Canadian Human Resource Management - PDF

Chapter 3 Human Resource Planning... a methodological process of analyzing the current workforce, determining future workforce needs, identifying the gap between the present and the future, and implementing solutions so that the organization can accomplish its mission, goals, and objectives. ANDRE...

Chapter 3 Human Resource Planning... a methodological process of analyzing the current workforce, determining future workforce needs, identifying the gap between the present and the future, and implementing solutions so that the organization can accomplish its mission, goals, and objectives. ANDREW MAYO1 Page 58 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. LO1 Explain the importance of human resource plans for strategic success. 1. LO2 Describe the human resource planning process. 1. LO3 Discuss methods for estimating an organization’s demand for human resources. 1. LO4 Explain the various methods of estimating a firm’s supply of human resources. 1. LO5 Identify solutions to shortages or surpluses of human resources.  1. LO6 Discuss the major contents of a human resource information system (HRIS). 1. LO7 Explain how data and analytics has contributed to enhancing HR service delivery. In Chapter 1, we addressed how different organizational strategies and tactical plans require different human resource practices, strategies, and tactics in order to be successful. In this chapter, we elaborate on this concept by addressing human resource planning—a fundamental step in strategic human resource management. Recall that strategic human resource management enables leaders and HR professionals alike to align the human resource systems, policies, and practices to the organizational strategy. Human resource planning, in turn, enables organizations to ensure that the right people are in the right place at the right time to support the completion of organizational strategies. It is also the opportunity to consider whether there is a gap in the current HR practices and procedures to enable success in the organization’s strategic plan. Perhaps more than any other HR activity, planning allows HR specialists to be proactive and strategic. Planning is a critical HR process—particularly over the long term, since without planning, an organization may find itself with an office without the employees or the business processes to run it effectively. HR plans themselves range from simple frameworks based on past trends to highly sophisticated modelling based on live-time data analytics. Regardless, it is important that some form of planning exists. Page 59 In 1924, International Business Machines was created. Better known today as IBM, the company has made major shifts in business strategy over the last 95 years. With origins in creating and manufacturing hardware (including clocks), IBM has undertaken a strategy of “making markets by transforming industries and professions with data.”2 To undertake a strategy focused on big data and data analytics, an appropriate shift in human resources would have needed to take place to ensure that the right individuals with the right skill sets were in place well in advance of executing this strategy. Without an appropriate human resource plan, the leaders at IBM would likely be addressing the age old phenomena. That is, they would be rushing to hire people in a reactive way rather than in a proactive way. LO1 Relationship of Human Resource Planning to Strategic Planning Human resource planning (HRP) is a strategic and proactive process used to determine future human resource requirements and the business processes that will be needed to support and enable those resources by anticipating future business demands, analyzing the impacts of these demands on the organization, determining the current availability of human resources and the applicable business processes, and making decisions on how to effectively adapt and utilize firms’ human resources. HRP helps identify what human resources are needed to ensure that the organization can respond to change and provides plans to help the organization respond effectively.3 Although the term human resource planning has been used interchangeably with other terms, such as employment planning, human capital planning, and human capital management, the process of human resource planning has expanded well beyond simply predicting the number of employees an organization will need. Because of the interdependence of organizational strategy and human resources, HR planning is often referred to as strategic human resource planning (SHRP). One major objective of human resource planning is to ensure that the organization has the right people with the right skills at the right time in order for the organization to fulfill organizational objectives.4 Simply putting the right people in the right place at the right time, however, does not ensure success. Having the appropriate human resource practices in place to create the right environment and enable and motivate people to do the right things is equally important. Complementing the “people resource” element, planning also involves planning for the appropriate HR practices and activities. For example, consider an organization that is planning a major expansion into a new market when employees are resistant to change, lack trust in leadership, and have generally low morale. In a case like this, human resources will need to figure out how to attract, hire, and retain more employees while simultaneously developing and implementing strategies to improve the organization’s culture. By anticipating the number and types of employees and the activities that will be needed, HR leaders help improve the utilization of human resources, attempts to achieve economies of scale by securing the right type of resources, and aligns its activities with the organization’s overall strategic direction. However, getting the right people in the right place at the right time does not ensure organizational success. For discussion purposes, this chapter focuses on creating a workforce plan and introduces concepts and tools that will be more fully developed throughout Part 2 of the text. Enabling and motivating “people” resources to do the right things is the focus of Part 3 of this text. Linking Strategy to Planning In Chapter 1, we outlined a number of forces—both internal and external—that would impact an organization’s ability to successfully achieve its goals. Adopting a strategic focus on HR enables managers to proactively anticipate the long-term “people” and “process” needs of an organization and to create a human resources strategy that brings those elements together. It is important to recognize, however, that a firm’s long-range strategic plan is accomplished by the thoughtful execution of a series of short-range tactical (or operational) plans that focus on current needs and operations. Purchasing a new information management system to improve efficiency, recalling a defective product, and managing inventory more effectively are some examples of tactical activities. Whatever the plan, it is made and carried out by people, which necessitates the proper staffing of an organization. As such, each tactic also requires managers and leaders to consider short-range HR needs. Page 60 Consider the interaction between performance consulting and digital learning. Performance consulting is a systems approach to enabling people in their jobs by focusing on the knowledge, skills, and abilities they need to successfully improve on a performance problem.5 In many cases, organizations will turn to asynchronous, online, modular, and on-demand learning to enable these new skills.6 Organizations that operate using traditional classroom-based learning and performance management systems would need to pivot their short-term human resource needs to adapt to current technology and approaches to enable long-term HR goals. When Nordstrom, an upscale U.S. retailer, announced that it would open a flagship store in Toronto, the underlying HR system would have gone to work. To be ready to execute this major initiative, Nordstrom must have had  the proper staff available with specific skills. For example, to staff its stores, Nordstrom