for goods is seasonal, the organization needs
to determine time of production or delivery so that the additional number of
employees needed will be considered and there will be enough employees with
the right skill when they are needed. In addition, technological changes that
leave employees ill-prepared for such also disrupt the balance of manpower
supply and demand in the organization. When an organization decides to alter
technology, the skills needed to address such changes must be considered.
Moreover, increased turnover, which again may be caused either by push
factors like dissatisfaction of employees, or pull factors such as better pay
outside, also increases the likelihood of employee shortage.

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An organization has several options to address manpower shortage. In
choosing options, an organization has to know the root cause of the shortage it
is addressing. It also needs to ascertain whether or not the shortage is short-
term or long-term. The organization has to look at other HRM functions, such
as compensation and benefits, or rethink its retention strategy when the
reason for manpower shortage is excessive turnover. Sometimes the shortage is
brought about by technological changes that render some employees in the
unit inadequate in utilizing the new technology. In this scenario, the shortage
is addressed by training existing employees with the new tasks brought about
by new technology until they are sufficiently trained for the new technology.
However, when the shortage is the result of increase in demand for labor
due to increase in demand for goods or services, the organization has several
options, depending on the projected length of the shortage it is experiencing.
These options include overtime work, transfer or temporary secondment to
units experiencing shortage, hiring of non-regular employees, outsourcing, and
recruitment.
1. Overtime. When manpower shortage is expected to be short-term, the
organization may assign employees to work overtime. This approach
addresses the shortage promptly, and it can easily be reversed once the
shortage is over. However, there is a limit to the length of time employees
can render overtime without negatively affecting productivity. Overtime
has been shown to decrease productivity (Hanna and Sullivan 2004) and
increase fatigue (Yumang-Ross and Burns 2014) and labor cost (Clayton
et al. 1997).
2. Secondment. When the shortage is localized in a certain unit of the
organization, surplus employees from other units may be trained and
assigned to the unit that is experiencing the shortage. The transfer may
be short-term arrangement or a permanent one.
3. Nonregular workers. When manpower shortage is a result of an increase
in the seasonal demand for labor, organizations usually hire nonregular
workers. This category of workers includes, casual, project-based and
contractual, seasonal, probationary, and apprentices and learners (PSA
2014). Casual workers are those whose length of employment in the
organization is not specific and show work is not considered necessary to
the organization’s line of business. Contractual and project-based
workers are those whose employment duration is specific at the outset.
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Seasonal workers are those hired for the duration of a seasonal work
demand. Probationary workers, on the other hand, are those who are
under observation by the employer to determine whether or not they are
qualified for regular employment in the organization. Apprentices are
persons who train with the organization in approved apprentice able
occupation and for a duration of three to six months and covered by the
apprenticeship agreement (TESDA 2004). Examples of apprentice able
occupation are automotive mechanic, etc. A list of apprentice able
occupation with the corresponding duration of training is embodied in
Department Order 52-03 series 2003 (DOLE 2003). On the other hand,
learners are persons who train in semiskilled and other industrial
occupations that are not considered apprentice able, and where training
period does not exceed three months (DOLE 2016). Thus, apprenticeship
and learnership programs are not only employment programs but also
training programs designed for apprentice and learners to learn skills
(TESDA 2004). All of the foregoing categories of worker, except the
probationary employees, are hired with the purpose of filling short-term
or non-permanent manpower needs. In June 2012, about 1.149 million
nonregular workers were employed in establishments with at least
twenty workers. They constituted 30.5 percent of the 3.769 million
workers employed in establishments with twenty or more employees (PSA
2014).
4. Outsourcing. Outsourcing is an arrangement wherein an organization
avails of the services of another organization to undertake the production
of its goods and services. It is a convenient arrangement because the
organization foes do not need to add employees in its payroll, and it also
does not need to lay off workers when the demand for its production is
diminished. Some organizations that do not want to increase the number
of their employees routinely use outsourcing to enjoy the cost and time
flexibility provided by companies that can do the job better or faster than
the focal organization (Matusik and Hill 1998). Examples of routinely
outsourced jobs are advertising, public relations, information technology,
auditing, and legal. Moreover, in the area of human resource
management, the most outsourced functions are training and
development (Supangco 2012). However, several organizations in the
Philippines do provide recruitment and payroll services.

