Environmental Scanning

Systematic process of studying & monitoring the external environment of the organization in order to pinpoint opportunities & threats Involves long range analysis of employment Factors include economic factors, competitive trends, technological changes, socio-cultural changes, politico-legal considerations, labour force composition & supply, & demographic trends
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Environmental Scanning

Eg., competitive pressures are likely to increase resulting in enhanced productivity requirements & HRP objective may be to increase employee productivity by 5% in 2 yrs. which will require the firm to determine current employee productivity (output / employees) Attempts to answer 2 questions:

Which jobs need to be filled (or vacated) during the next 12 months? How & where will we get people to fill (or vacate) these jobs?

Demand & supply of labour in loose & tight labour market

Major impact of the shortage of skilled workforce (tight labour market) in India has been on staff cost (increased by 35% in 2005) Fast growing sectors like retail, ITeS, telecom are new & do not have historical talent to bank on & hence they are hiring from other sectors with skill sets that are relevant to their industries
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Forecasting HR Demand

FORECASTING makes use of information from the past & present to identify expected future conditions.

Forecasts are not perfectly accurate & as the planning scope becomes shorter the accuracy of forecasts increases
HR demand forecasts may be internal / external
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Causes of Demand
EXTERNAL CHALLENGES:

Economic developments noticeable effect but are

difficult to estimate (Inflation, unemployment, & changing workforce patterns)

Social, political & legal challenges easier to

predict, but their implications are not very clear (Implication of abolishing mandatory retirement age in US may not be known until a generation has lived without 65 & out tradition)

Technology changes difficult to predict & assess

but may radically alter strategic & HR plans (PC would cause mass unemployment vis--vis IT field as a large one employing millions of people directly / indirectly complicates HR, because it tends to reduce employment in one dept. while increasing it in another)4

Causes of Demand
ORGANIZATIONAL DECISIONS:

As orgs. respond to changes in their environment, decisions are made to modify the strategic plan, which commits firm to longrange objectives growth rates & new products, markets / services & these objectives dictate number & types of employees needed in future To achieve long-term objectives, HR specialists must develop longrange HR plans that accommodate strategic plan In short run, planners find strategic plans become operational in form of budgets

Sales & production forecasts are less exact than budgets but New ventures means changing HR demands when a new

may provide even quicker notice of short-run changes in demand for HR venture is begun internally from scratch, lead time may allow planners to develop short-run & long-run employment plans merging HR group with Corporate Planning staff

Causes of Demand
WORKFORCE FACTORS (ATTRITION):

Demand is modified by employee actions such as

retirements, resignations, terminations, death, & leaves of absence

Analysis Technique Markov Analysis of

Attrition Rates

Forecasting Techniques
Trend Projection Forecasts:

Quickest forecasting techniques

Two simplest methods

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Extrapolation: involves extending past rates of change into future (if an avg of 20 production workers was hired each month for past 2 yrs, extrapolating that trend into future means that 240 production workers will be added during upcoming yr.)

2.

Indexation: a method of estimating future employment needs by matching employment growth with an index, such as ratio of production employees to sales (eg., for each million $ increase in sales, production deptt. requires 10 new assemblers)

Both are crude approximations in short run because they assume that causes of demand remain constant which is seldom the case making it very inaccurate for longrange HR projections
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Methods of Demand Estimation

TREND ANALYSIS & PROJECTION

Study of firms past employment needs over a period of yrs. to predict future needs Appropriate business factor that relates significantly to employment levels differs across industries (University student enrollment, Sales firm sales volume, Manufacturing firm total units produced) Steps:
1. 2. 3. 4. 5. 6.