needed retail clerks, managers, merchandisers, and cashiers. In addition, it required regional managers, a country manager, and an executive to oversee this expansion.7 Figure 3-1 shows the relationship between an organization’s strategic plans and its human resource plans. As illustrated, the overall organizational strategy defines the human resource objectives that are accomplished through the implementation of appropriate human resource plans. Successful organizations— both large and small, and public as well as private—recognize the importance of intellectual or human capital. An effective human resource plan is a critical tool to take advantage of this valuable asset. FIGURE 3- 1 Relationshi p Between Strategic and Human Resource Plans Table Summary: Summary HR Planning Can Vary From Capturing Basic Information to Live-Time Predictive Analytics Organizations are unique; they use different approaches for planning the allocation of human resources. It is typical to expect that, as organizations grow, they develop more robust planning practices, largely due to the significant impact on labour costs. Large Canadian employers, such as ONEX (170,000 employees), George Weston (140,800 employees), Magna International (169,000 employees), and RBC Royal Bank (85,000 employees), pay considerable attention to employment planning since even a one percent increase or decrease in the total workforce can result in significantly different labour costs. In some cases, organizations have hired “chief human resources officers,” asserting that organizations need to bring together strategy, research, data, planning, and employee engagement and well-being to create high-performance organizations.8 However, this type of planning is exceptional. Some organizations think very short term, their planning is informal, and their resource plan is static. For illustrative purposes, one may consider these differences in terms of four levels of sophistication. No formal planning In these companies, HR activities tend to be done in a reactionary way. Recruitment and hiring are done based on the immediate needs of the organization. Little attention is given to how talent development and motivation support better organizational outcomes. In these organizations, human resource professionals may be seen as “firefighters.”9 In very small companies, such as a sole proprietorship or small family business, the absence of HR planning may not create large scale problems. For larger organizations, however, the absence of HR planning can become very expensive because of poor decisions. Page 61 Basic Planning These organizations recognize the need to plan for their human resources. Planning activities may be a mix of proactive and reactionary. Planning will be driven by hiring managers and focused on the immediate and short-term (1–2 years) needs of a particular workgroup. Planning is often based on the number of employees (headcount) and that the number of employees is based on some “standardized” workload per employee. HR professionals may be involved, but are not fully integrated into the planning environment. Advanced Planning These organizations will make a direct connection between the organization’s strategic plan and strategic human resource planning initiatives. Planning will balance the immediate needs and anticipate needs 3–5 years in advance. Employee mobility through promotion and development will be integral to the planning process. Trends that are described in Chapter 1 will be a key factor in making planning decisions. HR professionals will be integral to the planning process and planning will consider needs among and between different workgroups. These organizations will likely be supported by a functional human resource information system (HRIS). sophisticated planning Senior HR professionals are integral to the organization’s strategic planning process. This enables strategic human resources to both inform the development of organizational strategy and support it more effectively once the organization’s strategy is set. Planning will effectively balance the organization’s immediate needs with its future (5+ years out) needs through a robust and integrated talent management system. In addition to a robust HRIS, these organizations will often rely on third-party expertise and technologies to supplement their internal planning process.10 Examples include cloud-based digital infrastructure as well as large scale data and predictive analytics to create predictive modelling. Strong system evaluations enable long-range planning to be continuously improved. For example, some organizations turn to companies like SAP to create software solutions to predict certain events, such as employee turnover.11 This has created a new challenge for HR professionals—namely, how to use data analytics without creating concern from employees.12 This is not to suggest that all organizations eventually progress through the levels. In some cases, an organization may not make it past no planning. This may be due to a lack of knowledge or simply a lack of time. According to the Chartered Institute for Personnel Development, HR analytics is using people-centric data in analytic procedures to solve business problems.13 In creating evidence-informed decisions, the field of HR is still coming into its own. Some authors argue that the primary challenge for HR is to use data at all, simply because the appropriate type of data doesn’t exist in most companies today.14 The remainder of the chapter is going to focus on the workforce planning portion of strategic human resource planning (see Figure 3-2): the process of putting the right people in the right place at the right time. This process is complemented by creating the right environment, which will be developed robustly in Part 3 of the text. The discussion begins with a look at factors causing human resource demand, followed by strategies to estimate demand and supply and match current and future supply with demand. The chapter ends with a brief look at human resource information systems (HRIS), the importance of using these systems to manage talent, and the various ways we can use the information to effectively utilize our human resource capabilities. FIGURE 3-2 The Workforce Planning Process Table Summary: Summary LO2 The Human Resource Planning Process As seen in Figure 3-2, human resource planning is a process with a specific order of activities helping managers to focus on the issues that are most important so they can plan effectively to ensure that organizational objectives are met. Page 62 The steps are as follows. Step 1: Forecast Demand for Resources This activity answers the following questions: How many human resources will we need? When will we need them? Where will we need them? It forecasts demand by looking at the many factors that cause labour need to exist and uses various forms of forecasting techniques. Step 2: Assess Supply of Resources This phase assesses the internal and external supply of labour. It answers these questions: What resources do we have available both inside the organization and in the external environment? What skills and competencies do these resources possess? What skills and competencies will these resources need? Step 3: Develop HR Objectives This step identifies what the planners expect to accomplish as a result of their actions. Planners carry out an analysis to determine the differences between demand and supply, and write HR objectives that will determine the choice of programs. Step 4: Design and Implement Workforce Systems to Balance Demand and Supply Here the planners decide what types of human resource programs will be developed to achieve their objectives. These programs attempt to balance demand and supply. For example, if the organization is projecting a shortage, it may choose to outsource or use overtime, or, if a surplus is expected, it may decide to allow employees to job share as opposed to downsize. Step 5: Establish and Conduct Evaluation With any process it is important to evaluate its effectiveness, using some form of quantitative or qualitative measurement. Evaluation of the process answers this question: Is there a tangible link between investments in human resource