Meaning & Definition of Human Resource Planning
Human Resource Management “Human Resource Planning” (HRP) is a process of balancing the supply of people, including current and prospective employees, with the organization’s future job openings over a set period of time.
It is the organization’s method for ensuring that the right quantity of people, the right sort of people, the right time, and the right place are available to achieve the organization’s goals.
Manpower planning, personnel planning, and workforce planning are all terms used to describe Human Resource Planning (HRP). It is a future-oriented activity that falls under the jurisdiction of organisational planning.
In addition to the production cost, improper planning may result in excessive staff recruitment, an increase in spending connected to direct costs, training costs, and other benefits for personnel.Inappropriate hiring has a negative influence on staff productivity, self-esteem, and efficiency. All of these considerations emphasise the relevance of HRP in a company.
“Human resource planning,” according to Bulla and Scott, “is the process of ensuring that an organization’s human resource requirements are identified and plans are established to meet those requirements.”
“Human resource planning,” according to James Walker, “is the process of analysing an organization’s human resource needs under changing conditions and devising activities to meet those needs.”
According to Geister, “human resource planning is the process of ensuring that a corporation has the correct amount of people and the right kind of people at the right places at the right time, doing activities for which they are economically most helpful,” which includes forecasting, developing, and controlling.
“Human resource planning,” according to Dale S. Beach, “is the process of determining and assuming that the organisation will have an adequate number of qualified persons available at the appropriate times, performing jobs that meet the enterprise’s needs while also providing satisfaction to the individuals involved.”
Nature of Human Resource Planning
1) Continuous Activity: It is a continuous activity since the requirement to assess the supply and demand of people resources inside the organisation is never-ending.
2) Clearly Specified Objectives : HRP objectives may be influenced by the organization’s strategic and operational planning. Essentially, the needs of human resources within an organisation are determined by the firm’s goals. HRP also strives to develop human resources by honing their technical skills, aiding them in planning their career paths, and retaining them, among other things.
3) Assessing the Staff Requirements: HRP focuses on the pre-planning of human resource needs and estimates inside the organisation. All aspects of the recruitment, selection, and training processes are meticulously planned in advance.
4)Maintaining Inventory of Existing Human Resources: It is made up of a registry of current human resources. The management must be aware of the existing labour supply in order to fill future higher-level roles.
5)Balancing Supply and Demand Equation: It is challenging to identify qualified candidates for open positions quickly. The supply and demand for human resources in the future must be checked first.
6) Developing a Positive Work Environment: HRP encompasses not only the acquisition of human resources, but also the maintenance of proper and effective working conditions within the organisation.
7) Formulation of Policies: HRP assists in the development of programmes, methods, and policies for obtaining, expanding, safeguarding, and utilising the organization’s human resources.
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Purposes/Objectives of Human Resource Planning
1)Assessing Manpower Requirements: Human resource planning plays a critical role in accurately assessing future human resource needs. It will be difficult for the organisation to have the correct type of personnel at the right time if it does not have a well-planned HRP.
2)Evaluation of Current Workforce: Human resource planning focuses on assessing the current workforce to determine its strengths and limitations.
3) Efficient Change Management: A company’s HRP assists in taking the necessary steps to address daily environmental changes such as product modifications, market conditions, technology advancements, government regulation changes, and so on.
4) Achieving Organisational Objectives: HRP focuses on the needs linked to the organization’s growth, expansion, diversification, or any other strategy for growth.
5) Furnishing the Accurate Details: HRP gives extensive information about human resources that are idle or underutilised. It also aids in decision-making in associated management disciplines such as promotions, etc.
6) Optimum Utilisation of Human Resources: HRP’s first and most important task is to ensure that the organization’s existing and future human resources are fully used.
7) Analyzing Manpower Gap: Human resource planning aims to bridge the gap between current resources and future demands by providing training and skill development.
Factors Influencing Human Resource Planning
Human resource planning is influenced by a number of things. These elements can be categorised as follows:
1) External Factors: External factors are those that have an impact on human resource planning from the outside. They include:
i) Legislative Provisions: HRP is influenced by several provisions relating to labour laws, reservations in recruiting, and government policies, among others.
ii) Level of Economic Development: The level of economic development in a country determines the level of human resource development. This aids in predicting future human resource supply.
iii) Business Environment: The external and internal elements that influence a company’s operations make up the company’s environment. These types of environmental conditions have an impact on the entire amount of production mix and, as a result, the future supply of human resources.
iv)Technological Advancements: Technology can be defined as the process of putting knowledge into practise in order to create new inventions. The level of technology has an impact on the type of human resources necessary.
v) Global Influences: Human resource planning is influenced by factors that have a global impact on variables such as personnel supply and demand in different parts of the world.