Determine & identify a business factor that relates to the number & type of people employed Identify historical trend of the relationship between this business factor & the number of people employed Determine the ratio of employees to the business factor, that is, the average output per individual employee per year labour productivity Determine the labour productivity ratio for the past 5 yrs at least & calculate the average annual rate of change in productivity Calculate the human resource demand by dividing the business factor by the productivity ratio Project human resource demand for the target year.
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Methods of Demand Estimation

SIMPLE LONG-RANGE TREND ANALYSIS

Extrapolates the volume of current business activity for the years for which the forecast is being made

Since there is a correlation between volume of business activity & employment level, linear extrapolation would also indicate HR demand by job & skill category
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Methods of Demand Estimation

RATIO ANALYSIS

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

Eg., revenue per employee, sales vol. per salesperson, service contract per engineer, units produced per employee, etc.,

Historical ratio between:

Some causal factor (sales volume)
No. of employees required (number of salesperson)
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Methods of Demand Estimation

REGRESSION ANALYSIS

Drawing a statistical comparison of past relationship among variables

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

LINEAR REGRESSION ANALYSIS

Relationship between two variables which is directly & precisely proportional

Manpower

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

X
x x

a
x x

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

b Production level

Y
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Methods of Demand Estimation

MARKOV ANALYSIS

Shows the percentage (& actual no.) of employee who remain in each job from one yr. to the next, as also the proportion of those who are promoted or transferred or who exit the organization Internal mobility among different job classifications can be forecast based upon past movement patterns past patterns of employee movements (transitions) used to project future patterns Pattern is used to establish transitional probabilities & to develop a transition matrix Transitional probabilities:

Indicate what will happen to the initial staffing levels in each job category / probability that employee from one job category will move into another job category Determine the forecasted employee levels at the end of the yr

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Forecasting & Analyzing HR Supply

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

INTERRELATED FACTORS THAT MUST BE CONSIDERED IN PROJECTING EXTERNAL HR SUPPLY

Government estimates of population available for work Net migration into and out of the area Numbers entering the workplace Numbers leaving the workplace Numbers graduating from schools / colleges Changing workforce composition Technological shifts Industrial shifts Trends in the industry (actions of competing employers) Economic forecasts Government regulations & pressures such as job reservations for certain groups
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Methods of Forecasting Internal HR Supply

HR INVENTORY

Obtains & stores information about each employee of the org. in a manner that is easily accessible because it is necessary for HRP

Employee information stored in the inventory relates to KSA, experience, & career aspirations of the present workforce of the firm
Contents of HR Inventory
Personal identification information

Biographical information
Educational achievements Employment history Information about present job Present skills, abilities, & competencies Future focused data Specific actions (like training needed for achieving career goals)
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Methods of Forecasting Internal HR Supply

HR INVENTORY

2 types
Skills inventory: describes the skills & knowledge of non-managerial employees & is used primarily for making placement & promotion decisions Management inventory: contains the same information as in skills inventory, but only for managerial employees which describes the work history, strengths, weaknesses, promotion potential, career goals

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Methods of Forecasting Internal HR Supply

HR INVENTORY

Can be used to develop employee replacement charts

Replacement charts lists current jobholders & identifies possible replacements should there be a vacancy for reasons such as resignations, transfers, promotions, etc.

Replacement charts include the following information on possible replacements like current job performance, potential for promotion, training experience required by replacement to be ready for the key position
Chart also details when a replacement is needed for a job short term forecasts in nature
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Methods of Forecasting Internal HR Supply

SUCCESSION ANALYSIS & PLANNING

A systematic & deliberate process of identifying, developing & tracking key individuals within the firm to prepare them for assuming senior & top-level positions in future. Eg., SAIL poaching from global players & preparing a defence system wherein 2nd & 3rd line of command is being prepared; IBM, ExxonMobil, GE, etc., have already hired its CEO for 2010 Eg., Godrej, Marico (fly. owned business) in India have drop dead succession plan which keeps the wheel moving where a promoter of the fly-owned firm may always be around to guide the company
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Methods of Forecasting Internal HR Supply

LABOUR WASTAGE ANALYSIS

Traditionally LW is measured by the employee turnover index (% wastage index)

(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

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Methods of Forecasting Internal HR Supply

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

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