Q.1 Elaborate the Process of Manpower Planning.

Ans) The process of human resource planning is one of the most crucial, complex
and continuing managerial functions which, according to the Tata Electrical
Locomotive Company “embraces organization development, management
development, career planning and succession planning.” The process has gained
importance in India with the increase in the size of business enterprises, complex
production technology and the adoption of professional management technique. It
may be rightly regarded as a multi-step process, including various issues, such as:

a) Deciding goals or objectives

b) Estimating future organizational structure and manpower requirements

c) Auditing human resources

d) Planning job requirement and job descriptions and

e) Developing a human resource plan.

a) Deciding goals or objectives: Human resource planning fulfils individual,

organizational and national goals; but, according to Sikula, “The ultimate mission or
purpose is to relate future human resource to future enterprise needs so as to
maximize the future return on investment in human resources.” In effect, the main
purpose is one of matching or fitting employee abilities to enterprise requirements,
with an emphasis on the future instead of present arrangements. The objectives
may be laid down for a short-term (i,e, for one year). For example, the short-term
objective may be to hire 25 persons from schedule tribes or backward class for the
purposes of training. The long- term objective may be to start a new industry, to
expand the market, to produce a new product, to develop its own sales force rather
than depend on distributors, or to have minority group members eventually in
position of middle and upper management cadres.

b) Estimating the future organizational structure or forecasting

the manpower Requirements:

The management must estimate the structure of the organization at a given point in
time. For this estimate the number and type of employees needed must be
determined. Many environment factors affect this determination. They include
business forecasts expansion and growth, design and structural changes,
management philosophy, government policy, product and human skills mix and
competition.

Forecasting provides the basic premises on which the manpower planning is built.
Forecasting is necessary for various reasons which have been stated below:

(a) The eventualities and contingencies of general economic business cycle

(such as inflation, wages, prices, costs and raw materials supplies) have an
influence on the short- range and long-run plans of all organizations.
 (b) An expansion following enlargement and growth in business involves
the use of additional machinery and personnel, and a re-allocation of
facilities, all of which call for advance planning of human resources.

(c) Changes in management philosophies and leadership styles.

(d) The use of mechanical technology (such as the introduction of automatic

controls, or the mechanization of materials handling functions) necessitate
changes in the skills of workers, as well as a change in the number of
employees needed.

(e) Very often, changes in the quantity or quality of products or services

require changes in the organization structure. Plans have to be made for this
purpose as well.

After estimating what the future organization structure should be, the next step is
to draw up the requirements of human resources, both for the existing department
and for new vacancies. For this purpose, a forecast of labour force is needed, and
requisition should be obtained from different departments, i,e., forecast has to be
made in returns of functional category; the members needed; and the levels at
which they are required. Vacancies, occurring in any department, should be notified
in writing by different department heads to the personnel department, stating
clearly the number of vacancies to be filled, job or category-wise types of personnel
needed, their technical qualification and experience and the reasons for acquisition
(I.e., whether for replacement or addition); a statement of duties, type of jobs pay
scales, age, and previous experience should also be made. Requisitions should be
based on accurate job specifications by first line supervisor. They should, as for as
possible, state the exact demands of a job.

In determining the requirements of human resources, the expected losses

which are likely to occur through labour turnover- quits, retirements, death,
transfers, promotions, demotions, dismissals, disability, resignations, lay-off and
other separations- should be taken into account. Changes in the human quality
resulting from the experience gained in the jobs during the period and the training
achieved also need to be considered. The addition of new lines of production and
new projects also influence the demand estimates of human resources. The basic
fact to remember is that the human resource in an organization constantly changes
in terms of its present and future size. Additional human resources are gained
through new employment of personnel, promotions, through transfers and
demotions; but personnel is lost through voluntary quits, death dismissals,
termination and retirements. After making adjustments for wastage, anticipated
and expected losses and separations, the real shortage or surplus may be found
out. If a shortage is there, efforts are made to meet it either by new recruitments or
promotion from within, or by developing the existing staff. If there is a surplus, it is
to be decided how it will be dealt with, i.e., whether there should be transfers, lay-
offs, retrenchment or reduction in the hours of work of all. Underestimation of the
quality and number of the employees required would lead to shortfalls in
performance, while overestimation would result in avoidable cost to the
organization. According to Dr. Ram Tarneja, “Management can ensure control of
labour costs by avoiding both shortages and surpluses of manpower through proper
manpower planning.”

It may be noted that for purposes of manpower planning, the main dimensions to be
taken into consideration are:
(i) The total number of personnel available: This could be obtained from the pay-
rolls and other personnel records, such as the applications for employment. The
total number has to be classified on some basis, such as manual workers (i.e., daily-
rated, weekly-rated or monthly-rated); clerical employees, ministerial staff,
managers and other executives; specialists and skilled and unskilled workers; sex-
wise distribution, etc.

(ii) The job-family: A detailed job-description for each position such as

stenographers who may belong to various departments, e.g. finance, marketing,
personnel, public relation, general administration, etc.

(iii) Age distribution of the employees, available in the present departments, say in
the age-group 20-29 years; 30-45 years, 46 years and above.

(iv) Qualification and experience desire, such as a person with 5 years or 10 years
experience in a particular branch/ job; and whether under-graduate, post- graduate
or MBAs or gradates in Science, Commerce, Arts, Engineering, Professional Diploma-
holders, etc; or with specialized knowledge in the field of marketing, finance,
computer programming or engineering work.