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5. Recruitment. When the manpower shortage is considered long-term, an
option for the organization is to hire new employees. It the start the
process of recruitment. The recruitment process is discussed in the next
chapter.
Summary
Human resource planning is the process of identifying human resource
needs in terms of number and type of individuals to achieve the objectives of
the organization, and determining the necessary actions to ensure that the
right individuals are available when needed. The process starts with identifying
manpower supply and demand. When surplus or shortage or both are
determined, the organization addresses these imbalances. The causes of
surplus and shortage must be ascertained to determine the proper ways to
address them. The most common cause or surplus is the decline in the
demand for goods or services offered by the organization. Action taken to
address such surplus include downsizing, redeployment, and restricting
overtime. On the other hand, shortage may be caused by an increase in the
demand for goods and services, technological changes that leave employees ill-
prepared for the change and increase in employee turnover. Actions to address
employee shortages include overtime, secondment, employment of non-regular
workers, outsourcing, and recruitment. Other means of addressing employee
shortages include training and assessment of the compensation system and
other reasons for turnover. These actions must address the root cause of
employee shortage.
Issues for Resolution

Luka Bravura Incorporated (LBI) had humble beginnings as a small stall
at a monthly bazaar in Makati. Owned and managed by two sisters, Luna and
Kai, the company is now widely known for its gorgeous Filipino-inspired
clothing, shoe, and bag lines which are hugely popular in the popular in the
Philippine, Asian, and European markets. A new investor from Indonesia wants
to partner with the sisters. Utilizing local premium materials and
craftsmanship, the new investor wants the sister to produce a clothing line for
the Indonesian market made primarily of batik made in the Philippines. Luna
thinks that manufacturing high-end apparel for the Indonesian market would
be a good addition to their business.

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1. What challenges will this new line bring into the current operations of
LBI?
2. What perspectives can be useful in addressing these challenges?
3. What should be done to address these challenges?

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HRM323 Information Sheet 3 Human Resource Planning

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HUMAN RESOURCE

BACHELOR OF SCIENE IN INFORMATION

Course Code : HRM323

Course Title : HUMAN RESOURCE MANAGEMENT

Course Credit : 3 units/54 hours

BULACAN POLYTECHNIC COLLEGE

Bachelor of Science in Bulacan Date Developed:

Bachelor of Science in Bulacan Date Developed:

COURSE TITLE : HUMAN RESOURCE MANAGEMENT

MODULE TITLE : HUMAN RESOURCE PLANNING

NOMINAL DURATION : 4 Hours

SPECIFIC LEARNING OBJECTIVES:

Bachelor of Science in Bulacan Date Developed:

Why Human Resource Planning

Bachelor of Science in Bulacan Date Developed:

The process of human resource planning also involves other managers in

The Human Resource Planning Process

Forecasting Demand for Manpower and Supply and Demand

Another aspect of human resource planning is determining the supply of

A useful tool to estimate supply of labor within a period is the transition

It is also important to estimate future needs because skills may not be

Thus, in addition to internal availability of labor, external labor supply

Assessing Supply and Demand Gaps

Addressing Manpower Surplus or Shortage

Bachelor of Science in Bulacan Date Developed:

In addressing manpower shortages, the organization has to diagnose the

Bachelor of Science in Bulacan Date Developed:

Bachelor of Science in Bulacan Date Developed:

Issues for Resolution

Bachelor of Science in Bulacan Date Developed:

Bachelor of Science in Bulacan Date Developed:

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