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Chapter 6 − Ascertaining HR Supply Strategic Human Resources Planning, 7e
CHAPTER 6
Ascertaining HR Supply
1. Understand the relationship between demand and supply forecasting techniques in the HR
planning process.
2. Recognize the importance of effectively managing the supply of human capital.
3. Comprehend the importance of segmenting human capital to better understand where
human capital plays a critical role in implementing strategy and how to manage the
supply of that human capital.
4. Discuss and evaluate the advantages and disadvantages of the following specific methods
of determining external and internal supply:
A. Skills and management inventories
B. Human capital segmentation
C. Markov models
D. Linear programming and simulation
E. Movement analysis
F. Vacancy/renewal models
5. Recognize when an HR gap may be filled through substitution strategies such as
automation, or when the gap may be attributable mostly to the bullwhip effect.
Chapter Summary
This chapter presented six models or techniques used by organizations to determine future HR
supply requirements. Skills and management inventories contain information that provides a
detailed analysis with the current workforce to determine whether it can meet the demand for
personnel replacement from current employees. Succession/replacement analysis expands on the
inventories approach by using succession/replacement charts and tables to identify specific
replacements for key organizational jobs and consider whether problem areas would occur if
individuals are to be promoted/transferred. The Markov model uses historical patterns of
individual movements between jobs in the organization and attaches transitional probabilities for
promotion, transfer, etc., in particular jobs over an annual or specified period. In this way, exact
numbers of open positions can be derived and career progression tracked to assess time required
for individuals to reach target jobs.
Linear programming uses mathematical equations to determine the optimal or best mix of labour
supply given specified constraints, such as minimizing compensation costs or achieving a diverse
workforce. Movement analysis enables identification, not only of the location and number of
positions that must be filled by the organization, but also of the total number of individuals to be
moved to fill openings. The vacancy model provides specific information on total personnel flows
into and out of each authority or compensation level, as well as for the whole organization.
Accordingly, one can calculate the exact numbers of internal promotions and external recruits that
will be required.
Finally, a discussion of HR supply demonstrates the need for organizations to develop retention
programs to control absenteeism and turnover.
Class Outline
Ask Students:
Why do many organizations prefer to use
Skills gap: a situation in which the supply internal supply to fill open positions?
of a particular form of human capital
available is inadequate to address the Ans.
demand. 1. Current employees are already socialized
to the norms, rules, and procedures of the
organization
2. The employer possesses detailed
HR Supply Programs knowledge (as listed on its HRMS skill
inventories) of the employees’
The Role of Employers in Influencing performance and KSAOs (e.g., work
Supply history and experience).
Only 38% of Canadian business offer 3. Internal labour provides employers with
training to teach technical skills to protection from economic downturns, as
employees in the highly desirable STEM employees can move from one job level
areas (science, technology, engineering, to another.
and math). 4. Selecting employees for training and
development, and promotion, enables the
organization to reinforce employee
Other Labour Pools loyalty and performance.
Organizations facing shortages could 5. Employee motivation and commitment
recruit from underutilized designated to the organization may increase when
groups: loyalty is rewarded.
• Mature workers/retired workers. • Lack of attention to HR planning
• Neurodiverse individuals within the means that many organizations
autism spectrum disorder and Tourette downsize their supply of trained
syndrome. workers in order to achieve short-run
cost savings, but at a greater long-
term cost.
Influence of Government Programs • HR planners are about to hit a
HR Retention Programs demographic wall, including the
Employers must try to keep their supply of effects of decreased birth rates, the
employees level. Even if they are usually retirement of baby-boom aged
able to hire many skilled employees, workers, and reduced labour force
changes can occur. Besides normal participation.
turnover, mismatch to jobs and other • Organizations are scrambling to
circumstances such as a tightening of the attract and retain qualified workers
labour market may be problems. (i.e., war for talent).
Ask Students:
What are the benefits of succession
Methods for Modelling the Supply of planning?
Human Capital Ans:
• Protect the legacy of business.
• Maintain a service for community.
Skills and Management Inventories • Build value of business.
• Provide financial security for owner and
Skills inventory: an individualized stakeholders.
employee record held on each employee • Deal with unexpected events (illness,
except those currently in management or accident or death).
professional positions. Information
includes: Prepare for the future from:
• Personal information (e.g., name, https://canadabusiness.ca/business-
employee number, emergency planning/succession-planning/F-S59-
information, compensation band, etc.). N611690-A/
• Education, training and skills
competencies.
• Work history (e.g., date of hire, seniority, Web-based Activity: In groups of three, have
current job and supervisor, etc.). students go to:
• Performance appraisals. https://www.canada.ca/en/shared-
• Career information (e.g., future jobs services/corporate/transparency/access-
desired by employees and information-privacy/publications/privacy-
recommendations by supervisors). impact-assessments-summary-employee-
• Hobbies and interests (including experience-skills-inventory.html
community and volunteer involvement).
