Module-III

Introduction to strategic human resource planning

In order to improve the strategic alignment of staff and other resources, it’s
essential to understand how a strategic HR planning process works. At its most
basic level, strategic human resource planning ensures adequate staffing to meet
organization’s operational goals, matching the right people with the right skills at
the right time. It’s important to ask where the organization stands currently and
where it is going in order to remain flexible. Each company’s plan will look
slightly different depending on its current and future needs, but there is a basic
structure that organizations can follow to ensure that they are on the right track.
The strategic human resource planning process begins with an assessment of
current staffing, including whether it fits the organization’s needs, and then moves
on to forecasting future staffing needs based on business goals. From there, the
strategist need to align organization’s strategy with employment planning and
implement the plan not only to hire new employees but also to retain existing
employees and properly train the new hires—and the current employees—based on
business changes.

Human Resource Management Planning Process

When 71% of CEOs believe that their employees are the most important factor in
their company’s economic success, it’s easy to understand the importance of the
human resource management planning process—the process by which
organizations determine how to properly staff to meet business needs and customer
demands. Despite the obvious need, many organizations do not have a strategic
human resource planning process in place, with nearly a third of HR professionals
saying their departments need to improve strategic alignment.

Steps and process of Strategic Manpower Planning

1. Assess Current HR Capacity

2. Forecast HR Requirements

3. Develop Talent strategies

4. Review or Evaluate

1. Assess Current HR Capacity

The first step in the human resource planning process is to assess current staff of
the organization. Before making any moves to hire new employees for the
organization, it’s important to understand the talent already have in inventory.
Develop a skill inventory for each of your current employees. It can be done in a
number of ways, such as asking employees to self-evaluate with a questionnaire,
looking over past performance reviews, or using an approach that combines the
two.

2. Forecast HR Requirements

Once the organization has a full inventory of the resources, it’s time to begin
forecasting future needs.

 Will your company need to grow its human resources in number?

 Will you need to stick to your current staff but improve their productivity
through efficiency or new skills training?
 Are there potential employees available in the marketplace?

It is important to assess both company’s demand for qualified employees and the
supply of those employees either within the organization or outside of it. The HR
manager need to carefully manage that supply and demand.

Demand Forecasting

Demand forecasting is the detailed process of determining future human resources

needs in terms of quantity—the number of employees needed—and quality—the
Caliber of talent required to meet the company's current and future needs.

Supply Forecasting

Supply forecasting determines the current resources available to meet the demands.
With previous skills inventory, the manager will know which employees are in our
organization are available to meet our current demand. The manager will also want
to look outside of the organization for potential hires that can meet the needs not
fulfilled by employees already present in the organization. It is important to
calculate staffing needs and developing a staffing plan.

Matching Demand & Supply

Matching the demand and supply is where the hiring process gets tricky—and
where the rest of the human resources management planning process comes into
place. The manager will develop a plan to link organization’s demand for quality
staff with the supply available in the market. The organization can achieve this by
training current employees, hiring new employees, or combining the two
approaches.

3. Develop talent strategies

After determining company’s staffing needs by assessing current HR capacity and

forecasting supply and demand, it’s time to begin the process of developing and
adding talent. Talent development is a crucial part of the strategic human resources
management process. Talent Development Process consists of following phases.

Recruitment

In the recruitment phase of the talent development process, the HR manager begins
the search for applicants that match the skills our company needs. This phase can
involve posting on job websites, searching social networks like: LinkedIn for
qualified potential employees, and encouraging current employees to recommend
people they know who might be a good fit.

Selection

Once the management has connected with a pool of qualified applicants, conduct
interviews and skills evaluations to determine the best fit for the organization the
next step is to place the right people for the right role.

Hiring

Decide the final candidates for the open positions and extend offers. Bring clarity
to the hiring process to find the best candidates for the company.

Training and development

After hiring the new employees, bring them on board. Organize training to get
them up to speed on company’s procedures. Encourage them to continue to
develop their skills to fit the company’s needs as they change. Find more ideas on
how to develop employees’ onboarding process which will be helpful to
familiarize new employee with organization’s products, services, customers and
other stakeholders.

Employee remuneration and benefits administration

Keep your current employees and new hires happy by offering competitive salary
and benefit packages and by properly rewarding employees who go above and
beyond. Retaining good employees will save your company a lot of time and
money in the long run.

Performance management

It is very important to focus on regular performance reviews for all employees.

Identify successes and areas of improvement. Keep employees performing well
with incentives for good performance.

Employee relations

A strong company culture is integral in attracting top talent. Beyond that, make
sure that the company is maintaining a safe work environment for all, focusing on
employee health, safety, and quality of work life.

4. Review and Evaluate

Once Human Resource Management process plan has been in place for a set
amount of time, the HR department can evaluate whether the plan has helped the
company to achieve its goals in factors like: production, profit, employee retention,
and employee satisfaction. If everything is running smoothly, continue with the
plan, but if there are roadblocks along the way, the manager can always change up
different aspects to better suit your company’s needs.
What are workforce planning tools?