programs and organizational sustainability, and, if so, to what degree?15 Forecasting Labour Demand A challenge facing organizations is that “people” resources are rarely in a state of being perfectly balanced. Because organizations and their environments are continually changing, organizations quite likely will find themselves in a position of having either too many employees or not enough. This underscores the importance of effective human resource planning. While it may not completely eliminate it, a good HR plan reduces the risk of being out of balance. To have an effective HR plan, organizations need to have a clear understanding of what they need in terms of employees, what they have, and what the difference is between the two. Moreover, a good HR plan will identify and anticipate shifts in either an organization’s demand or its supply of human resources. The best place to begin is to forecast the need for resources. To this end, we need to consider the factors that cause a demand to exist. Forecasting: Identifying the Causes That Will Drive Demand To understand how to forecast demand, we need to consider what would cause an organization’s need for employees or specific skill sets to change in one direction or another. Note that the examples provided are not exhaustive but, rather, provide some illustration of what may impact human resource demand. As well, some forces may create either an undersupply or an oversupply, depending on other factors. For example, sales projections may create an oversupply if sales projections are falling or an undersupply if sales projections are increasing. Some of these causes are within the organization’s control, and others are not. Human resource forecasts are attempts to predict an organization’s future demand for employees. Strategic Plan As discussed earlier in the text, the organization’s strategic plan commits the firm to long-range objectives, such as growth rates, new products, markets, or services. These objectives determine the numbers and types of employees needed in the future. Obviously, a fast-growing firm has more beginning-level vacancies. The number of higher-level openings also depends on how well the HR department assists employees to develop their capabilities. If workers are not encouraged to expand their capabilities, they may not be ready to fill future vacancies. Demographic Impacts In Chapter 1, a series of demographic impacts were identified, including age and gender. Like national, regional, or even local demographics, each organization will have a demographic profile of its own. This profile helps inform HR leaders regarding impending changes in their workforce. For instance, HR leaders may capture the average age of employees against the average retirement age to gain insight into future retirements. Consider the impact of the shrinking population of Newfoundland and Labrador on employability and on the cost of health care.16 Page 63 A key consideration for an organization's demographic profile is the role of equity, diversity, and inclusion in HR systems. With more than 30 percent of individuals who identify with a diverse group having experienced some form of discrimination in the workplace,17 effective human resource planning needs to consider not only the current and desired demographic profile of the organization, but also the conscious and unconscious biases of hiring managers and HR professionals that may systemically impact the organization’s demographic profile. Turnover Turnover is the departure of employees from an organization. In some cases, such as resignations, the decision to leave the organization is made by the employee. In other cases, the employer makes the decision, such as in terminations. In yet other cases, the turnover may be temporary (e.g., leaves of absence). Turnover may be functional (i.e., good) or dysfunctional (i.e., bad). Regardless of the cause, effective human resource planning needs to be prepared to understand and predict employee departures as well as possible. At the end of April 2020, the annual resignation rate in Canada was down to 7 percent, largely due to the disrupted labour market caused by COVID-19.18 In stark contrast, two years earlier in February 2018, the number of employees voluntarily leaving their jobs in the United States was at the highest point in 17 years; this was due to individuals’ confidence that they would find another job because of a strong U.S. economy.19 Legal Changes Changes occurring in social, political, and legal spheres are easier to predict, but their implications are seldom clear. As demographics change, so do employee attitudes toward work and their employers. The impact on human resource planning of the Canadian Human Rights Act, passed more than 40 years ago, is still somewhat unclear. Major judicial verdicts, changes in employment laws (such as minimum wages),20 and federal and provincial government regulations all have great implications for the human resource planner. Although many large firms have established employment equity programs, the results of a change from the notion of equal pay for equal work to that of equal pay for work of equal value (see Chapter 4) will have profound implications. Technological Changes Technological changes, which are normally difficult to predict, can affect both demand for, and supply of, human resources and appropriate HR practices and tools.21 As an example, many thought the computer would mean mass unemployment. While it is true that digitization and automation have eliminated certain types of jobs, the high-tech and electronics industry today employs hundreds of thousands of people and is a high-growth business. In some cases, it is the high-tech jobs that are in the highest demand. An example is the artificial intelligence sector.22 Very often, technological changes tend to reduce employment in one department while increasing it in another, making planning tricky. The rapid automation, digitization, and technology of many work activities may necessitate new skills on the part of employees. A study by McKinsey notes that automation may affect 50 percent of the world economy or 1.2 billion employees and 14.6 trillion wages.23 The World Economic Forum predicted that 75 million jobs would be displaced by automation, however, 133 million jobs would be created by automation by 2022.24 Competitors Competitors affect an organization’s demand for human resources, though not in any uniform manner. Employment in some of the traditional sectors (such as the steel industry) barely grows because of foreign competition and a push for productivity improvement. But in the high-tech and electronics industries, competition causes lower prices, larger markets, and additional employment. In yet other cases, the arrival of a competitor may create demand because employees leave to work for the competitor or an organization fails to compete. Budgets and Revenue Forecasts Budget increases or cuts are the most significant short-run influence on human resource needs. Related to budgets are revenue forecasts. While less exact than budgets, revenue forecasts may provide even quicker notice of short-run changes in human resource demand. If a sharp decline in sales were to occur, retailers might quickly discard the short-run human resource plan and impose an employment freeze. Consider Bombardier’s needing to potentially lay off hundreds of workers because the company was not successful on a bid to build new trains for the city of Montreal.25 Historical sales and production forecasts can be used as the operational index to which HR planning forecasts its future human resource demands. Page 64 New Ventures New ventures mean new human resource demands. When initiated internally to the organization, the lead time may allow planners to develop short-run and long- run employment plans. But new ventures begun by acquisitions and mergers cause an immediate revision of human resource demands. A reorganization, especially after a merger or an acquisition, can radically alter human resource needs. Several positions or jobs may have to be eliminated to avoid duplication, while new integrating roles may have to be created for the smooth operation of merged units. For