(v) The salary range etc.

c) Auditing Human Resources: Once the future human resource needs are
estimated, the next step is to determine the present supply of manpower resources.
This is done through what is called “Skills inventory.” A skills inventory contains
data about each employee’s skill abilities, work preference and other items of
information which indicate his overall value to the company. A sample
skill inventory proforma is been below:

Skill Inventory Performa

Personnel factors

Name ……………………… Birth Place……………..…………..

Age………………………… Occupation of parents……………..……

Sex……………………………… Present address …………………………

Dependants …………………… Permanent address……………………..

Marital status ………………… Telephone number (if any) …….………

Education and Training

School …………………………………………………………………………..

Degrees/Diplomas obtained………………………………………………….

Training undergone……………………………………………………………

Experience and Skills

 Job areas ………………………

Special skill (such as ability to speak write foreign languages)…………..

Job titles…………………………. Reasons for leaving ……………………

Supervisory responsibility……………………………………………………..

Job dates ………………………………………………………………………

Additional Information

Salary …………………………………… Test results ……………….……

Grade …………………………………… Performance ratings ………….

Absenteeism record…………………… Location of relatives …………..

Disciplinary record ……….…………… Appraisal data……………… .

Career plans …………………………… Any other information…………

The above facts are usably recorded by an employee in some forms from which the
information is fed into a computer. Other data pertaining to his performance ratings
and his superiors’ evaluation of his potential for promotion may also be fed into the
computer. The result may either be kept in a file (on tape or otherwise stored)
containing information as to the number of employees in the organization, and
other data about each employee, and an indication of his fitness for promotion. A
specimen employee information card is given below:

Employee Information Card

Employee No……………. Address ………… Town…………………

Dept.………………. ` Code. …………………………….

Position…………………… Exp. Date…………………………

Employee status : Regular/ Part-time/Co-operative

Shift : 1/2/3

Marital status : Married/Single/Widowed/

Separated/Divorced

No. of dependent children : 1/2/3/4/5

Relatives in company : Yes/No. If yes, who?

Union membership : (which one)

Experience of skill : Clerical/mechanical/sales/supervisory/ others

 Special training : Departmental/on-the /vestibule

Accidents : Loss time

Hospitalization : Yes/No

Member of the credit union : Yes/No

Absenteeism Days………….

Date…………… Operator………..

Some organizations do not compile a skills inventory but prepare organization

charts to determine how many people, at what level, in what position and what kind
of experience and training would be required to meet the objectives. These charts
show a person’s age, the number of years he has been in a particular position, and
his fitness for promotion. These charts or skill inventories help in determining and
evaluating the quantity and quality of the present human resources of an
organization. They tell us what exist in stock and what is needed to be added to
that stock, taking into account the capability qualification, experience a Manning
table which into account the employees. Some companies maintain a manning table
which lists all the jobs in the unit and the number of workers holding each job. Other
companies also use Replacement charts, which show the present performance of
each position holder and the promotional potential of possible replacements.

d) Planning job requirement and job descriptions

Once the present manpower resources are determined, the personnel department
can estimate what changes will occur in the present labour force in the next few
years, say 5 years.

Job Analysis: After having decided how many persons would be needed, it is
necessary to prepare a job analysis, which records details of training, skills,
qualification, abilities, experience and responsibility, etc. which are needed for a
job. Job analysis includes the preparation of job descriptions and job specifications.

e) Developing a Human Resource Plan: This step refers to the development

and implementation of the human resource plan which consists in finding out the
sources of labour supply with a view to making an effective use of these sources.
The first thing, therefore, to decide on the policy is- whether the personnel should
be hired from within through promotional channels or should it be obtained from an
outside source. The best policy which is followed by most organizations is to fill up
higher vacancies by promotion and lower level position by recruitment from the
labour market.

The labour market is a geographic area from which employers recruit their work
force and labour seeks employment. Here the force of demand and supply interact.
A labour market generally has the following characteristics:

(a) It highly unstructured and unorganized, for a majority of workers are illiterate
and ignorant and do not have any information about available job opportunities.
 (b) The procedures by which companies recruit workers and the methods by
which workers go about getting jobs are highly variable.

(c) A great range of wage rates for the same occupation exits in the labour
market depending upon the attitude of the management towards wage levels,
the employer’s ability to pay and the productivity of labour.

(d) Labour is mostly not mobile either because it has incomplete or inaccurate
knowledge of job opportunities and available wages or because of lack of job
security.

(e) The supply of labour fluctuates and is influenced by the population in the
labour market the attractiveness of job (benefits, service wage, rates, and the
reputation of a company), the extent of unemployment and the particular skills
that are in demand.

(f) Manual labour for unskilled jobs has been replaced by activities that require
skills, scientific knowledge, technical acumen and professional training.

Various external factors influence the outflow and inflow of manpower resources. A
few such factors that operate at local level are:

(i) Population density at various distances from the factory or work place:

(ii) Local unemployment level, particularly of the categories which are relevant
for the operation of the organizations

(iii) Availability of part time labour

(iv) Current competition for similar categories of manpower from other

organizations:

(v) Output from the educational system (general as well as technical);

(vi) Pattern of in-migration and out-migration within the area and between it
and

(vii) Transport facilities and communication pattern.