Workforce planning tools are instruments that help analyse current capabilities and
future needs for the employees. These tools are data-driven instruments that help
identify the gap between current capabilities of the workforce and its future needs.
In addition, they help the organization come up with ways to fill this gap.

1. Strategic Workforce Planning (SWP) Map

The first workforce planning tool is the workforce map. This map shows how
workforce planning activities align with the bigger picture, like the organizational
strategy. An often-heard critique about HR policies is that it doesn’t follow
organizational strategy. The beauty of workforce planning is that it offers tools to
add value to the organization. The model below shows this very clearly.

1. Market, Product & Competition Analysis

2. Organizational Strategy
3. Quantity & Quality of Workforce (SWP)
4. HR Strategy (Recruitment & Selection, Performance & Reward, Training &
Development)

The board of directors sets a strategy for the organization. This strategy is not
made up – it is derived from three key factors:

 What’s happening in the market? E.g. trends in demand and supply.

 What products and/or services are the company already producing?
 What is the competitor doing? How the organization compete with
competitors through process, product or business model innovation.

These factors influence the strategy that the board sets. This forms the beginning
point of strategic workforce planning as it helps the company to determine where
the organization wants to go in the next 3-5 years. This is the target.
  The next or second step is to identify where we are now.
 The 3rd step in the model is the quality and the quantity of the workforce. An
excellent tool to do this is the performance-potential matrix. Based on these
insights, the HR strategy is created. This strategy is executed in all the
different functional HR areas, like recruitment, performance management,
rewards and promotions, etc.

2. 9 Box Grid or Performance Potential Matrix

High Potential High Consistent

Potential Gem/Enigma/Roug Potential/Growth Star/Future
h Diamond Employee/Future Leaders
Star
Moderate Inconsistent Core Player/Key Current Star/High
Potential Player/Dilemma Player Performer
Low Talent Risk/Under Average Solid
Potential Performer Performer/Effective Performer/Trusted
Performer/ Professional/High
Solid Professional Professional
Low Performance Moderate High Performance
Performance
The performance-potential matrix is also called 9-box grid or HR3P matrix, maps
employees’ performance and potential in one model. The matrix map consists of
employees in different categories, ranging from “talent risk”, which are low
potential and low performance, all the way to “consistent stars”, who are high
potential and high performance. This is just one of the models that visualize
performance and potential. An advantage of the model is that it’s easy to
understand

3. HR Dashboarding

A third workforce planning tool that a lot of companies are actively investing in, is
the HR dashboard. The HR dashboard is a very effective instrument to show
current workforce capabilities. There’s a lot to talk about the HR dashboard. On a
conceptual level, the dashboard is filled with information from different source
systems, like a payroll system, applicant tracking system, and other Human
Resources Information Systems. Based on this data, metrics are calculated and
displayed. In this model systems are extracted, data is transferred and loaded into a
data lake or data warehouse. Reporting software uses this data to report on it.

4. Compensation & Benefit analysis

It does provide a number of great opportunities for data analysis. For two reasons.
First of all, compensation and benefit data is highly structured and accurate.
Secondly, it is directly related to a financial outcome and thus bottom-line
performance.

The simplest analysis has two elements:

 Set an internal pay benchmark and group people in (severely) overpaid and
(severely) underpaid categories

 Retrieve performance data and categorize people in overperforming or

underperforming.

Overperforming people are overpaid and your underperforming people to be

underpaid. If there’s a difference in the two the manager either run the risk of
losing top performers because of underpay or not losing bad performers because of
overpay. The latter is referred to as the golden cage. This data can be enriched by
labour market statistics. The manager can use payment benchmarks from outside
organization to adjust for internal payment discrepancies. He/she can also use job
market information to control for external demand and projected demand for
certain jobs. These kinds of numbers are available for any industry and can be very
beneficial in anticipating and adjusting to future workforce needs.

5. Scenario Planning

Scenario planning is the ultimate workforce planning tool. It helps to anticipate

multiple possible futures so that the manager won’t be caught off-guard. In
scenario planning, the manager imagines different potential futures that have a
severe impact on the business. These scenarios can involve technological
innovation, new legislation, natural disasters, changes in attitudes of the general
public, etc. By thinking about these scenarios, analysing them and describing how
they will make an impact on day-to-day business, the HR manager can develop a
strategy for unlikely but impactful events. One of the early pioneers in this
approach was Shell. Shell used scenario planning to develop strategies for dealing
with the 1973 energy crisis, the 1979 oil price shock, the fall of the Soviet Union,
and the increasing pressure on companies to address environmental issues.