2) Internal factors: These are the internal elements that influence human resource planning. The following is a summary of these factors:
i)Firm’s Plans and Guidelines: The company’s growth, expansion, or diversification strategy specifies the quantity and quality of human resources required inside the organisation.
ii) Rules and Regulations for Human Resources: HRP is influenced by the stated rules and regulations for human resources inside the organisation, such as the skills required, the amount of remuneration, workforce provisions, and so on.
iii) Job Analysis: This is a thorough examination of a certain job in terms of the abilities required to do a specific task. The thorough examination of the job aids in determining the kind of abilities required of those to be hired within the company.
iv) Perspective of Timeframe: The HRP of an organisation differs from one company to the next, depending on the environment in which it operates. Long-term planning is appropriate if the environment is reasonably stable; nevertheless, if the environment in which the organisation operates is highly dynamic, short-term planning is recommended.
v)Reliability and Credibility of Information: Effective planning relies on reliable data regarding connected elements.HRP is based on data relating to aspects such as capital budget, organisational structure, degree of technology, functional area objectives, job analysis, recruitment sources, retirement plans, and so on in every organisation.
vi) Policies regarding the Operational and Production System of Firm: A company’s HRP is also based on its judgement on the quantity of items to be produced or purchased from the market. It determines the number of people needed to produce the same within the system.
vii) Trade Unions:The HRP will be influenced by various measures taken by trade unions to protect the interests of employees. The HRP is influenced by decisions about working hours, recruitment sources, and so on.
viii)Phases of Organisational Lifecycle: Different stages of the organization’s lifecycle will have a significant impact on the firm’s HRP.Employee recruitment will be required during the firm’s growth stage to meet increased demand, whereas employees will be retrenched during the firm’s decline stage to save expenses. Human resource planning is critical in both situations.
Processes of Human Resource Planning
Traditionally, HRP was limited to responding to solely business needs. HRP has grown proactive and crucial in the contemporary corporate landscape as a result of business development, technological advancements, and management system innovation. HRP is a mechanism for anticipating human resource requirements and availability, as well as bridging the supply-demand gap.
Environmental Scanning
The human resource planning process is founded on a thorough examination of many components of the corporate environment in which it operates. It is the first phase in HRP since it gives a clear image of the organization’s expected problems, threats, and opportunities.
HRP necessitates a thorough examination of all elements affecting the firm’s internal (technology, culture, strategy, etc.) as well as external (competitors, regulations, etc.) environments. Internal factors are used to identify the firm’s strengths and shortcomings, while external elements are used to highlight the firm’s risks and opportunities.
Organisational Objectives and Policies
Following the environmental study, strategies and policies for many aspects (such as marketing, production, finance, technology, diversification, and expansion) are analysed in order to estimate the labour movement in the near future.It is necessary to establish a time-bound schedule for human resource planning.
Only after considering changes in organisational structure and job design can exact staffing requirements be determined. A thorough examination of a company’s plans is necessary because all human resource plans are derived from business plans that are linked to the nature, level, and organisational activities.
Forecasting Human Resource Requirements (Demand Forecasting)
HR demand forecasting is the process of determining an organization’s predicted labour requirements in terms of number and quality. It is necessary to meet the organization’s expected workforce needs in order to attain the desired level of performance.
On the basis of present human resources and a review of organisational plans and procedures, the predicted human resource requirement is determined. It is true to a considerable extent that demand forecasting is influenced by the size of the company’s operations throughout a certain time period. Human resource needs, on the other hand, are not proportionate to the size of a company’s operations.
When forecasting HR requirements, take into account the factors that influence the link between the growth of the business and the number of personnel. Human resource planning provides a precise estimate of the number of employees required in the future.
Demand Forecasting Techniques
1) Managerial Judgement: This method involves bringing together managers from various departments to assess future labour needs. It could take either a bottom-up or a top-down strategy. Department heads present their requirements to senior management, and only they prepare estimates in a bottom-up strategy.
Top managers establish the workforce requirement in a top-down strategy. Forecasts are then reviewed with department leaders for collaborative agreement. However, neither of these procedures is flawless; only the combination of the two yields successful outcomes.
2) Ratio Analysis: This is the process of calculating the relationship between a specific business aspect and the number of personnel necessary. The number of instructors required in an educational institute, for example, is determined by the number of students.