At the corporate level, other factors operate, viz.,

(i) Trends in the growth of the working population;

(ii) Government training schemes and system of technical, vocational,

professional, and general education, and their out-turn;

(iii) Impact of social security measures on manpower supply;

 (iv)Mobility of the products of the technical, professional and vocational
institutions;

(v) Cultural factors and customs, social norms, affecting school leaving age,
labour force participation of women, children and young persons.

The personnel manager should have a thorough knowledge of the labour market.
Which particular source in the labour market will be tapped depends upon the policy
of a firm, the position of labour supply, the arrangement with labour unions, and
Government regulations. However, it is always safe for the personnel manager to be
in close liaison with these different sources and use them as and when the need
arises.

2. Discuss the functions of Manpower Planning.

Ans) Human resource planning means deciding the number and type of the human
resource required for each job, unit and the total company for a particular future
date in order to carry-out organizational activities. Personnel management is
productive exploitation of manpower resources. This is also termed as ‘Manpower
Management’. Manpower Management is choosing the proper type of people as
and when required. It also takes into account the upgrading in existing people.
Manpower Management starts with manpower planning.

Need of Manpower Planning in Organization :- Man power planning involves

two main concept (i,e) analyzing the current human resource and forecast the
manpower. Manpower planning ensures optimum use of available human resources.

Manpower planning is advantageous to firm in following manner.

1. Shortages and surpluses can be identified so that quick action can be taken
wherever required.
2. All the recruitment and selection programmes are based on manpower
planning.
3. It also helps to reduce the labor cost as excess staff can be identified and
thereby overstaffing can be avoided.
4. It also helps to identify the available talents in a concern and accordingly
training programmes can be chalked out to develop those talents.
5. It helps in growth and diversification of business. Through manpower
planning, human resources can be readily available and they can be utilized
in best manner.
6. It helps the organization to realize the importance of manpower management
which ultimately helps in the stability of a concern.

Objectives of Human Resource Planning

(a) To recruit and retain the human resource of required quality and quantity
(b) To foresee the employee turnover and make the arrangements for minimizing
turnover and filling up of consequent vacancies

(c) To meet the needs of the programmes of expansion, diversification

(d) To foresee the impact of technology on work, existing employees and future
human resource requirements

(e) To improve the standards, skills, knowledge, ability, discipline etc.,

(f) To minimize imbalances caused due to non-availability of human resources of

the right kind, right number in right time and right place,

(g) To make best use of its human resources and

(h) To estimate the cost of human resources

Advantages of Manpower Planning:

Manpower planning ensures optimum use of available human resources.

1. It is useful both for organization and nation.
2. It generates facilities to educate people in the organization.
3. It brings about fast economic developments.
4. It boosts the geographical mobility of labor.
5. It provides smooth working even after expansion of the organization.
6. It opens possibility for workers for future promotions, thus providing incentive.
7. It creates healthy atmosphere of encouragement and motivation in the
organization.
8. Training becomes effective.
9. It provides help for career development of the employees.

Benefits of Human Resource Planning

Human Resource Planning(HRP) does not stop with finding the required kind
and number of employees but also determines the action plan for all the function of
personnel management. The major benefits of human resource planning are:

It offsets uncertainty and change. But HRP offsets uncertainties and changes to
the maximum extent possible and enables the organization to have right men at the
right place and in right time.

It provides scope for advancement and development of employees through

training, development etc,
 It helps to anticipate the cost of salary, benefits and all the cost of human
resources, facilitating the formulation of budgets in an organization etc,

To foresee the changes in values, aptitude, and attitude of human resource and
to change the techniques of interpersonal management etc,

It gives an idea of the type of tests to be used and interview techniques in

selection based on the level of skills, qualifications, intelligence, values etc. of
future human resources.

It causes the development of various sources of human resources to meet the

organizational needs.

It helps to take steps to improve human resources contributions in the form of

increased productivity, sales, turnover etc,

It facilitates the control of all the functions, operations, contribution and cost of
human resources.

Human Resource Planning Process/ Manpower Planning

Human Resource Planning has to be a systems approach and is carries out in

a set procedure. The procedure is as follows:

1. Analyzing the current manpower inventory:

Before a manager makes forcast of future manpower, the current manpower status
has to ne analysed. For this the following things have to be noted:-

• Type of organization
• Number of departments
• Number and quantity of such departments
• Employees in these work units

Once these factors are registered by a manager, he goes for the future forecasting.

2. Making future manpower forecasts-

Once the factors affecting the future manpower forecasts are known, planning can
be done for the future manpower requirements in several work units.

3. Developing employment programmes-

Once the current inventory is compared with future forecasts, the employment
programmes can be framed and developed accordingly, which will include
recruitment, selection procedures and placement plans.

4. Design training programmes-

These will be based upon extent of diversification, expansion plans, development

programmes,etc. Training programmes depend upon the extent of improvement in
technology and advancement to take place. It is also done to improve upon the
skills, capabilities, knowledge of the workers.

Activities involved in Manpower Planning:

• Identifying and designing current and planned organization structure of the

organization.
• Estimating current and future workload for different functions and
organizational units in the organization, and, based on that, estimating the
current and future total requirement of people to fill the various positions of
different types and at different levels.
• Developing profile or specifications for people to fill the various positions
identified.
• Taking an inventory of existing employees in the company, and their
capabilities.
• Comparing the manpower requirements and availability to determine the
additional people required in the organization at different times. While
working out this requirement, suitable provision is made for likely attribution
of some of the existing employees. Similarly while examining capability
requirements of employees consideration is given to on the development of
skill and capability of people with work experience. This activity results in
identification of the total additional manpower requirements to be fulfilled by
various means.
• Determining, the means of acquiring the additional required manpower
through various means such as external recruitment, internal transfers and
promotions, and training.
• Preparing recruitment plan.
• Preparing training plan.