example, consider the takeover of Whole Foods by Amazon in 2017. Following the takeover, employees began to fear the deployment of drones, which would lead to layoffs.26 Organizational and Job Design Changes in the organization structure have major implications for human resource needs. In some cases, new roles may be created. In others, roles may be eliminated. Prior to 2014, Nokia, a Finnish company, was heavily invested in the cellphone market. Recognizing that it could no longer be profitable in the device market, Nokia sold its interests in cellphones to Microsoft. In doing so, Nokia swung more heavily into the networking equipment industry. After buying out a partnership with Siemens, Nokia shifted its strategy, corporate structure, business plan, and management team—all resulting in a need for the HR team at Nokia to pivot and adapt.27 LO3 Forecasting Techniques for Estimating Human Resource Demand As Figure 3-3 shows, forecasting techniques range from the informal to the sophisticated. Even the most sophisticated methods are not perfectly accurate; instead, they are best viewed as approximations. Most firms make only casual estimates about the immediate future. As they gain experience with forecasting human resource needs, they may use more sophisticated techniques (especially if they can afford specialized staff). FIGURE 3-3 Techniques for Estimating Future Human Resource Needs Table Summary: Summary Expert Trend Other Informal and instant Budget and Extrapolation decisions planning analysis New-venture Formal expert survey Indexation analysis  Expert Trend Other Statistical Delphi technique Simulation models analysis Each of the forecasting methods in Figure 3-3 is explained below. Expert Forecasts Expert forecasts rely on those who are knowledgeable to estimate future human resource needs. At the first level of complexity, the manager may simply be convinced that the workload justifies another employee. The idea that workload justifies a recruit illustrates an informal and instant and often inaccurate forecast. The primary risk in doing so is that it is not part of a systematic planning effort. A better method is for planners to survey managers, who are the experts, about their department’s future employment needs, identify differences in perspectives, and place the data in context. The centralization of this information permits formal plans that identify the organization’s future demand. The survey may be an informal poll, a written questionnaire, or a focused discussion using the nominal group technique (NGT).28 The NGT presents a group of managers with a problem statement, such as, “What will cause our staffing needs to change over the next year?” Then each of the participants writes down as many answers as possible. These ideas are then shared in round-table fashion until all written ideas and any new ones they stimulated have been recorded. The group’s ideas are then discussed and ranked by having each member of the group vote for the three to five most important ones.29 If the experts cannot be brought together, sophistication can be added to the survey approach with the Delphi technique.30 This technique solicits estimates from a group of experts, usually managers. Then HR planners act as intermediaries, summarizing the various responses and reporting the findings to the experts. The experts are surveyed again after they get this feedback. Summaries and surveys are repeated until the experts’ opinions begin to agree on future developments. The main difference between the two techniques is that in the NGT they meet face-to-face, whereas in the Delphi technique they utilize a lead coordinator to collect, summarize, and disseminate the information to and from the experts. Page 65 Trend Projection Forecasts Perhaps the quickest forecasting technique is to project past trends. The two simplest methods are extrapolation and indexation. Extrapolation involves extending past rates of change into the future. For example, if an average of 20 production workers were hired each month for the past two years, extrapolation indicates that 240 production workers will probably be added during the upcoming year. Indexation is a method of estimating future employment needs by matching employment growth with a selected index. A common example is the ratio of production employees to sales. For example, planners may discover that for each million-dollar increase in sales, the production department requires 10 new assemblers. The relevant business factor here is sales figures in dollars. That is, an overall productivity index for all relevant sales personnel is computed. This ratio, with appropriate modifications, enables the firm to estimate its demand for personnel for the next period. However, the growth or decline rate in the labour force may be different during growth and downsizing periods (typically, the growth of the management tier happens at a somewhat faster pace than its compression). When using indexation, this factor must be recognized.  © Ingram Publishing By analyzing the staffing needs of existing oil rigs, planners of a new rig can forecast their human resource needs until changes in technology occur. How can planners react to shortages of skilled staff? Extrapolation and indexation are crude, short-run approximations because they assume that the causes of demand—external, organizational, and workforce factors—remain constant, which is seldom the case. They are inaccurate for long- range human resource projections. More sophisticated statistical analyses make allowances for changes in the underlying causes of demand, yet still do not provide the predictive power of data analytics described shortly. Other Forecasting Methods There are several other ways planners can estimate the future demand for human resources with more accuracy. Budget and Planning Analysis Organizations that need human resource planning generally have detailed long- range plans, short-term operational plans, and budgets to support those plans. A study of long-range planning may show planned growth or contraction. Analysis of these plans plus extrapolations of workforce changes (resignations, terminations, and the like) can provide short-run estimates of human resource needs. Short-term operational plans along with budgets can then be used to validate these projections. New-Venture Analysis When new ventures complicate employment planning, planners can use new- venture analysis, which requires planners to estimate human resource needs by comparison with firms that already perform similar operations. For example, an integrated steel company that owns steel plants and iron ore mines decides to explore iron ore at a new site. The management can estimate its employment needs in the new mine by looking at employment levels of other iron ore mines and making necessary adjustments for productivity improvements. Simulation and Predictive Models Page 66 As we discussed earlier, the most sophisticated organizations use robust technology to forecast effectively. Data analytic models are a series of mathematical formulas and algorithms that simultaneously use extrapolation, indexation, survey results, and estimates of workforce changes to compute future human resource needs. They simulate and forecast changes in demand for human resources caused by various internal and external factors. A study conducted by PwC revealed that 41 percent of HR professionals believe they are up to speed on the role of emerging technology and its use for HR. In contrast, only 25 percent of business leaders surveyed were confident that HR professionals held a firm grasp on emergent technologies. Regardless, HR professionals need to advance in this arena.31 Converting a Forecast Into Human Resource Requirements Forecasts translate the causes of demand into short-range and long-range statements of need. The resulting long-range plans are, of necessity, general statements of probable needs. Specific numbers are either omitted or estimated. To summarize forecasts, organizations often create staffing tables. A staffing table may be a specific number or an approximate range of needs, depending on the accuracy of the underlying forecast. Staffing tables are neither complete nor wholly