HUMAN RESOURCE

PLANNING
(HRP)

HRP: AN OVERVIEW

HRP is a process of analyzing & identifying the

need for & availability of human resources
(HR) so that organization can meet its
objectives

DEFINING HR PLANNING
Strategy Oriented DEFINITION
A strategy for the acquisition, utilization, improvement &
retention of an organizations human resources
AIMS of HRP:

1.
2.

to ensure the optimum use of the people currently employed

to provide for the future staffing needs of the organization in terms of
skills, number, & ages of people

HRP establish control: planner work as a policeman who checks

whether staffing levels are optimum

Process Oriented DEFINITION

HRP is as a continuous process of analyzing an organizations HR

needs under the changing conditions & developing the activities
necessary to satisfy these needs like staffing, recruitment,
selection, training, etc.
Process aimed at assisting management to determine how the
organization should move from its current staffing position to its
desired staffing position
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IMPORTANCE OF HRP

Helps to determine the future personnel needs

It is a part of strategic planning
Creating highly talented personnel
International strategies depend upon HRP
HRP provides foundation for personnel functions
Increasing investments made in human resources is
another compelling reason for HRP
Helps in uniting the perspectives of line and staff
managers
Better clarity and direction is possible in all departments
Attracting and retaining qualified outsiders
Management succession between generations of owners

Family relationships and HR policies

PERSPECTIVES OF HRP

MACRO HRP
Assessing & forecasting demand for & availability of skills at national
/ global level
Predict the kinds of skills that will be required in future & compare
these with what is / will be available in the country
Eg.

Microsoft going to cut 18000 jobs by June 2015

Recent budget allocations

MICRO HRP
Process of forecasting demand for & supply of HR for specific
organization
Eg.

Genpact (an IT solution company in India) has launched a Train the

trainer program to address the skills gap of students for members of the
faculty at Management departments
INFOSYS going to rehire performer ex employees + also plans to tackle
its increasing attrition rates

Quarterly promotion cycle , fast track career for performers

HR PLANNING PROCESS

BUSINESS STRATEGY & HRP

Business
strategy focus
(Porter)

HR strategy

HRP activities

Cost leadership
Cost

control
Stable business
environment
Efficiency & quality

Job

& employee
specialization
Employee efficiency
Long HR planning
scope

Internal

promotions
Emphasis on training
Hiring & training for
specific capabilities

Shorter

External

Differentiation
Long

term focus
Growth
Creativity in job
behaviour
Decentralization

HR planning

scope
Hire HR capabilities
required
Flexible jobs &
employees

staffing
Hire & train for broad
competencies

BUSINESS STRATEGY & HRP

Business
strategy focus

HR strategy

HRP activities

Defender
Finds

change
threatening
Favors strategies
which encourage
continuity & security

Bureaucratic

approach
Planned & regularly
maintained policies to
provide for lean HR

Build

HR
Likely to emphasize
training programs &
internal promotion

Prospector
Highly

innovative
Favors strategies of
product & / or market
development

Creative

& flexible
management style
Have high quality HR
Emphasize
redeployment &
flexibility of HR
Little opportunity for
long-term HRP

Acquire

HR
Likely to emphasize
recruitment, selection
& performance base
compensation

ENVIRONMENTAL SCANNING

Systematic process of studying & monitoring

the external environment of the
organization in order to pinpoint
opportunities & threats

Involves long range analysis of employment

Factors include economic factors,

competitive trends, technological changes,
socio-cultural changes, politico-legal
considerations, labour force composition &
supply, & demographic trends
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ENVIRONMENTAL SCANNING

Eg., competitive pressures are likely to increase resulting in

enhanced productivity requirements & HRP objective may be
to increase employee productivity by 5% in 2 yrs. which will
require the firm to determine current employee productivity
(output / employees)
Which jobs need to be filled (or vacated) during the next 12 months?
How & where will we get people to fill (or vacate) these jobs?
What are skill sets required to increase the productivity

Demand & supply of labour in loose & tight labour market

Major impact of the shortage of skilled workforce (tight labour
market) in India has been on staff cost (increased by 40%)
Fast growing sectors like retail, ITeS, telecom do not have historical
talent to bank on & hence they are hiring from other sectors with
skill sets that are relevant to their industries

10

FORECASTING HR DEMAND

FORECASTING makes use of information

from the past & present to identify
expected future conditions.

Forecasts are not perfectly accurate & as

the planning scope becomes shorter the
accuracy of forecasts increases

HR demand forecasts may be internal /

external
11

HR Forecasting .