Operation of Scenario Planning as Workforce Planning Tool

 First of all, the HR manager want to analyse the focal issue of concern for
the workforce. This is the issue that the planning exercise canters on.
 Secondly, the manager wants to identify driving forces of change. These can
be external and internal. Examples are the specific demographic driver,
environmental drivers, socio-political drivers, market drivers, and so on. The
challenge is to make these drivers as specific as possible.
 Thirdly, the manager wants to rank these specific driving forces on their
importance and uncertainty. Importance refers to the impact the driver will
make on the workforce. Uncertainty refers to the uncertainty of the
estimation. This step is required to select the most relevant and divergent
conditions.
 Next, the two most uncertain and important driving forces are selected and
two polar opposites are selected. These are mapped on a 2×2 grid.
 This creates four distinctly different and impactful workforce challenges.
For each of these scenarios, a name and story are created related to how they
will play out and impact the workforce.
 In the final step, strategies are created to resolve these challenges. This
exercise takes a team at least half a day up to a few days, depending on the
level of complexity.

Gap Analysis

Definition: Gap Analysis can be understood as a strategic tool used for analysing
the gap between the target and anticipated results, by assessing the extent of the
task and the ways, in which gap might be bridged. It involves making a
comparison of the present performance level of the entity or business unit with that
of standard established previously. Gap Analysis is a process of diagnosing the gap
between optimized distribution and integration of resources and the current level of
allocation. In this, the firm’s strengths, weakness, opportunities, and threats are
analysed, and possible moves are examined. Alternative strategies are selected on
the basis of:

 Width of the gap

 Importance

 Chances of reduction

 If the gap is narrow, Stability Strategy is the best alternative.

 When the gap is wide, and the reason is environment opportunities,
Expansion Strategy is appropriate,
 If it is due to the past and proposed bad performance, Retrenchment
Strategies are the perfect option.

Types of Gaps

The term ‘strategy gap’ implies the variance between actual performance and the
desired one, as mentioned in the company’s mission, objectives, and strategy for
reaching them. It is a threat to the firm’s future performance, growth, and survival,
which is likely to influence the efficiency and effectiveness of the company. There
are four types of Gaps:

1. Performance Gap: The difference between expected performance and the actual

performance.

2. Product/Market Gap: The gap between budgeted sales and actual sales is termed
as product/market gap.

3. Profit Gap: The variance between a targeted and actual profit of the company.

4. Manpower Gap: When there is a lag between required number and quality of
workforce and actual strength in the organization, it is known as manpower gap.

In case, gaps are discovered the company’s management has three alternatives:

 Redefine the objectives: If there is any difference between objectives and

forecast, first and foremost the company’s top executives need to check whether
the objectives are realistic and achievable or not. If the objectives are intentionally
set at a high level, the company should redefine them.

 Do nothing: This is the least employed action, but it can be considered.

 Change the strategy: Lastly, to bridge the gap between the company’s objectives
and forecast, the entity can go for changing strategy, if the other two alternatives
are considered and rejected.

Before making any change in the strategy, one must consider that the gap exists
between the present and proposed state of affairs. It is too wide to be noticed, and
the organization is encouraged to reduce it. The company’s management is of the
opinion that something can be done to reduce it.

Stages in Gap Analysis

1. Ascertain the present strategy: On what assumptions the existing strategy is

based?

2. Predict the future environment: Is there any discrepancy in the assumption?

3. Determine the importance of gap between current and future environment: Are

changes in objectives or strategy required?

Whether it is anticipated sales, profit, capacity or overall performance, they are

always based on the past, and present figures and some amounts of guess are also
involved in it. So, the occurrence of the gap is quite natural, but if the gap is large,
then it is a point to ponder because it might have an adverse effect on the
company’s future.

Business process approach to HRP.

The Business Process Approach is the most reasonable approach to human

resource planning begins with acquiring knowledge of the human resources
function: recruitment and selection, training and development, employee relations,
workplace safety, and compensation and benefits. Your organizational goals
should include attention to all aspects of the human resources planning process.

Legal Framework
Beginning with the basic premise of fair employment practices, the human
resources planning strategy starts with the legal framework. Companies that seek
guidance from federal, state and local regulations concerning employee and
employer rights are on the right track. Establishing relationships with agency staff
from the U.S. Equal Employment Opportunity Commission, U.S. Department of
Labor, the National Labor Relations Board and U.S. Citizen and Immigration
Services will work for advantage. These are the primary federal agencies that
enforce employment actions. When the organization creates an employee
handbook, the understanding of, and commitment to, fair employment practices
must be expressed in writing.

Organizational Mission and Goals

This approach to human resources planning mirrors the section in your business
plan devoted to explaining why the company exists and what value it presents to
the community. Human resources planning is also based on your organization's
mission statement, goals and objectives because the workforce will be in alignment
with the company values. "Entrepreneur" contributors Dennis Daley and
colleagues state: "Combining human resource practices with a focus on the
achievement of organizational goals and objectives can have a substantial effect on
the ultimate success of the organization." Establishing business ethics and
guidelines concerning the organization as a whole is extremely important, and thus,
an integral part of the human resources planning.

Policy Development

Building upon the organization's legal framework and organizational mission and
values statement, the organization is ready to approach the policy development.
This is a logical approach. Developing policies for the workforce of organization-
wide. Policies such as customer service standards, financial controls, marketing
operations, corporate governance and IT resources. This is one of the final
approaches to human resources planning. Because the organization has now
completed the legalities of staffing of organization and forming the values by
which the workforce will operate.