accurate; they are only approximations. But these estimates allow HR specialists to match short-run demand and supply. They assist HR departments in writing HR objectives, they help operating departments run more smoothly, and they can enhance the image of the HR department with specific estimates of future human resource needs, allowing HR specialists to become more proactive and systematic. For example, a review of Figure 3-4 shows that the city’s HR department must hire 32 police academy recruits every three months. This knowledge allows recruiters in the HR department to plan their recruiting campaign so that it peaks about six weeks before the beginning of the next police academy class. The advanced planning allows the department to screen applicants and notify them at least three weeks before the class begins. For those still in school or otherwise unable to be ready that quickly, recruiters can inform them when the following class begins. If the HR department waited for the police department to notify them, notification might come too late to allow a systematic recruiting and screening process. Staffing tables enable recruiters to be proactive and to better plan their activities. FIGURE 3-4 A Partial Staffing Table for a City Government Table Summary: Summary Metropolis City Government Staffing Table Date Compiled: Budget Job Title Using Anticipated Openings by Code (as found Department(s) Month of the Year Number Total 1 2 3 4 5 6 7 8 9 10 11 12  on job description) Police 100-32 Police 128 32 32 32 32 Recruit Police 100-33 Police 3 2 1 Dispatcher Meter 100-84 Police 24 2 222 222 222 2 2 Reader Traffic 100-85 Police 5 2 1 1 1 Supervisor Team Supervisor 100-86 Police 5 2 1 1 1 —Police (Sergeant) Duty Supervisor 100-97 —Police Police 2 1 1 (Staff Sergeant) Shift Officer 100-99 —Police Police 1 1 (Inspector) 200-01 Car Washer Motor Pool 4 1 1 1 1 Mechanic’s 200-12 Motor Pool 3 1 1 1 Assistant Mechanic 200-13 Motor Pool 2 1 1 III 200-14 Mechanic II Motor Pool 1 1 Mechanic I 200-15 (Working Motor Pool 1 1 Supervisor) 300-01 Clerk IV Administration 27 10 5 6 6 LO4 The Supply of Human Resources Page 67 Once the HR department makes projections about future human resource demands, the next major concern is filling projected openings. There are two sources of supply: internal and external. The internal supply consists of present employees who can be promoted, transferred, or demoted to meet anticipated needs. The external supply consists of talent from outside the organization that can be hired or contracted. Internal Supply Estimates Estimating the internal supply involves more than merely counting the number of employees in an organization. Planners audit the present workforce to learn about the capabilities of present workers. This information allows planners to tentatively estimate which openings can be filled by present employees. These tentative assignments usually are recorded on a replacement chart. Considering present employees for future job openings is important if workers are to have careers with their employer and feel engaged. The patterns of employee transitions among jobs must be carefully assessed and taken into consideration. Audits, replacement charts, and employee transition matrices (more popularly called Markov analysis and discussed in detail below) also are important additions to the HR department’s information base. With greater knowledge of employees, the department can more effectively plan recruiting, training, and career-planning activities. The HR department can also help meet its employment equity goals by identifying internal minority candidates for job openings. An economic force that is making internal supply estimates more difficult is the increase of voluntary temporary work, or the gig economy. This is because transitions in and out of roles in an organization are happening faster, leading to greater complexity in prediction. Temporary work will be discussed more fully later in the chapter. Human Resource Audits Human resource audits summarize the employees’ knowledge, skills, and abilities. They generate skills, management, and leadership inventories that, in turn, facilitate the preparation of a replacement chart and replacement summaries. Following is a brief discussion of skills inventories in the context of human resource planning. Skills Inventories An inventory catalogues the capabilities found in the organization’s workforce. Skills inventories may be applied to both managerial and nonmanagerial roles. A skills inventory will bring together data about specific employees. This may include, but is not limited to, an employee’s educational history, work history, extra-work experiences, core skills, knowledge, abilities, and key project accomplishments. From these profiles, planners learn about the mix of employee knowledge, skills, and abilities and whether the current staff will be able to meet the organization’s goals.32 One may note the similarities between a skills inventory and a typical applicant resumé. In many ways, a resumé that covers these key areas enables HR professionals to determine if an applicant can fill a gap in the organization’s skills, knowledge, and abilities. Skill inventories may also summarize an employee’s potential by describing the employee’s performance history and readiness for promotion, as well as any deficiencies in the employee’s profile. To be useful, inventories of human resources must be updated regularly. A robust review and update every two years is often sufficient for most organizations if employees are encouraged to report major changes to the human resource department when they occur. Major changes include new skills, degree completions, changed job duties, and the like. Failure to update skills inventories can lead to present employees being overlooked for job openings within the organization and may create an inaccurate profile of the organization’s available skills. As the average length of term that employees have with a company decreases, managers may need to reconsider the length of time between instances of refreshing information. To make the process easier and more efficient, inventories are more often being conducted electronically. For example, Cognology has developed a digital skills audit platform.33 Page 68 Some organizations are complementing skills audits with competency audits. As the nature of work continues to change, having a robust understanding of employees’ competencies allows human resource managers to mitigate the risks associated with an under- or oversupply of human resources. Management and Leadership Inventories An audit of management talent is called a management or leadership inventory. As in the case of skills inventories, management inventories are comprehensive reports of available management and leadership capabilities in the organization. Like skills inventories, management inventories should be updated periodically since they also are used for key human resource–related decisions. In fact, some employers use the same form for managers and nonmanagers. When the forms differ, the management inventory requests information about management activities. Common topics include the following: Number of employees supervised Types of employees supervised Total budget managed Management training received Duties of subordinates Previous management duties Skill inventories and leadership inventories are not mutually exclusive. The 9-box grid (discussed in Chapter 8) is an example of an individual evaluation tool that integrates an employee’s current contribution to the organization (i.e., skills inventory) with that employee’s potential level of contributions to the organization (i.e., leadership inventory).34 Recently, a great deal of attention has been paid to the domain of talent management. Understanding who in an organization may be transferred into a management or leadership role is a fundamental component of talent management. In some organizations, leaders at all levels are issued leadership profiles, such as the Leadership Practices Inventory (LPI).35 By accumulating information on employees’ leadership behaviours, organizations are able to more accurately identify who from within the organization may be suitable