Ask Students:
Management inventory: an individualized What does it say about how the federal
employment record for managerial, government uses Employee Skills
professional, or technical workers that Inventories?
includes all elements in the skills inventory Ans: These inventories are used to determine
with the addition of information on the learning, training and development
specialized duties, responsibilities, and requirements of persons employed in the
accountabilities. public service and fix the terms on which the
learning, training, and development may be
carried out.
Contains all of the information found in a
skills inventory as well as:
Ask Students:
The model uses information on the When might an employer want to keep the
different types of employees and their names of possible replacements
movement: confidential?
• Remaining in the current job. Ans.
• Promotion to a higher classified job. • To prevent competitors for the new role
• A lateral transfer to a job with a similar from resigning before they can be
classification level. offered alternative positions.
• Exit from the job (e.g., termination, • To prevent changes in stock prices
layoff, voluntary leaving by the before a press release is held.
employee) • To avoid speculation among staff.
• Demotion (relatively rare).
Ask Students:
Ripple or chain effects: the effect created Why are formulas and corresponding
when one promotion occurs: It causes numbers important in HR?
several other employee movements as Ans.
subordinates are promoted to fill sequential Since HR is typically seen as not having
openings. skills with numbers, e.g., training, it is
essential that HR professionals can quantify
their value in terms of the bottom line.
DISCUSSION QUESTIONS
1. This chapter discusses some of the reasons for giving preferential consideration to your
own workforce to fill job openings. Are there any disadvantages? What can management
do to mitigate these potentially negative effects?
Ans.
Advantages Disadvantages
Fit in, get along with team Same diversity makeup generally
Employee morale high, company Lack of current education
investing
Loyalty and commitment Conflict among staff who do not get
promoted, are working for a past co-
worker.
• Can avoid some of the negative effects by offering a mix of internal postings and
external hires.
• Offer tuition reimbursement for internal employees to gain current skills.
Ans.
Employees can be segmented as front workers, back workers, full-time workers, part-time
workers, by job title.
3. This chapter identified three sources of labour (Aboriginal people, older people,
automation) that are growing and may be available to meet labour demands. Imagine that
you are the owner of a warehouse distribution centre in Edmonton, Alberta. On your own
or in groups, prepare a list of the advantages and limitations for using one of these labour
sources.
Ans.
Using Automation
Advantages Disadvantages
Low cost per hour Lesson
Can customize to meet different needs No new ideas
No breaks, benefits, absences No problem solving
4. A Markov model provides important information to the HR supply analyst with respect to
movement or flows of employees through various jobs in the organization. Discuss how
this supply-forecasting technique might also provide useful information to line managers
and workers (i.e., non-HR staff).
Ans.
Modelling forecasts even if some estimates must be made.
Take into consideration the movement between jobs, based on historical movement
patterns, with adjustments if needed.
Helps avoid missed opportunities from having the right people to do the right job at the
right time.
CASE STUDY
HR Planning at M&K
QUESTIONS
1. Estimate the total HR demand for M&K for next year, by job level.
Ans.
HR
Demand
Level 5 50
Level 6 100
Level 7 100
Level 8 250
Level 9 579
2. Estimate changes in HR supply for M&K for next year, by job level.
Ans.
HR Supply
Change
Level 5 plus 11
Level 6 plus 137.5
Level 7 plus 15
Level 8 plus 918
Level 9 plus 198
Level 9 0
b. A mix of internal and external supply as detailed in item 7b on page 160 of the text.
Ans.
Promote Hire
Internally Externally
Level 5 25 25
Level 6 40 60
Level 7 30 70
Level 8 50 200
Level 9 0 579
As HR director, what do you see as some of the talent strategies and plans that have to be in place to
facilitate each of the above options?
Ans.
To promote from within:
• Structured performance appraisals process with goals
• Determine HR supply
• Analyze possible scenarios
• Ongoing training development
• Skills inventory
• Replacement charts
• Internal postings
4. Calculate the transitional probabilities of movements for levels 5 to 9 on the basis of information
provided in item 8 on page 160 of the text. Using the calculated transitional probabilities, what
employee movements (at levels 5 to 9) might take place next year?
Ans.
Employee Movements
Level 5 100
Level 6 200
Level 7 400
Level 8 100
Level 9 579
5. Using information provided in item 9 on page 160 of the text, estimate the number of
managers that M&K would need using regression analysis if revenue levels:
a. Increase to $2.5 billion.
How many managers would M&K have to let go if revenues drop to $1.5 billion?
Ans.
At $3.5 billion, M&K would need 900 managers.
Year X – 4 1 150
Year X – 3 1.3 200
Year X – 2 1.5 250
Year X – 1 1.8 320
Year X 2 400
Year X + 1 3 750
Year X + 1.5 3.5 900
Year X – 4 1 150
Year X – 3 1.3 200
Year X – 2 1.5 250
Year X – 1 1.8 320
Year X 2 400
Year X + .5 2.5 550
Year X + 1 3 650
How many managers to let go if revenue drops from 2.5 billion to 1.5 billion?