Unit III: Human Resource Planning Process

3.1 Introduction

A key function of HRM is to acquire and to effectively manage the deployment of

human capital to ensure its most productive utilization.

Rapidly changing patterns of labor supply and demand significantly complicate

organizational attempts to ensure the right mix of skills, knowledge, behaviors and
attitudes to meet current and future requirement.

HRP is the process of assessing current HR capabilities and forecasting future labor
supply and demand, to produce HR plans that will enable an organization to achieve
its strategic objective.

Formal HRP (previously manpower planning) was prevalent during the mid twentieth
century.

Statistical techniques were used to forecast and plan future employment needs, often
based on extrapolation from previous experience (Nick Wilton 2011).

Long term approaches to predicting future labor requirements are no longer feasible
under more unpredictable market conditions.

A contemporary understanding of HRP suggests a more complex process than simply

the collection and analysis of market and labor market data to determine an
organizations quantitative demand for labor. ( quantitative or hard, and qualitative or
soft dimensions)

There are four stages involved in the process of HRP

The importance of HRP is that it provides the means of ensuring that personnel
policies and their objectives are properly integrated into the organization policies,
goals and objectives.

i. Investigation or Analysis of existing resources -A profile of the workforce, based on

certain characteristics which are relevant for planning purposes, supplemented, in some
instances, by analysis of certain issues such as absenteeism or overtime working.
ii. Forecasting

HR demand forecasting- An analysis of the staffing requirements necessary for the

organization to succeed in achieving its business objectives, taking into account the
requirements of the corporate plan.

HR supply forecasting -A forecast of anticipated changes in the supply of labor. This

takes account of anticipated losses from the existing workforce and the external
supply of suitable staff from sources outside the organization.

iii. HR plan

By bringing together information obtained from the first three stages, an analysis is
made of the action required to fill the gap between the demand forecast and the
supply forecast.

This action may determine the activities to be undertaken under several personnel
policies.

iv. Utilization/ Implementation; Putting the HRP in action to achieve both quantitative
and qualitative HR needs

HRP Process

3.2 Types of HR forecasts

HR forecasting can be defined as ascertaining the net requirement for personnel by
determining the demand for and supply of human resources now and in the future.
The use of information from the past and present to identify expected future conditions.
I.
HR Demand Forecast
II.
HR Supply Forecast
a.
Internal Supply
b.
External Supply

Employment practices, demand and supply analysis, internal availability, external

availability etc. are consider at time of HR forecast.
Principles of Forecasting
Many types of forecasting models that differ in complexity and amount of data & way
they generate forecasts:
1. Forecasts are rarely perfect,
2. Forecasts are more accurate for grouped data than for individual items,
3. Forecast are more accurate for shorter than longer time periods.
The HR forecast takes account of forecasts about the general economy, and those of
them specific business or organization, to arrive at the conclusion of whether to
increase or decrease staff, and exactly what type of staff will be needed.
3.3 Time scale of HRP forecasts
Short-termless than one year
Intermediateup to five years
Long-rangemore than five years
HR forecast pattern is changed depending on time scale.

Time
Frame

Requirement
Basis

Availability

Possible action plans to

meet the requirement

Less than a
year

Annual Budget
(operational plans)

Existing manpower+
contractual manpower

Body
shoppers/contractors,
overtime, recruitment on
contract etc.

1-2 years

Forecasted budget
or forward budget
(Business plans)

Current manpower less

projected attrition

Transfer, promotion, new

recruitment,
restructuring,
redundancy, T&D.

2-5 years

Long-term plans

Projected
manpower(including
those trainees who will
be inducted during the
period)

Succession plans,
recruitment,
restructuring,
redundancy, T&D

More than 5
year

Perspective plans

Labor market,
education system

Succession plans,
management
development, OD, job
restructuring.