to put in a leadership role. Replacement Charts Replacement charts are a visual representation of who will replace whom in the event of a job opening. The information for constructing the chart comes from the human resource audit. Figure 3-5 illustrates a typical replacement chart. It shows the replacement status of only a few jobs in the administration of a large city. FIGURE 3-5 A Partial Replacemen t Chart for a Municipal Government Table Summary: Summary With mandatory retirement abolished, it becomes increasingly unnecessary to include age in replacement charts. It may, however, be desirable to gather retirement intentions to facilitate long-term planning. Alternatively, organizations may compare someone’s age with the average age of retirement from the organization to predict when someone may retire. Although different firms may seek to summarize different information in their replacement charts, the figure indicates the minimum information usually included or needed. The chart, which is much like an organization chart, depicts the various jobs in the organization and shows the status of likely candidates. Replacement status consists of two variables: present performance and promotability or potential. Present performance is determined largely from supervisory evaluations. Opinions of other managers, peers, and subordinates may contribute to the appraisal of present performance. Future promotability is based primarily on present performance and the estimates by immediate superiors of future success in a new job. The HR department may contribute to these estimates through the use of psychological tests, interviews, and other methods of assessment. This information is also captured in the 9-box chart example mentioned earlier. HR and management decision-makers find that these charts provide a quick reference. Their shortcoming is that they are built on the assumption that the organizational structure is quite static. They also contain little information. To address the lack of information, replacement summaries may be prepared, as discussed next. Page 69 To supplement the chart—and, increasingly, to supplant it—human resource specialists develop replacement summaries. Replacement summaries list likely replacements and their relative strengths and weaknesses for each job. As Figure 3-6 shows, the summaries provide considerably more data than the replacement charts. This additional information allows decision-makers to make more informed decisions. FIGURE 3-6 A Replacement Summary for the Position of City Manager Table Summary: Summary Replacement Summary for the Position of City Manager Present Office Harold Jarvis Age 63 Holder Probable In two years Reason Retirement Opening Salary Grade 99 ($86,000) Experience 8 years Candidate 1 Jondula Smythe Current Assistant City Position Manager Explanation Jondula’s performance Current Outstanding evaluations by the City Manager are Performance always the highest possible. Promotability Ready now for Explanation During an extended promotion illness of the City Manager, Jondula assumed all duties successfully,  including major policy decisions and negotiations with city unions. Training None Needs Age 58 Experience 4 years Candidate 2 Larry Katz Current Utilities Manager Position Explanation Larry’s performance has Current kept costs of utilities to citizens 10 to Outstanding Performance 15 percent below that of comparable city utilities through careful planning. Explanation Larry’s experience is limited to utilities management. Although successful, he needs more Needs more Promotability broad administrative experience in experience other areas. (He is ready for promotion to Assistant City Manager at this time.) Training in budget preparation and Training public relations Needs would be desirable before promotion to City Manager. Age 52 Experience 5 years Transition Matrices and Markov Analysis Markov analysis is a fairly simple method of predicting the internal supply of human resources in the future. This is particularly useful in organizations where employees move from one job (or rank) to another on a regular basis. It is also useful in organizations where jobs do not fluctuate rapidly due to external (e.g., technological) or internal (e.g., strategic) change. Markov analysis reflects the patterns in these human resource movements using transition matrices. A transition matrix describes the probabilities of an incumbent’s staying in the present job for the forecast time period (usually one year), moving to another job position in the organization, or leaving the organization. When this matrix is multiplied by the number of employees in each job at the beginning of a year, the forecaster is easily able to estimate the number of persons who will remain in the job at the end of the year. Figure 3-7 shows a sample transition matrix. It indicates that 80 percent (or 0.80) of the incumbents in Job A remain in their present position at the end of the year, 10 percent (or 0.10) move to Job B, 5 percent (or 0.05) move to Job C, none of them move to Job D, and 5 percent (or 0.05) leave the organization (through resignations or otherwise). When these probabilities are multiplied by the number of persons in Job A at the beginning of the year (namely, 200), we see that 160 of them remain in their present position, 20 of them move to Job B, 10 of them move to Job C, and the remaining 10 leave the organization. When similar calculations are performed for all the jobs (in the case of this firm, for Jobs A, B, C, and D), we are able to predict the approximate number of employees who will remain in each job position. Page 70 FIGURE 3-7 An Example of Markov Analysis Table Summary: Summary (a) Transition Probability Matrix Year Beginning Year End Job Job Job Job Exit A B C D Job A 0.80 0.10 0.05 0.00 0.05 Job B 0.10 0.70 0.00 0.10 0.10 Job C 0.00 0.00 0.90 0.05 0.05 Job D 0.00 0.00 0.00 0.90 0.10 (b) Expected Movements of Employees  Initial Staffing Job Job Job Job Exit Level A B C D Job A 200 160 20 10 0 10 Job B 70 7 49 0 7 7 Job C 60 0 0 54 3 3 Job D 100 0 0 0 90 10 Predicted End-of-the-Year 167 69 64 100 30 Staffing Level Markov analysis is popular because of the ease of its use. However, it is only as good as the transition probabilities used. The probabilities are not very reliable if there are only a few incumbents in each job. This makes it appropriate only for medium-sized and large organizations. Page 71 Markov analysis can also be used speculatively to assess the impact of possible changes in transition analysis. Thus, “what if” analyses can be undertaken to understand the impact of possible future scenarios. For example, “What if the quit rate for Job A doubles from its present 6 percent per year?” This makes it a useful tool for human resource forecasting, especially in the context of strategic planning. External Supply Estimates Not every future opening can be met with present employees. Some jobs lack replacements to fill an opening when it occurs. Other jobs are entry-level positions; that is, they are beginning jobs that are filled by people who do not presently work for the organization. When there are no replacements or when the opening is for an entry-level job, there is a need for external supplies of human resources. When estimating external supplies, three major factors must be examined: trends in the labour market, community attitudes, and demographic trends. These are briefly outlined below. Labour Market Page 72 The HR department’s success in finding new employees depends on an accurate labour market analysis. Even when unemployment rates are high, many needed skills are difficult to find. This is a key distinction for human resource managers. A labour market analysis defines the people potentially available for work. A skills market, however, narrows the available people to those who have the appropriate skill set. In the short run, the national unemployment rate serves as an approximate measure of how difficult it is to acquire new employees. HR specialists realize that this rate varies for different groups, as well as from province to province and city to city. A significant challenge with using an employment rate as a measure of potential employee recruitment