Recent Trends in HRP

(a) Outsourcing: Most of the organization started to plan for outsourcing

human resource rather than HRP in order to

- Reduce the cost

- Avoid the difficulties in human resource management

- Reduce the negative implication of overstaffing

(b) Contingency clause in HRP: Most of the software companies have

been implementing time bound projects. So the fast delivery has been the vital
strategy of many manufacturing companies. most of the companies plan for
contingency human resource in order to ensure that no projects is delayed due to
human factor.
Conclusion:-

Manpower planning plays a vital role in Human Resource activity of an

organization. Human Resource is an asset to every organization. Manpower
planning mainly involves determining the needs and supply of human resource and
the available sources.

The organization should make Manpower Planning in such away that it

should satisfy both organization and employer at a higher level. It result in creating
working environment and maintain better employee and employer relationship.

3. Smart Invest is a financial company which has been

functioning for past 15 years. The company decides to has
computerized the office 7 years ago. Now it has decided to
use the application of information system in HRM. Suggest
that how and in what all activities they could are the
information system.

Ans) Information System Applications in Human Resource Management

A unified data model provides a single, accurate view of HR activities ranging from
recruitment, employment, training, performance management, compensation
management and real time management. Oracle human resource leverage
workflow and internet-based processes optimize various HRM activities. The system
maintains global HR data in case of Trans-national companies and total
organizational human resource data in case of national companies in a single
location for accurate and easy availability.

The system of applications of Information Technology (IT) in HRM is referred to as

Human Resource Module. HRIS merges some of HRM functions with the IT field,
wherein the planning and programming of data processing systems have evolved
into standardized routines and packages of Enterprise Resource Planning (ERP)
software. ERP integrates the human resource module with finance, production, and
sales and administration modules.

Generally, traditional HRM functions are common to all organizations. They consist
of tracking data regarding personal histories, family details, skills, capabilities,
experiences, pay, benefits and grievances. Performance of these functions are
increasingly complex, must be performed at the lowest possible cost and also at a
fast rate, which pose increased challenges for HR professionals. Organizations have
started to automate these functions by introducing HRIS technology.

Development of client -server HRIS enables HR executives to assume responsibility

and ownership of their systems compared to client-server architecture, which came
largely in the form of mainframe computers and necessitated heavy capital
investment to purchase program proprietary software. HRIS is developed around six
main areas of human resource management viz., e-recruitment/applicant tracking,
e-training, e- payroll,e-benefits, e-self service and e-time and labour management.
E-recruitment / Applicant Tracking

E-recruitment manages job descriptions and job vacancies, search for candidates
and the interview process. It is also referred to as an applicant-tracking system; this
is a web-based application that enables the electronic handling of organizational
employment needs.

These activities include posting job advertisement on web sites to stimulate and
attract candidates, known as job boards. Job boards allow candidates to apply on-
line and the candidates’ data are stored on a database that allows searching,
screening and filtering of applications. The application tracking system shortlists the
candidates and arranges for interview and recruitment-related activities.

E-recruitment maintains profiles, searches for and refers jobs to colleagues and
follows the recruitment process. It integrates resume extraction capabilities using
the Magnaware / Mohomine extraction engine to search for potential candidates. It
uses event-driven applicant tracking and manages positions on multiple external
websites. E-recruitment/applicant tracking system reduce administrative tasks, cost
and time required to perform recruitment activities.

E-training

E-training provides a complete, scalable and open infrastructure that allows

organizations to manage, deliver, and track employee training participation in on-
line or classroom-based environments. Trainees interact with content and/or
trainers at their own pace. Managers set the business flow from order processing to
delivery and performance management to training output automatically. E-training
systems deploy content to global learners; make use of mixed media and multiple
discrete sites on a single instance of the application, define competencies attained
by trainees, and update the trainees’ competency profiles. It aims to ensure that
HRM provides the right resources, competent and experienced trainers, and
consolidate training initiatives on a scalable and cost effective basis. In addition, it
aims to measure training effectiveness.

E-training, provides learning opportunities not only to employees, but to customer

and all other stakeholders by providing one-stop administration, automated
catalogue distribution and enrollment and collaborative sites with other strategic
partners.

E-payroll

E-payroll models automatically collect data regarding employee attendance and

work record for the purpose of evaluating work performance, they calculate various
deductions including tax, and generate periodic pay cheques and tax reports.
Payroll modules in turn send data and accounting information to the general ledger
for posting and subsequent operations and they frequently integrate e-payroll with
e-finance management.
Payroll systems can define standard rules for automatically assigning and changing
employee salary by using simple formulae. They are able to control processing rules
and calculations using fast formula and use logic for complex cases. They can
manage global compensation with one application by implementing a core payroll
engine and installing local extensions to add the necessary functionality, reporting
and process for individual countries. E-payroll is able to process from data,
simultaneously, fully reconciled results and multiple employee groups. By preparing
paperless online pay slips, the system is able to reduce administrative costs and
time for the total operations. Employees too can view their exclusive data and get
personalized reports.

E-benefits

E-benefits administration models enable HR professionals to track and administer

diverse and complex benefit plans, employee benefit programs which may involve
transpiration medical and health care, insurance, pension, profit-sharing, and stock
option benefits. Such modules, through internet-based automation, can enable HR
to improve benefits support and analysis whilst reducing time and costs involved in
the administration, while increasing the consistency decisions on compliance issues
at various levels across the organization.