Assume a university with 20,000 students and 1000 professors; the student-to-lecturer ratio is 20,000:1000, or 20:1. According to this ratio, the university requires one lecturer for every 20 pupils. If 500 new students are projected to enrol in the coming year, the institution will need to hire 25 (500/20) additional lecturers (assuming that all the 1000 current lecturers will not leave prior to next year).
It provides a more comprehensive view than trend analysis. Despite the fact that it is an excellent method for anticipating demand, it has the flaw of omitting key critical elements such as new technology and increased employee performance.
3) Trend Analysis: The demand for people resources is based on the organization’s previous trends.The historical relationship between a business component and the need for workers is examined. The correct business aspect that has a significant impact on employment levels differs per industry.
For example, the appropriate element for an educational institution could be total number of students enrolled; for a marketing firm, it could be sales volume; and for a manufacturing firm, it could be total units produced. For a preliminary estimate of human resource demand, the trend analysis method is best. This is because human resource forecasting is influenced by a variety of factors, one of which is prior trend.
4) Scatter Plot: This is a graph-based method for determining the relationship between two variables. This method can be used by a human resource planner to determine the link between the two components, namely the degree of business actions and the staffing requirements to handle them. If there is a link, the question then becomes whether an HR planner can estimate the level of company activity and forecast human resource needs.
5) Computerised Forecast: Computerised forecasting employs computers and software packages to anticipate future manpower requirements by estimating firm sales, production volume, and the human resources required to maintain the estimated output amount.
6) Work-Study Techniques: This method examines the relationship between the volume of work and employee productivity.Data on work volume is derived from organisational records, and increases and decreases in operations can be calculated. Time and motion studies are used to determine efficiency, ensuring a consistent output per unit of time or per hour. As a result, the number of operatives needed to execute a certain volume of operations is as follows:
Planned Output = Standard Output per Hour / Standard Hours per Person
As a result, standard production per hour is not always a constant factor, but it does increase with time as a result of learning, which can occur through examination, observation, and communication.
7) Delphi technique : This is a technique that concentrates on the qualitative part while also attempting to eliminate subjectivity by including members from the group who have already been chosen for it and establishing the judgments for it. As a result, a joint decision-making mechanism is required, which necessitates a commitment to growth in order to promote cooperation and coordination in order to make acceptable forecasts. This method works well in instances where the environment is undergoing significant changes as a result of technology advancements.
Because specialists do not meet face-to-face, there is a minimum amount of subjectivity in decision-making. If they are deployed to different areas, it will be more cost-effective. It can reclaim the decision-making class by decreasing personality conflicts and limiting the power of the dominant group members over the decision-making process.
8) Econometric Models: This model analyses statistical data relating to the organization’s history. In statistical or mathematical terms, it is anticipated to determine the link between the various variables. Variables such as profit margins, investments, complexity, quality, and product sales are associated with personnel requirements to create a single equation that describes the exact relationship between the manpower requirement and other variables inside the company.
Forecasting Human Resource Supply (Supply Forecasting)
Another facet of human resource evaluation is supply forecasting. The next step is to estimate the supply of manpower and sources for acquiring such human resources in the organisation after identifying the number and quality of personnel that will be required in the future.
Supply forecasting is used to get this information. Human resource planning relies heavily on supply forecasting. After accounting for absenteeism, internal mobility, wastage, changes in work hours, and other working conditions, supply forecasting evaluates internal and external potential candidates.
Sources of Supply
1) Internal Supply:It is made up of the organization’s current employees. It is an organization’s primary source of employment.It is an organization’s primary source of employment. It is difficult to predict the exact availability of personnel in the future, however there are a few strategies that can be used to estimate internal HR supply:
i) Staffing Tables/Manning Charts: It is a visual representation of the jobs inside an organisation that shows how many employees are currently working on certain jobs and how many will be needed in the future. It divides employees into groups based on sex, age, category, job title, skills, qualifications, and experience. This table/chart demonstrates how well existing personnel are utilised.
ii) Markov Analysis: It shows the percentage of employees in a given job within the organisation (from one year to the next), as well as the information of employees who are being promoted or transferred. This is based on the organization’s historical statistics on employee movements. Past records are examined in order to forecast future moves.
iii) Skill Inventories: This is a classic method in which a database is maintained that contains a record of employees’ knowledge, abilities, experience, and skills. It is non-technical in nature, yet it is extremely valuable in situations where there is a scarcity of trained individuals in the organisation to fill anticipated openings.This strategy makes it easier for management to devise plans to fill vacant job vacancies through external recruitment.
iv) Replacement and Succession Planning:These techniques necessitate some technical understanding. Replacement planning is used on a short-term basis, and a chart is created to show the current occupants of open positions within the organisation, as well as those who are expected to fill them in the near future. It aids in determining the number of employees who are eligible for promotion to predetermined positions.