opportunities is that it represents only a moment in time. That is, it provides a measure of how many people are unemployed during a certain historical period. It does not identify what the future looks like. To address this shortcoming, some jurisdictions have undertaken an analysis to determine what the future supply and demand is for specific occupations. The province of Manitoba conducts analyses on a short-term and long-term basis. Manitoba’s Labour Market Occupational Forecast predicts surplus or undersupply of potential employees in Manitoba over a six-year period.36 Regardless of the unemployment rate or regional demand outlook, external needs may be met by attracting employees who work for others or in other regions. In some professions—such as teaching and engineering—labour mobility between provinces is quite high.37 In other industries, such as the infrastructure trades, there is less mobility relative to university graduates.38 In the long run, local developments and demographic trends have the most significant impact on labour markets. Local developments include community growth rates and attitudes. For example, labour shortages in Canada’s agriculture industry have doubled over the last 10 years and are expected to double again before 2025. This labour gap is forcing agricultural companies and farms to turn to temporary foreign workers to fill the gap.39 The lack of jobs results in still more people leaving the local labour market. This is particularly so in the case of minorities and other underrepresented groups of society. During a recessionary period, the job prospects of minorities and new immigrants are more adversely affected. As an example, during the global economic downturn in late 2000, a study out of Ireland demonstrated that immigrants were losing jobs at an annual rate of 20 percent, whereas domestic Irish persons were losing jobs at a rate of 7 percent.40 While people move across labour markets, language and cultural barriers may often act as deterrents. Sometimes, migrants from other areas may receive a hostile welcome in the local labour market: In 2014, the Temporary Foreign Worker Program came under great scrutiny when the program was linked to joblessness.41 This experience is troubling in that a strong source for external workers for Canadian employers is the Canadian Temporary Foreign Worker Program.42 This program was overhauled in 2014 to ensure that employers were putting Canadian workers first in their hiring decisions.43 As of 2018, Canada was seeing an increase in temporary foreign workers gaining permanent residency.44 With border restrictions created by the COVID-19 health crisis, the Canadian government focused its attention on granting citizenship to those temporary foreign workers already in the country.45 This has not slowed the back and forth opinions on the program, which continues to be contested because of the policies associated with it.46 Community Attitudes Community attitudes also affect the nature of the labour market. Anti-business or nongrowth attitudes may cause present employers to move elsewhere. An example of this is activist investing. In 2013, an activist investor group tried to break apart Agrium—a Calgary- based fertilizer company—into its wholesale and retail businesses. This action would have divided Agrium into two companies and would likely have had a dramatic effect on the employee pool.47 Agrium was later merged with PotashCorp to form Nutrien.48 A further example is the influence of the social justice movements of Indigenous, Black, and people of colour on organizations’ hiring intentions and practices.  In July 2020, RBC announced that it would increase its target for executives identifying as Indigenous, Black, or people of colour from 20 percent to 30 percent.49 Demographic Trends Page 73 Chapter 1 provided a detailed account of a number of demographic influences on an organization. Demographic trends are another long-term development that affects the availability of external supply. Fortunately for planners, these trends are known years in advance of their impact. Two examples serve to illustrate such trends: Consider the 2011 research study released by the Information and Communication Technology Council. It found that a major technology labour crunch was looming in Canada. The study predicted that there would be 106,000 openings in the five years that followed in the information and technology sector, and the study highlighted the specific skill sets needed.50 Driven by baby boomer retirements, the lack of hiring during the prior recession, and the significant changes in technology requirements, a major shortage existed then and exists now for these types of skills. Another example relates to the shipping industry. A shortage of truck drivers in the United States is forecast to reach 900,000 as fewer people enter this industry. A career in driving is not one that all people aspire to and, as a result, this industry is experiencing a staffing shortage. Finding ways to attract people to trucking careers is difficult. Taken in combination with the observation that 70 percent of goods sold in the United States are transported by truck, some companies are needing to stop nonessential shipments.51 There are several sources of information available to planners. For example, major sources of data include Statistics Canada and Employment and Social Development Canada (ESDC). Another source of information is the Conference Board of Canada, which generates excellent research reports on many other HR- related topics. Statistics Canada publishes reports on labour force conditions on a monthly, quarterly, annual, and occasional basis. Information available on total labour force projections includes geographic, demographic, and occupational variables, and labour income, census data, and population projections by sex at birth and province over various years. The Canadian Occupational Projection System (COPS) was designed by Employment and Social Development Canada. The COPS provides a highly detailed projection of the Canadian economy up to 10 years in the future.52 Job Bank is a group of products available from ESDC that identifies trends in the world of work. It outlines job outlooks by occupation as well as by field of study and estimates the prospect of finding jobs in a specific occupation or field in a specific location. Job Bank provides Canadians with the latest information available about work—information that is important for anyone in the process of making decisions or advising others in the area of career planning. For example, Job Bank forecasts that the chance of finding work as a registered nurse in Edmonton, Alberta, and Fredericton, New Brunswick, is very strong. Of note, however, it also identifies that the average wage in Edmonton is $44.00/hour whereas the rate in Fredericton is $38.00/hour. Figure 3-8 provides a summary of the HR tools used to estimate internal and external supply of labour. FIGURE 3-8 Summary of HR Tools Used to Estimate Internal and External Supply of Labour Table Summary: Summary External Supply Internal Supply Indicators Indicators Human resource audits Labour market analysis Skills inventories Community attitudes Management inventories Demographic trends Replacement charts/summaries Transition matrices and Markov analysis HR Objectives The identification of supply and demand forecasts and summaries only provides the human resource professional with context and information. It does not address the process by which any gaps can be addressed. As such, the next step in the process identifies what the organization expects to accomplish as a result of its actions. It directs the planning process of the organization, identifies what the planner will do to achieve its goals, and sets a baseline to determine whether the organization has achieved its goals. For example, if the organization’s strategy were to grow its market share by 20 percent, the HR objective would be to add a certain number of “head count” with a certain set of skills by a predetermined date. However, if the organization’s objective is to reduce labour costs by 20 percent, then the objective might be to reduce the workforce in each department by 5 percent by a