CHAPTER 5 – THE HUMAN

RESOURCE PLANNING PROCESS

 KEY CONCEPTS AND SKILLS

➲ Impact of business planning on human resource

planning
➲ Long-term and short-term factors to be considered
in human resource demand forecasting
➲ Factors to be considered in human resource
supply forecasting
➲ Forecast human resource requirements based on
production schedules
➲ Human resource actions needed to match human
resources demand with supply
➲ Techniques used in human resource forecasting
 CHAPTER OUTLINE

➲ Impact of business planning on human resource

planning
➲ Determining human resource requirements
➲ Resources demand forecasting
➲ Resources supply forecasting
➲ Human resource actions
➲ Some human resource forecasting techniques
➲ Bottom-up approach
➲ Rule-of-thumb approach
➲ Zero-base forecasting
➲ The Delphi technique
➲ Time series or trend analysis
➲ Other forecasting methods
 HUMAN RESOURCE PLANNING

➲ Process of systematically reviewing human

resource requirements so that organisation will be
able to obtain the required number of employees
with the required skills available at the time when
needed.
IMPACT OF BUSINESS PLANNING
ON HUMAN RESOURCE PLANNING

➲ Effective human resource planning can only be

done after strategic planning
➲ Strategic Planning = organisation’s process of
defining its strategy, or future direction, and making
decisions on allocating its resources to pursue this
strategy.
➲ Long-range strategic planning (2 to 5 years) flows
into middle-range operational planning (1 to 2
years)
➲ From these plans, annual budgets are derived and
budgeting decisions developed
 Impact of Business Planning On
Human Resource Planning

BUSINESS PLANNING HUMAN RESOURCE

PROCESS PLANNING PROCESS

STRATEGIC PLANNING ISSUES ANALYSIS

(Long-Term) Business Needs
Corporate Philosophy External Factors
Environmental Scan Internal Supply Analysis
Strengths and Weaknesses Implications for
Objectives and Strategies Management
 Impact of Business Planning On
Human Resource Planning

BUSINESS PLANNING HUMAN RESOURCE

PROCESS PLANNING PROCESS

OPERATIONAL PLANNING FORECASTING

(Medium-Term) Staffing Levels
Planned Programmes Staffing Mix
Resources Required Organisation and
Organisational Strategies Job Design
Plans:Acquisitions Available and Projected
Divestitures Resources
Net Requirements
 Impact of Business Planning On
Human Resource Planning

BUSINESS PLANNING HUMAN RESOURCE

PROCESS PLANNING PROCESS

BUDGETING ACTION PLANS

(Annual) Staffing Authorisations
Budgets Recruitment and Selection
Performance Goals Promotions and Transfers
Programmes Training and Development
Monitoring and Control Compensation
of Results Industrial Relations
 DETERMINING HUMAN RESOURCE
REQUIREMENTS

RESOURCES DEMAND FORECASTING

Long-term Factors
1. The organisation’s long-term business plans.
2. Demographics.
3. The economy.
4. Technological trends.
5. Social trends.
 RESOURCES DEMAND
FORECASTING

Short-term Factors
1. Production schedules and budgets.
2. Retrenchments or relocations of facilities.
 RESOURCES SUPPLY
FORECASTING

1. Current inventory.
2. Productivity level.
3. Turnover rate.
4. Absenteeism rate.
5. Movement among jobs.
 HUMAN RESOURCE ACTIONS

1. Hiring.
2. Training.
3. Career management.
4. Productivity programmes.
5. Reductions in work force.
 FORECASTING WORK FORCE
REQUIREMENTS

Step 1. Determine what department is scheduled to

produce for period
Step 2. Calculate how much work schedule means in
terms of total man-hours
Step 3. Convert totals to man-hours and divide by 8 to see
how many man-days it will take to complete schedule
Step 4. Divide total man-days by number of working days
during period to find number of employees needed.
Step 5. Check how many indirect persons are needed to
service required number of employees during this period
Step 6. Add number of direct labour to number of indirect
persons to get total needed
Step 7. Make allowances for absences.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Bottom-Up Approach
➲ Using supervisor and manager estimates of
manpower requirements
➲ Based on reasoning that people at the bottom
where the action is (supervisors and managers)
are most knowledgeable about employment
requirements.
➲ Good method especially in making short-term
forecasts.
➲ Each successive level, starting with the lowest,
forecasts its requirements, ultimately providing a
total forecast of employees needed.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Rule-Of-Thumb Approach
➲ Rules of thumb set up for certain environmental
conditions that are used for forecasting human
resource requirements
➲ E.g., a department store may choose to hire a new
sales assistant for each 100 square metres of floor
space
➲ Rule-of-thumb technique is useful but main
disadvantage is that the rules of thumb are
designed to maintain the status quo.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Zero-Base Forecasting
➲ Based on techniques of zero-base budgeting
➲ Does not use organisation’s current level of staffing as
starting point for determining future staff requirements
➲ Each annual budget must be re-justified and managers
will need to defend with supporting evidence why they
need so many people in their department
➲ When a position becomes vacant, vacancy not filled
automatically
➲ Instead, manager will have to justify why the position
needs to be filled
➲ Any new positions must also be justified accordingly.
➲ Through zero-base forecasting, organisation ensures
no over-staffing takes place.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

The Delphi Technique

➲ Structured approach for reaching consensus judgement
➲ Experts chosen on basis of knowledge of internal
factors, general business plans, or external factors that
might affect demand
➲ Objective is to predict future developments in particular
area by integrating independent opinions of experts.
➲ Face-to-face group discussion among experts avoided
➲ Intermediary is used
➲ Intermediary’s job to pool, summarise, and feedback to
experts during first round of forecasting
➲ Cycle then repeated, so that experts given opportunity
to revise their forecasts and reasons behind their
opinion within three to five rounds.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Time Series or Trend Analysis

➲ Quantitative method that makes use of trend
extrapolation by using past trends to make
projections into the future.

1. Find appropriate business factor

➲ Critical first step is to select a business factor to
which workforce size can be related
➲ Business factor must satisfy 2 requirements:
➲ should relate directly to essential nature of
business
➲ changes in selected factor must be proportional
to number of employees required
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Time Series or Trend Analysis

2. Plot historical relationship between business
factor and work force size
➲ Develop quantitative relationship between past
staffing levels and past levels of the business
factor.
3. Labour productivity
➲ Ratio of output per individual worker
➲ To forecast staffing requirements accurately,
necessary to know rate at which labour productivity
and business factor are changing.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Time Series or Trend Analysis

4. Determining the trend in labour productivity and
adjustments to the trend
➲ To determine average annual rate of productivity
change during past 5 or 10 years, data must be
collected
➲ Can calculate average annual productivity change
and, along with projected changes in business
factor, use as forecast of what changes will be
forthcoming
➲ Evaluate causes of any past changes deviating
from average annual change in productivity.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Time Series or Trend Analysis

5. Projecting future staffing needs to the target
year
➲ Projection of staff needs to target year is
straightforward
➲ Actual and projected levels of the business factor
and actual and projected labour productivity
obtained
➲ Number needed in any given year can be
determined
➲ Forecast of net HR demand is determined simply
by subtracting the supply forecast from the
demand forecast.
 SOME HUMAN RESOURCE
FORECASTING TECHNIQUES

Other Forecasting Methods

➲ Budget and planning analysis