Succession planning, on the other hand, is done over a long period of time in order to train future leaders or managers. Succession planning analyses future trends using data from the current workforce to determine who will replace vacant positions in the organisation ahead of time and begins training personnel for those jobs.
v) Cohort Analysis: A cohort is a group of employees who were hired at the same time. This is a technique that takes into account the length of time that employees have been with the company and focuses on cohort/homogenous groupings of employees. It entails creating a’survival curve’ that shows which employees have left the company and which individuals are still employed.
When the cost of obtaining labour from internal sources is higher and current employees cannot be spared for future assignments, the corporation can hunt for it outside the company.
2)External Supply: The organisation may be forced to hunt for prospective personnel from outside sources as well.The term “external sources” refers to potential human resources that exist outside of the organisation. External supply sources may range from one company to the next, from one industry to the next, and even from one area to the next. Nowadays, campus recruitment is one of the most effective strategies of external recruitment.
Other organisations, on the other hand, look into their competitors’ databases, unsolicited applications, or consultants. It’s especially effective when the cost of hiring existing employees for new positions is higher or when existing employees are already overburdened. If a company examines its external workforce, it will be able to identify the following:
i) Manpower sourced from outside sources, based on composition and qualities.
ii) Types of positions and qualified people available outside the company
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Matching Supply and Demand
Forecasting workforce supply and demand is done to determine if there is a gap between labour supply and demand, and then management formulates a plan of action to close the gap. The type of action necessary is determined by the organization’s current status. The following are some of the scenarios that an organisation may encounter:
1) Demand Equals Supply: This is a circumstance that mostly affects extremely small businesses that operate in a stable environment rather than huge businesses that operate in dynamic environments. A situation like this does not necessitate any corrective action.The organisation should continue operating as is, as no immediate remedial action or modifications are required.
Increased recruiting, layoffs, additional training modules, or early retirement are not appropriate responses to the problem. All that is required of the organisation is to maintain the status quo.
2) Demand is Less than Supply: With a rising number of major organisations focused on downsizing, right sizing, restructuring, and outsourcing for cost reduction, improved efficiency, productivity, and competitiveness, there is a larger likelihood that employee supply will exceed demand.
In this case, an organization’s goal should be to keep the correct amount of employees needed to produce its goods and services while also reducing its overall headcount.In this case, there are a number of ways that can be utilised to match demand and supply, which are outlined below:
i) Restricted Hiring: Restricted hiring is a good way to reduce the number of employees in your company. If the company’s staff surplus isn’t large enough, it can simply let employees retire when they reach retirement age and not fill the vacancies. In this scenario, the rate of retirement is a key signal for determining when the necessary workforce strength can be reached. There will, however, be exceptions to the no-hiring policy.
The employee’s replacement will be determined by the importance of the position.When a general marketing person leaves the company, for example, there will be no serious issues because the remaining employees can handle the high demand. However, if the brand manager leaves the company, the advertising and publicity efforts may be disrupted or severely harmed. This is due to the fact that brand management is an important part of every marketing strategy.
Even if the company has a no-hiring policy, employees who could bring operations to a halt must be replaced when they leave. However, in the event of a bigger personnel surplus, a variety of alternative ways will be used to reduce the organization’s employment level, in addition to restricted hiring.
ii) Reduced Hours: To avoid a permanent workforce reduction, limiting the number of working hours may be the best option for reducing hourly workers. Instead of a traditional 40-hour workday, a 35-hour workweek can be implemented. A reduction in working hours of this magnitude results in a 12.5 percent reduction in the total number of salaried employees.
iii) Job Sharing: A more modern strategy to decreasing the total workforce is job sharing. A single full-time job is split between two people who share the associated responsibilities, compensation, and benefits. The biggest disadvantage of this strategy is the significant decrease in each employee’s income. As a result, this method is only suitable for brief periods of time.
iv) Early Retirement: Workforce reductions can also be achieved by providing incentives to employees to encourage them to retire earlier. Another advantage of this strategy is that employees who retire early receive the highest salary in the company. As a result of this strategy, the organisation is able to cut not just its entire staff, but also its human costs.
v) Layoffs: When an organisation has a large surplus of manpower, it may choose to implement a lay-off policy. The term “layoff” refers to a reduction scheme in which a particular number of employees from the cach department are laid off. Layoffs are frequently used at the discretion of management in organisations where there are no unions.In unionised organisations, on the other hand, the policy must adhere to certain norms and standards established by the collective bargaining agreement.