E-self service human resource

E-self service HR modules collect process and manage all other kinds of data and
information. For example, employees’ demography profiles and addresses
recruitment, selection training, development, promotions, capabilities, skill mapping
and compensation planning. Such a module would allow individual employees to
update and use employee-specific information, personalized to an individual’s role,
experience, work content, language and information needs. Thus, individual
employee and managers are empowered to update information in order to
streamline business processes, reduce costs and errors, increase speed, and
enhance service.

This module helps employees in managing everything from profiles including skills,
resumes, contact details, self-appraisal data, bank data, learning, benefits and
payroll. It empowers managers to operate transfers, employee training enrollment,
performance appraisals, competency mapping, career planning and development
and terminations.

E-time and labour

E-time and labour automates entire time and attendance records keeping process
and operations through an automatically generated virtual time card. It provides an
intuitive, web-based interface. The time and labour management module, by
interacting with information technology, collects and evaluates time and work
information. This module provides broad flexibility in data collection methods,
human resource distribution capabilities and data analysis, and helps in establishing
organizational cost accounting capabilities. This module allows entering time via
web browser, mobile device and time card. It defines rotation plans based on shifts
and work plans and employee mobility among departments or units. It supports
policies for holidays, over-time, and rounding. It improves reporting, extracting, and
processing with a single database of employee time-related information. This
module is integrated automatically with other modules of human resource
management like payroll and benefits.

1. What is scenario planning? Explain.

Ans) Scenario planning is sometimes described as a formal strategic planning
technique, but it can also be regarded as an informal approach to thinking about
the future in broad terms, based upon an analysis of likely changes in the internal
and external environment.
A scenario can be defined as ‘an imagined sequence of future events’ (Oxford
English Dictionary). Scenario planning is a simple, more or less formalized process
for establishing a view about any changes that can be foreseen to the scale and
type of activities in the organization and to its structure, and for identifying any
external environment changes that are likely to affect it. The aim is to obtain a
better understanding of the possible situations that may have to be dealt with in the
future. It is described by Reilly (1999) as follows: “Scenario planning tries to open
minds to a range of possibilities that organizations may have to confront. These
possibilities are then ordered to produce a series of internally consistent postures of
alternative futures… it is an intellectual process that seeks to identify issues and
examine the possible consequences of events.”

The creation of a scenario involves making broad assessments of likely internal

developments in the direction in which the organization is going and the
implications this has on people requirements. The assessments may have to be
made in the absence of any articulated business plan, and thus involve questioning
top management and key line managers on how they see the future, and asking
them to interpret what this means in terms of their human resource needs.
Assessments also have to be made on likely changes in the external environment as
it may affect the labour market.

Estimating Future Human Resource Requirements

Scenario planning is in some situations as far as it is possible to go in estimating

future people requirements, but where it is feasible and appropriate, attempts can
be made to produce demand and supply forecasts, and to determine what action
needs to be taken if the forecasts indicate the possibility of a human resource
deficit or surplus.

Demand forecasting

Demand forecasting is the process of estimating the future numbers of people

required and the likely skills and competences they will need. The ideal basis of the
forecast is an annual budget and longer term business plan, translated into activity
levels for each function and department, or decisions on downsizing’. In a
manufacturing company the sales budget would be translated into a manufacturing
plan giving the numbers and types of products to be made in each period. From this
information the number of hours to be worked by each skill category to make the
quota for each period would be computed.

Details are required of any plans or projects that would result in demands for
additional employees or different skills: For example, setting up a new regional
organization creating a new sales department, carrying out a major project or
developing new products or services. As far as possible, plans should also be
reviewed that could result in rationalization, and possibly downsizing, as a result of
a cost reduction drive, a business process re-engineering exercise, new technology
leading to increased productivity , or merger or acquisition.

The demand forecasting techniques that can be used to produce quantitative

estimates of future requirements are described below.

Managerial or expert judgment

This is the most typical method of forecasting and may be linked to some form of
scenario planning. It simply requires managers or specialists to sit down, think
about future workloads, and decide how many people are needed. This can be no
more than guesswork unless there is reliable evidence available of forecast
increases in activity levels or new demands for skills.

Ratio trend analysis

This is carried out by studying past ratios between, say, the number of direct
(production) workers and indirect (support) workers in a manufacturing plant, and
forecasting future ratios, having made some allowance for changes in organization
or methods. Activity level forecasts are then used to determine (in this example)
direct labour requirements, and the forecasts ratio of indirect to direct would be
used to calculate the number of indirect workers needed.

Work study techniques

Work study techniques can be used when it is possible to apply work measurement
to calculate how long operations should take and the number of people required.
Work study techniques for direct workers can be combined with ratio trend analysis
to calculate the number of indirect workers needed.

Forecasting skill and competence requirements

Forecasting skill requirements is largely a matter of managerial judgment. This

judgment should, however, be exercised on the basis of a careful analysis of the
impact of projected product market development and the introduction of new
technology either information technology or computerized manufacturing.

Supply forecasting

Supply forecasting measures the number of people likely to be available from within
and outside the organization having allowed for attrition (labour wastages and
retirements) absenteeism, internal movements and promotions, and changes in
hours and other conditions of work. The forecast will be based on:

An analysis of existing human resource in terms of numbers in each occupation,

skills and potential; Forecast losses to existing resource through attrition; Forecasts
changing to existing resources through internal promotions; Effect of changing
conditions of work and absenteeism; Sources of supply from within the organization;
Sources of supply from outside the organization in the national and local labour
markets.