Mathematical models

Trend analysis
Regression analysis
Simulation models
Productivity factors
Staffing ratios.

HR demand
and
forecasting

Judgmental methods

Rule of thumb
Delphi technique
Estimate
Nominal groups

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QUALITATIVE METHODS OF DEMAND FORECASTING

Method

Advantages

Disadvantages

Estimation

People in position estimate

the number of people the
firm will require in the
next yr.

Incorporates
knowledge of
corporate plans in
making estimates

May be subjective

Expert
opinion

Panel of experts forecast HR requirements for particular future business

scenarios. For this method, there may be a single expert, or estimates of
several experts may be pooled together

Delphi

Experts go through several

rounds of estimates with
no face-to-face meeting

Incorporates future
plans & knowledge of
experts related to
mkt., industry &
technical development

Subjective, time
consuming & may
ignore data

Group
brainstor
ming

Face-to-face discussion
based on multiple
assumptions about future
business direction

Generates lot of ideas

Does not lead to

conclusion

Nominal
group
technique

Face-to-face discussion

Group exchanges
facilitate plans

Subjective which
may ignore data

Simple
averaging

Simple averaging of
viewpoints

Diverse view points

taken

Extremes views are

masked when
averaged

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QUANTITATIVE METHODS OF DEMAND FORECASTING

Method

Advantages

Disadvantages

Trend
analysis
&
projectio
n

Based on past relationship between a business factor related to employment

& employment level itself

Simple
long-run
trend
analysis

Extrapolates past
relationship between
volume of business activity
& employment levels into
the future

Recognizes linkage
between employment &
business activity

Assumes that
volume of business
activity of firm for
forecast period will
continue at same
rate as previous yrs
Ignores multiplicity
of factors
influencing
employment levels

Regressi
on
analysis

Regresses employment
needs onto key variables

Data driven
Uses multiple business
factors

Difficult to use &

apply

14

QUANTITATIVE METHODS OF DEMAND

FORECASTING
Method

Advantages

Disadvantage
s

Simulati Uses probabilities of

on
future events to
models
estimate future
employment levels

Makes several
assumptions about
the future regarding
external & internal
environment
Simultaneously
examines several
factors

Workloa
d
analysis

Based on actual content

of work

HR requirements
Job analysis may
based on expected
not be accurate
output of the firm
Difficult to apply
Productivity changes
taken into account

Markov
analysis

Probabilistic
Based on past
relationship between
business factor related
to employment &
employment level itself

Data driven

15

Costly &
complicated

Assumes that
nature of jobs has
not changed over
time
Applicable to
stable
environment

METHODS OF DEMAND ESTIMATION

SIMPLE LONG-RANGE TREND ANALYSIS

Extrapolates the volume of current business

activity for the years for which the forecast is
being made

Since there is a correlation between volume

of business activity & employment level,
linear extrapolation would also indicate HR
demand by job & skill category

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FORECASTING TECHNIQUES
Trend Projection Forecasts:

Quickest forecasting techniques

Two simplest methods
1.

2.

Extrapolation: involves extending past rates of change

into future (if an avg of 200 production workers was hired
each month for past 2 yrs, extrapolating that trend into
future means that 240 production workers will be added
during upcoming yr.)
Indexation: a method of estimating future employment
needs by matching employment growth with an index,
such as ratio of production employees to sales (eg., for
each million $ increase in sales, production deptt.
requires 10 new assemblers)

Both are crude approximations in short run

because they assume that causes of demand
remain constant which is seldom the case making
it very inaccurate for long-range HR projections
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METHODS OF DEMAND ESTIMATION

RATIO ANALYSIS
RATIO between output & manpower
deployed to achieve that output is
established at a given point of time

Eg., revenue per employee, sales vol. per

salesperson, service contract per engineer, units
produced per employee, etc.,

Historical ratio between:

Some causal factor (sales volume)

No. of employees required (number of

salesperson)
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METHODS OF DEMAND ESTIMATION

REGRESSION ANALYSIS
Drawing a statistical comparison of past
relationship among variables

Statistical relationship between no. of patients

(business factor) & employment level of nurses in a
nursing home may be useful in forecasting the no.
of employees that will be needed if the no. of
patients increases by say 20%

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METHODS OF DEMAND ESTIMATION

LINEAR REGRESSION ANALYSIS
Relationship between two
variables which is directly
proportional

Production output &

manpower are the two
variables & the
relationship between
these two is plotted on a
graph by drawing a line
of best fit

Analysis aims at providing

a measure of the extent to
which changes in the
values of two variables are
correlated with one
another