3.4 HR Demand and Supply Forecasting at macro and micro level

The HR demand forecast is an estimate of the numbers of staff required to
carry out the level of business or service that is anticipated.
The basis of this should be a corporate forecast, from which the staffing needs can be
derived.
Employment policy should be taken as the main official document of HR demand
forecasting at macro level.
Determining how many and what type of people are needed
Derived from organizational plans.
HR Supply Forecasts
How many and what types of employees the organization actually will have.
Estimates the number and quality of its current employees and the available external
supply of workers.
Derived from organizations experience with turnover, terminations, retirements,
promotions, and transfers.
Internal Supply Forecasting

Forecasting External HR Supply

Factors:
Net migration in area
Individuals entering and leaving the
workforce

Graduation rates

Changing workforce
composition and patterns

Economic forecasts
Technological developments
Competing employers
Government regulations and
legislation

Types of Forecasting Methods

Decide what needs to be forecast
Level of detail, units of analysis & time horizon required
Evaluate and analyze appropriate data
Identify needed data & whether its available
Select and test the forecasting model
Cost, ease of use & accuracy
Generate the forecast
Monitor forecast accuracy over time
Forecasting methods are classified into two groups:

Qualitative methods judgmental methods

Forecasts generated subjectively by the forecaster
Educated guesses
Quantitative methods based on mathematical modeling:
Forecasts generated through mathematical modeling

Qualitative Methods

Judgmental
Estimates
Rules of thumb
Delphi
Technique
Nominal
Groups

Mathematical
Statistical regression
analysis
Simulation models
Productivity ratios
Staffing ratios

3.5 Issues and Difficulties in Manpower Forecasts

Human resource is the most important asset of an organization.

The planning of human resources an important function.

It ensures adequate supply, proper quantity & quality as well as effective utilization of
human resources.
Human resource planning is the process by which a management determines how an
organization should move from its current manpower position to its desire manpower
position.
Through planning a management strives to have right number &the right kind of
people at the right place ,at the right time to do things which results in both
the organization & the individual getting long time benefits.
Issues and Difficulties;
Accuracy of forecasts- If the forecast are not accurate, planning will not be
accurate. Inaccuracy increases when departmental forecasts are merely prepared
without critical review.
Identity Crisis- Many human resource specialists & the managers do not understand
the whole manpower planning process. Because of this there is generally an identity
crisis.
Support of Top Management:- Manpower forecasting requires full support from the
top management. In the absence of this support & commitment, it would not be
possible to ensure the necessary resources & cooperation for the success of the
manpower forecast.
Management information systemEffectiveness of the forecasting depends upon the reliability of the information
system. In the absence of reliable data it would not be possible to have effective
forecasting and planning.
Coordination with other managerial Functions:-There is generally a tendency on
the part of the manpower planners to remain aloof from others operating managers &
to become totally absorbed in their own world. To be effective, manpower forecasting
& planning must be integrated with other management functions.
Expensive & Time consuming:-Manpower forecasting planning is an expensive
&time consuming process .Employers may resist manpower planning feeling that it will
increase the cost of manpower.
Unbalanced Approach:- Many human resource person gives more importance on the
quantitative aspects of manpower to ensure that there is adequate flow of people in &
out of the organization. They overlook the qualitative aspects like career development
& planning ,skill levels, morale.
Main Difficulties Faced in Manpower Forecasts using Quantitative Tools are described
below:
(i)When productivity data is considered as available to decide upon the manpower
requirement, it is important to understand that the productivity rise cannot always be
attributable to the increased human effort.
productivity increases due to changes in technology or the sum total of
operational and managerial efficiency.

(ii) The relationship between output and manpower is not always straight forward.
Increase in output may lead to the economies of scale and the resultant cost efficiency
and rise in productivity, which may not be attributable to the manpower productivity.
(iii) The effects of factors like new technology, incentive schemes, etc., upon
productivity, may not be consistent over a time period. Therefore, projecting
manpower requirement, considering effects of such factors may be inaccurate.
(iv) The effects of different factors may not always be linear. The interrelationship of
different factors complicates the forecasting of manpower. Although we have
statistical techniques like multiple regression analysis, factor analysis, etc., their
computational rigours often dissuade the manpower planners from using such tools.

3.6 Labor Wastage Analysis

Relates with method of forecasting internal labor supply.
Traditionally LW is measured by the employee turnover index (% wastage index)
(No. of empls leave in mth / avg. empls) x 100
Turnover classified into:
Avoidable separations (resignations & dismissal)
Unavoidable separations (retirement, death, & marriage)
Turnover rate = [(S-US) / M] x 100
3.7 Manpower Planning Models
Quantitative/Statistical/Mathematical Model
Strategic Management Model