Mathematical modeling techniques aided by computers can help in the preparation

of supply forecasts in situations where comprehensive and reliable data on stocks
can be provided. As this is rarely the case, they are seldom used.

Analyzing demand and supply forecasts:

The demand and supply forecasts can then be analyzed to determine whether there
are any deficits or surpluses. This provides the basis for recruitment, retention, and
if unavoidable, downsizing plans. Computerized planning models can be used for
this purpose. It is, however, not essential to rely on software planning package. The
basic forecasting calculations can be carried out on a spreadsheet that sets out and
calculates the number required for each occupation where plans need to be made,
as in the following example:

Number currently employed -70

Annual wastage rate based on past records -10 per cent

Expected losses during the year- 7

Balance at the end of the year- 63

Number required at the end of the year -75

Number to be obtained during the year(5-4) - 12

Labour Turnover

The analysis of the number of people leaving the organization (labour turnover or
wastage) provides data for use in supply forecasting, so that calculations can be
made on the number of people lost who may to be replaced. More importantly,
however, the analysis of the number of leavers and the reasons why they leave
provides information that will indicate whether any action is required to improve
retention rates. It can prompt further investigations to establish underlying causes
and identify remedies.

In this section, consideration is given to the following aspects of labour turnover:

Its significance; Methods of measurement: The reasons for turnover; What it costs;
Its incidence; How to benchmark rates of turnover. The significance of labour
turnover

The point was made by IRS (2000) that rates of labour turnover provide a graphic
illustration of the turbulence within an organization. High rates of attrition can
destabilize a business and demotivate those who attempt to maintain levels of
service and output against a background of vacant posts, inexperienced staff and
general discontent. Obviously, recruitment induction and training costs all raise with
an increase in labour turnover. As the CIPD (2000) has commented, ‘ ‘turnover may
be a function of negative job attitudes, low job satisfaction, combined with an ability
to secure employment elsewhere, i.e. the state of the labour market. On the other
hand, turnover is a normal part of organization functioning. While excessively high
turnover may be dysfunctional, a certain level of turnover is to be expected and can
be beneficial to an organization’.

Methods of Measurement

There are a number of ways of measuring labour turnover, as described below:

The Labour Turnover Index

The labour turnover index (sometimes referred to as the employee or labour

wastage index) is the traditional formula for measuring wastage. It has been
described by the CIPD (2000) as the ‘crude wastage method’. It is calculated as
follows:

This method is commonly used because it is easy to calculate and to understand.

For human resource planning purposes, it is a simple matter to work out. If a
company wants to increase its workforce by 50 people from 150 to 200, and the
labour turnover rate is 20 per cent (leading to a loss of 30 people), then if this trend
continues, the company would have to recruit 90 employees during the following
year in order to increase and to hold the workforce at 200 in that year (50 extra
employees, plus 40 to replace the 20 per cent wastage of the average 200
employees employed). It can also be used to make comparisons with other
organizations which will typically adopt this method.

This wastage formula may be simple to use but it can be misleading. The main
objection to the measurement of turnover in terms of the proportion of those who
leave in a given period is that the figure may be inflated by the high turnover of a
relatively small proportion of the workforce, especially in times of heavy
recruitment. Thus, a company employing 150 people might have had an annual
wastage rate of 20 per cent, meaning that 30 jobs had become vacant during the
year, but this could have been spread through the company, covering all
occupations and long as well as short service employees. Alternatively, it could
have been restricted to a small sector of the workforce – only 20 jobs might have
been affected, although each of these had to be filled 10 times during the year.
These are totally different situations and unless they are understood, inaccurate
forecasts would be made of future requirements and inappropriate actions would be
taken to deal with the problem. The turnover index is also suspect if the average
number of employees upon which the percentage is based is unrepresentative of
recent trends because of considerable increases or decreases during the period in
the numbers employed. When assembling and analysis labour turnover figures, it is
important to obtain information on the incidence for different categories of
employee, especially those who are most difficult to attract and retain, such as
knowledge or highly skilled workers.

Survival rate

Method of analyzing turnover that is particularly useful for human resource planners
is the survival rate: the proportion of employees engaged within a certain period
who remain with the organization after so many months or years of service. Thus,
an analysis of trainees who have completed their training might show that after two
years, 10 of the original cohort of 20 trainees are still with the company- a survival
rate of 50 per cent.

The distribution of losses for each entry group, or cohort, can be plotted in the form
of a survival curve. The basic shape of this curve has been found to be similar in
many situations, although it has been observed that the peaks of the curve may
occur further along the time scale and /or may be lower when it relates to more
highly skilled or trained entry cohorts. Thus to ensure 50 trained staff in five years’
time, 100 people would have to be engaged this year. Start figures like this can
permit action, especially when the costs of recruitment and induction are taken into
account.

Half-life index

A simpler concept derived from survival rate analysis is the half-life index which is
defined as the time taken for a group or cohort of starters to reduce to half its
original size through wastage (five years in the above example). Comparisons can
then be made for successive entry years or between different groups of employees
in order to show where action may have to be taken to counter undesirable wastage
trends.