X
x

Manpower

a
x

b
Production
level
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METHODS OF DEMAND ESTIMATION

MARKOV ANALYSIS

Shows the percentage (& actual no.) of employee who

remain in each job from one yr. to the next, as also the
proportion of those who are promoted or transferred or who
exit the organization

Internal mobility among different job classifications can be

forecast based upon past movement patterns past patterns
of employee movements (transitions) used to project future
patterns

Pattern is used to establish transitional probabilities & to

develop a transition matrix

Transitional probabilities:

Indicate what will happen to the initial staffing levels in each

job category / probability that employee from one job category
will move into another job category

Determine the forecasted employee levels at the end of the yr

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A TRANSITION MATRIX /
MARKOV MATRIX
Named after the Russian mathematician Andrei Andreyevich
Markov
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Forecasting
&
Analyzing
HR Supply

23

FORECASTING & ANALYZING HR SUPPLY

Internal supply forecasts relate to conditions
inside the org. such as age distribution of
workforce, terminations, retirements, etc.
External supply forecasts relate to external
labour market conditions & estimates of
supply of labour to be available to the firm in
the future in different categories

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METHODS OF FORECASTING EXTERNAL HR

SUPPLY
INTERRELATED FACTORS THAT MUST BE CONSIDERED IN PROJECTING
EXTERNAL HR SUPPLY

Government estimates of population available for work

Net migration into and out of the area

Numbers entering the workplace

Numbers leaving the workplace

Numbers graduating from schools / colleges

Changing workforce composition

Technological shifts

Industrial shifts

Trends in the industry (actions of competing employers)

Economic forecasts

Government regulations & pressures such as job reservations for

certain groups

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METHODS OF FORECASTING INTERNAL HR

SUPPLY
HR INVENTORY

Obtains & stores information about each employee of the org. in a

manner that is easily accessible because it is necessary for HRP

Employee information stored in the inventory relates to KSA,

experience, & career aspirations of the present workforce of the firm

Contents of HR Inventory

Personal identification information

Biographical information

Educational achievements

Employment history

Information about present job

Present skills, abilities, & competencies

Future focused data

Specific actions (like training needed for achieving career goals)

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METHODS OF FORECASTING INTERNAL HR

SUPPLY
HR INVENTORY- types

Skills inventory: describes the skills & knowledge

of non-managerial employees & is used primarily
for making placement & promotion decisions

Management inventory: contains the same

information as in skills inventory, but only for
managerial employees which describes the work
history, strengths, weaknesses, promotion
potential, career goals

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METHODS OF FORECASTING INTERNAL HR SUPPLY

HR INVENTORY
Can be used to develop employee
replacement charts

Replacement charts lists current jobholders &

identifies possible replacements should there be
a vacancy for reasons such as resignations,
transfers, promotions, etc.

They include information on possible

replacements like current job performance,
potential for promotion, training experience
required by replacement to be ready for the key
position

Chart also details when a replacement is

needed for a job short term forecasts in
nature
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REPLACEMENT CHARTS

List the critical jobs in a company , the

employees currently positioned in those roles
, their competencies , the current vacancies
and facilitates in future planning.
groups employees into four
Employees

ready for promotion

Employees who would be ready for
promotion, but with training
Employees performing satisfactorily but
needs motivation and further improvements
Employees who are not fit to be on
employment and need to be replaced.
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METHODS OF FORECASTING INTERNAL HR

SUPPLY
SUCCESSION ANALYSIS & PLANNING

A systematic & deliberate process of identifying,

developing & tracking key individuals within the
firm to prepare them for assuming senior & toplevel positions in future.

Eg., SAIL poaching from global players & preparing

a defence system wherein 2nd & 3rd line of
command is being prepared; IBM, ExxonMobil, GE,
etc., have

Eg., Godrej, Marico (fly. owned business) in India

have drop dead succession plan which keeps the
wheel moving where a promoter of the fly-owned
firm may always be around to guide the company
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METHODS OF FORECASTING INTERNAL HR

SUPPLY
LABOUR WASTAGE ANALYSIS
Traditionally LW is measured by the
employee turnover index (% wastage index)

Turnover classified into:

(No. of empls leave in mth / avg. empls) x 100

Avoidable separations (resignations & dismissal)

Unavoidable separations (retirement, death, &

marriage)

Turnover rate = [(S-US) / M] x 100

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METHODS OF FORECASTING INTERNAL

HR SUPPLY
ABSENTEEISM RATE
No. of man-days lost due to absence
from work during the period
AR = --------------------------------------- x 100
Avg. number of
Total number
empls. during this pd.
of days

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THANK YOU

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