The reduction in the employment base is a serious issue that may have a big impact on the organization’s future hiring attempts. As a result, the reduction strategy should be used with caution and awareness in order to minimise any negative consequences.
3) When there is a lack of manpower, an organisation should make extra efforts to obtain the necessary workforce to meet the organization’s needs. For this objective, a variety of strategies can be used:
i)Innovative Recruiting: When a company’s staff is insufficient, it may be forced to experiment with novel recruitment strategies.The company may explore new and varied geographical areas or recruitment strategies, as well as look for diverse types of job applicants. Creative recruiting can take many different shapes.
ii) Compensation Incentives: When there is a lack of competent workers in the market, companies may compete with one another to hire them. Firms provide monetary incentives to applicants in this endeavour. Premium pay is one of the most prevalent strategies used in this strategy.
However, this strategy may result in a bidding war, which the organisation will be unable to sustain for an extended length of time. To recruit talented individuals, this necessitates a more nuanced type of remuneration incentives. Four-day workweeks, flexible working hours, part-time jobs, teleworking, and childcare centres are examples of such options.
iii) Training programmes: During a period of severe staff shortages, the organisation may run specific training programmes in order to ensure that individuals are qualified for the position. Remedial education and skills training programmes are the two main types of programmes that can be used to attract applicants.
iv) Different Selection Standards: Another way to deal with employee shortages is to lower the selection criteria. In order to ensure that there are sufficient numbers of selected applications to fill the openings, the organisation may make certain changes to its selection criteria that are used to pick candidates. This strategy could be combined with training programmes to ensure that selected candidates are capable of handling operations.
Action Planning
The organisation must take quick action to close the gap between the two estimations, i.e., HR demand and HR supply, if one exists. During this phase, quick action is taken to maintain a balance between the specific requirement and the precious resources available. When there is excess labour, a number of large companies use downsizing, rightsizing, re-structuring, re-engineering, and outsourcing to reduce costs, improve efficiency, and productivity while remaining competitive.
On the other hand, in order to deal with the shortage of personnel, the organisation must take different actions to ensure that adequate resources are available to meet future manpower needs, such as recruitment, selection, training, development, incentives, and so on.
Evaluation and Control
The process of reviewing and controlling employee performance is critical within the organisation since it leads to the organization’s effective performance. If the organisation does not evaluate the efforts of its employees on a regular basis, it may be impossible to predict future changes. It must have a methodical and well-thought-out process for reviewing it on a regular basis. For the following reasons, it is critical:
1) Take corrective action if there are any deviations.
2) Upgrade labour resources in response to changing environmental demands.
3) Evaluate HR targets;
4) Evaluate long-term plans’ progress.
5) To deal with and manage personal or organisational grievances. For example, the organization’s evaluation process can assist in establishing some critical features such as turnover costs, productivity data, staff reduction, and so on.
Importance of Human Resource Planning
1) Serves as Talent Pool: Every organisation requires people with a specific set of skills, experience, and education. This criterion can be met by proper human resource planning, as specifying the number and type of people required to meet the organization’s demands is necessary.
2)Allows Easy Expansion and Diversification: Human resource planning can successfully execute an organization’s future plans for diversification, modernization, and expansion. It ensures correct and efficient task completion by arranging the right amount of people with the right abilities at the right time to face the demanding needs.
3) Helps in Budget Formulation: It lets the organisation to monitor and assess the cost of various procedures and actions involving human resources. Salary and other perks, for example, are double-checked, and budget preparation for various sections of the organisation is planned.
4) Reduces Uncertainty and Change: In order for an organisation to function properly, both human and non-human resources must be utilised effectively. There would be worry in the organisation if it was not done. The manufacturing or production process cannot begin if the organisation has sufficient non-human resources such as money, machines, and raw materials but ineffective human resources.
Human resource planning can help lessen such uncertainties and changes by assisting in the right selection and placement of efficient employees at the required location and time.
5)Controls Labour Imbalance: HRP aids in the proper management of human resources. Human resources should not be insufficient, nor should they be excessive. When there are insufficient human resources, other organisational resources are underutilised.
When there is an abundance of human resources, they are underutilised. Human resource planning aids in the management of this imbalance before it becomes unmanageable and costly.
6)Helps in Training and Development of Employees: Due to constant competition, personnel must be trained and developed on a regular basis to ensure that they are capable of contributing to the organisation. HRP assists in identifying employees that require training.
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