Stability index

The stability index is considered by many to be an improvement on the turnover

index. The formula is:

Number with 1 year service or more x100

Number employed 1 year ago

This index provides an indication of the tendency for longer service employees to
remain with the company and therefore shows the degree to which there is
continuity of employment. But this too can be misleading because the index will not
reveal vastly different situations that exist in a company or department with high
proportion of long serving employees in comparison with one where the majority of
employees are rendering short service.

Length of service analysis

This disadvantage of the stability index can be partly overcome if an analysis is also
made of the average length of service of people who leave. This analysis is still
fairly crude, because it deals only with those who leave- a more refined analysis
that compares, for each service category, the numbers leaving with the numbers
employed.

Choice of measurement

It is difficult to avoid using the conventional employee (labour) turnover index as

the easiest and most familiar of all methods of measurement, but it needs to be
supplemented with some measure of stability. An analysis of turnover or wastage as
part of human resource planning exercise requires detailed information on the
length of service of leavers, to identify problem areas and to provide a foundation
for supply forecasts.

Reasons for Turnover

An analysis of the reasons for leaving derived from exit interviews will provide
useful information on which to base retention plans. Exit interviews aim to establish
why people are leaving and why they cannot be persuaded to stay back. The
reasons for leaving can be classified under the following headings:
More pay; Better prospects (career move); More security; More opportunity to
develop skills; Better working conditions; Poor relationship with manager /team
leader; Poor relationship with colleagues; Bullying or harassment ; Personal-
pregnancy, illness moving away from area etc.

Exit interviews should aim to opinions on any specific reasons for dissatisfaction
under any of the above non-personal headings. Some leavers will be forthcoming,
others will not. It is up to the interviewer to probe skillfully and sensitively to
establish reasons for dissatisfaction or unhappiness; so that where those feelings
are justified, something can be done about them. Judgment is required to sort out
genuine complaints from unjustified or exaggerated ones. An analysis of reasons
should take place and trends be noted. General issues can be addressed by
reviewing employment and reward policies and practices. Issues affecting particular
managers should also be tackled. This may be difficult if tie is a behavioral matter,
such as bullying. However, the problem cannot be ignored.

Exit interviews are not completely reliable, and it is desirable to gain a more
comprehensive picture of the views of existing employees through attitude surveys.

The Cost of Labour Turnover

Labour turnover can be costly. The following factors should be considered:

Leaving costs –payroll costs and personnel administration of leaver: Direct cost of
recruiting replacements (advertising, interviewing, testing etc); Opportunity cost of
time spent by HR and line managers in recruitment; Direct cost of introducing
replacements (induction course, cost of induction manuals etc); Opportunity cost of
time spent by HR and managers in introducing new starters; Direct cost of training
replacements in the necessary skills; Opportunity cost of time spent by line
managers and other staff in providing training; Loss of the input from those leaving
before they are replaced in terms of contribution output, sales, customer
satisfaction and support etc; Loss arising from reduced input from new starters until
they are fully trained.

The incidence of labour turnover:

The labour turnover rate for all employees as revealed by the CIPD 2005 UK survey
was 15.7 per cent. The turnovers of different categories of employees were: staff
31.1 per cent, manual workers 16.7 per cent, secretarial and administrative staff
16.7 per cent and professional staff and managers 9.1 per cent.

Benchmarking labour turnover:

Labour turnover rates provide a valuable means of benchmarking the effectiveness

of HR policies and practices in an organization. They do not tell the whole story, but
if turnover is significantly higher in comparable organizations, this should stimulate
action to investigate why this is the case and something must be done about it.

Benchmarking can be carried out by networking with other organizations possibly

forming a club to exchange information regularly. There are also a number of
benchmarking agencies as listed by the IRS (2000), and the European Foundation
for Quality Management (EFQM ) survey which uses the internet. National sources of
data include the government’s labour force and learning and training at work
surveys, and the annual survey of labour turnover conducted by the CIPD.

2. Discuss the selection methods.

Ans) The main selection methods are the interview, assessment centers and tests.
The various types of interviews and assessment centers are described in the next
two sections of this unit. Another and much dubious method, used by a few firms in
the UK and more extensively in the rest of Europe, is graphology.

Types of Interviews:
Individual interviews -The individual interview is the most familiar method of
selection. It involves face-to-face discussion and provides the best opportunity for
the establishment of close rapport between the interviewer and the candidate. If
only one interviewer is used, there is more scope for a biased or superficial
decision, and this is one reason for using a second interviewer or an interviewing
panel.

Interviewing panels -When two or more people gather to interview one

candidate, it may be described as an interviewing panel. The most typical situation
is that in which a personnel manager and line managers see the candidate at the
same time. This has the advantage of enabling information to be shared and
reducing overlaps. The interviewers can discuss their joint impressions on the
candidate's behaviour at the interview and modify or enlarge any superficial
judgments.

Selection boards - selection boards are more formal and usually, larger
interviewing panels, evened by an official body because there are a number of
parties interested in the selection decision. Their only advantage is that they enable
a. number of different people to have a look at the applicants and compare -otes on
the spot. The disadvantages are that the questions tend to be planned and
delivered at random, the prejudices of a dominating member the board can
overwhelm the judgments of the other members, and the candidates are unable to
do justice to them because they are seldom lowed to expand. Selection boards tend
to favour the confident and articulate candidate, but in doing so, they may miss the
underlying weaknesses of a superficially impressive individual. They can also
underestimate the qualities 9f those who happen to be less effective in front f a
formidable board, although they would be fully competent in the less formal or less
artificial situations that would face them in the job.

Assessment Centres -A more comprehensive approach to selection is provided by

the use of assessment centers. These incorporate a range of assessment
techniques and typically have the following features :-
The focus of the centre is on behaviour.
Exercises are used to capture and simulate the key dimensions of the job. These
include one-to-one role plays and group exercises. It is assumed that performance
in these simulations predicts behavior on the job.
Interviews and tests will be used in addition to group exercises.
Performances are measured in several dimensions in terms of to competencies
required to achieve the target level of performance in a Particular job or at a
particular level in the organization.
Several candidates or participants are assessed together to allow interaction and to
make the experience more open and participative.
Several assessors or observers are used in order to increase the objectivity of
assessments. Involving senior managers is desirable to ensure that they ‘own' the
process. Assessor must be carefully trained.
Assessment centers provide good opportunities for indicating the extent to which
candidates match the culture of the organization. This will be established by
observation of their behaviour in different but typical situations, and by the range of
the tests and structured interviews that are part of the proceedings. A well-
conducted assessment centre can achieve a better forecast of future performance
and progress than judgments made by line or even personnel managers in the
normal, unskilled way.

Graphology - Graphology can be defined as the study of the social structure of a

human being through his or her writing. Its use in selection is to draw conclusions
about a candidate's personality from his or her handwriting as a basis for making
predictions about future performance in a role. The use of graphology as a selection
aid is extensive on the continent but relative uncommon in the UK- Fowler (1991a)
quotes research finding that indicate that only between 0.5 and 1.0 per cent of
employers use it in the UK. This very small proportion may be attributed t the
suspicion the great majority of recruiters have that graphology is in some way
spurious and using it as a prediction will be a waste of time and money. In an
extensive review of the research literature, Fowler (1991a) established that some
studies indicate a predictive validity coefficient in the range of 0.1 to 0.3.although
zero results have also been obtained. These are low figures, which achieve only a
poor level of validity. Fowler's conclusion was that clues about personality
characteristics may be deduced by skilled graphologists but that the use of
graphology as a single or standard predictor cannot be recommended. He also
suspects that, for some people, the real attraction of graphology is that it can be
used without the subject's knowledge.

Choice of selection methods: -There is a choice between the main selection

methods. What Cook (1993) refers to as the classic trio consists of application
forms, interviews and references. These can be supplemented or replaced by bio
data, assessment centers and psychological tests. It has been demonstrated again
and again that interviews are an inefficient method of predicting success in a job.
Smart (1983), for example, claims that only 94 out of 1,000 interviewees respond
honestly in conventional interviews. Validity studies such as those quoted by Taylor
(1998), produce equally dubious figures for conventional interviews and indicate
that assessment centers, psychometric tests, bio data and structured interviews are
more accurate methods of selection. For good reasons, organization will retain
interviews as the main method of selection where assessment centers are
inappropriate. But there is a very powerful case for structuring the interview and a
strong case for supplementing it with tests. The more evidence that can be
produced to help in making crucial selection decisions, the better.

3. Due to the recent recession FinPlus , finance company

has to downsize the current employees. In this scenario
what are the responsibility of HR professional. What kind
of plan they can prepare.

Ans) The downsizing plan:-

If everything fails, it may be necessary to deal with unacceptable employment costs
or surplus numbers of employees by what has euphemistically come to be known as
‘downsizing’. The downsizing plan should be based on the timing of reductions and
forecasts of the extent to which these can be achieved by natural wastage or
voluntary redundancy. The plan should set out:-

• The total number of people who have to go, and when and where this needs
to take place;
• Arrangements for informing and consulting with employees and their trade
unions;
• A forecast of the number of losses that can be taken up by natural wastage;
• Any financial or other inducements to encourage voluntary redundancy;
• A forecast of the likely numbers who will wander to leave.
• A forecast of the balance of employees, if any, who will have to be made
redundant (the plan should of course, aim to avoid this through natural
wastage and voluntary redundancy);
• The redundancy terms;
• Any arrangements for retraining employees and finding them work elsewhere
in the organization;
• The steps to be taken to help redundant employees find new jobs by
counseling, contacting other employers or offering the services of
outplacement consultants;
• The arrangements for telling individual employees about the redundancies
and how they are affected, and for keeping the trade unions informed.

The Contribution of HR to Develop the Resource Capability

Human resource planning, in the broader meaning of the term, is one of the
fundamental strategic roles of the HR function. HR can make a major contribution to
developing the resource capability of the firm and therefore its strategic capability
by systematically reviewing the firm’s strategic objectives and by ensuring that
plans are made that will ensure that the human resources are available to meet
those objectives. Thus HR is focusing on the acquisition and development of the
human capability needed to :

Ensure that they are aware of the strategic plans of the business, and can provide
advice on the human resource implications of those plans;

Point out to management the strengths and weaknesses of the human resource of
the organization, and the opportunities and threats they present so that these can
be considered when developing business plans;

Be capable of scenario planning in the sense that they can identify future issues
concerning the acquisition, retention and employment of people, and advise on
methods of addressing those issues;

Understand the extent to which quantitative assessments of the future demands for
and supply of people may be feasible and useful, and know the methods that can be
used to prepare such forecasts;
Be aware of the scope to deal with future requirements by introducing various
forms of flexibility;

Be capable of preparing relevant and practical resourcing plans and strategies for
retaining people, based upon an understanding of the internal and external
environment of the organization, and the implications of analyses of labor turnover.