certain date, carefully taking into account the preservation of individuals with critical skill sets and significant ongoing potential. Once these objectives are identified, then the planner can decide what specific HR programs and strategies will be appropriate. Page 74 LO5 HRM Strategies to Achieve Objectives in Supply and Demand Typically, human resource planners face two decision situations: the available supply of human resources is either less or greater than their future needs. It is only the rare, fortunate planner who finds that the supply and demand are equal. Each of the above two situations requires somewhat different corrective actions, which are discussed next. Strategies to Manage an Oversupply of Human Resources When the internal supply of workers exceeds the firm’s demand, a human resource surplus exists. There are various strategies that HR can consider. It can group each of these strategies under three main headings: head-count reduction, attrition, and alternative work arrangements. Head-Count Reduction Here are four main ways to ensure a head-count reduction: layoffs, leaves without pay, incentives for voluntary separation, and termination. Layoffs Layoffs, the temporary withdrawal of employment to workers, are used in cases of a short-run surplus. Layoffs are the separation of employees from the organization for economic or business reasons. The separation may last only a few weeks if its purpose is to adjust inventory levels or to allow the factory to retool for a new product. When caused by a business cycle, the layoffs may last many months or even years. Employees who have been laid off will typically be placed on a “recall” list. When the organization needs the employee again, they are recalled to work. However, if the layoff is the result of restructuring or rescaling of an industry, the “temporary” layoffs may become permanent. Furlough is a term that is increasingly being used in Canada as a synonym for temporary layoff. As unpleasant as layoffs are for both workers and management, they may be required when attrition (see below) is insufficient to reduce employment to acceptable levels. In some organizations, each employee who is laid off may receive a supplemental employment benefit over and above government EI benefits. However, during severe economic downturns, the employer’s ability to provide these benefits may be seriously jeopardized. While the terms of a collective agreement dictate layoff procedures in unionized settings, nonunion employers may have to consider other factors or be exposed to constructive dismissal claims. For example, in Ontario, the province’s Employment Standards Act permits a temporary layoff of an employee without pay for up to 13 weeks in a consecutive 20-week period. If the unpaid layoff exceeds that period, it will no longer be deemed “temporary” and the employer will become liable for reasonable notice and severance pay, if applicable.53 Leaves without Pay One way to temporarily reduce the number of employees on the payroll is to offer, or in some cases request, a leave of absence without pay. A leave without pay (LWOP) program is often used to provide employees an opportunity to take a short “sabbatical” for personal reasons (e.g., education, family issues). In some cases, such as with significant budgetary cuts, the employer may initiate the leave without pay.54 By one survey, 25 percent of Canadians are actively planning for an unpaid leave of absence.55 Incentives for Voluntary Separation Sometimes organizations decide to offer employees some form of an “enticement” to leave the organization early. This practice is often referred to as a buyout. It may be referred to as a voluntary severance package (VSP) and contain a cash incentive, pension support, and outplacement services. A key aspect of these programs is that they need to be voluntary.56 Termination Termination is a broad term that encompasses the permanent separation from the organization for any reason. This term can imply that the employee was fired as a form of discipline. However, this is not always the case. When employees are discharged for business or economic reasons, and the employer has no plans to rehire them, it is also referred to as a termination. A key consideration when using termination as a strategy is the requirement to provide terminated employees with sufficient notice, pay in lieu of notice (i.e., severance pay), or a combination of the two. While employment standards vary between provinces, it is common for terminated employees to receive the equivalent of one week per year of service with the organization. Page 75 The blow of discharge may be softened through formal outplacement procedures, which help present employees find new jobs with other firms. External consultancy firms are typically used to provide services such as resumé writing, job search, and interview preparation. Not only do such efforts help the former employee, but they also give evidence to the remaining employees of management’s commitment to their welfare.57 A recent study highlighted that only about 30 percent of firms in the United States focused on outplacement services. That said, the same study highlighted that $1.5 billion was spent on outplacement services in 2001 in the United States.58 Attrition Attrition is the normal separation of employees from an organization as a result of resignation, retirement, or death. It is initiated by the individual worker and not by the company. In most organizations, the key component of attrition is resignation, which is a voluntary separation. Although attrition is a slow way to reduce the employment base in an organization, it presents the fewest problems. Voluntary departures simply create a vacancy that is not filled, and the staffing level declines without anyone being forced out of a job. Two common attrition strategies are hiring freeze and early and phased retirement offers. Hiring Freeze Most employers initially respond to a surplus with a hiring freeze. This freeze stops the HR department from filling openings with external applicants. Instead, present employees are reassigned. Faced with a drop in heavy oil commodity prices in early 2015, Suncor cut 1,000 jobs and announced a hiring freeze.59 Early and Phased Retirement Offers A special form of attrition is early retirement. It is one form of separation that the HR department can actively control. It is used to reduce staffing levels and to create internal job openings. Early retirement plans are designed to encourage long-service workers to retire before the normal retirement age in the organization (say, 65 years). Since employees who retire before age 65 will draw benefits longer, their monthly retirement benefits may be reduced proportionately. Some companies are allowing older employees to reduce their work activity and gradually phase into retirement without loss or reduction of pension benefits. The most typical pattern in phased retirement is to allow gradually shortened workweeks, a preferred schedule among older workers according to some surveys.60 Most companies in the survey required that an employee first work a minimum of five years in the firm and be at least 55 years old in order to participate in a phased retirement program, and over half allowed employees to later change their minds. An example of phased retirement is provided by the University of Toronto: The University of Toronto offers its faculty members a pre-retirement package that allows them to scale down their workload over three years provided they are between 57 and 68.61 Alternative Work Arrangements If the head count of employees is not to change, other options are to adjust the work term by reducing the number of work hours through job sharing, using part- time workers, transferring employees where resources are needed, or loaning employees to other organizations. Job Sharing Reducing the number of total work hours through job sharing is the first of the above options to adjust the work term. Job sharing, also called job splitting, involves dividing duties of a single position between two or more employees. From the employer’s perspective, this eliminates the need to lay off one employee completely. But the employees also benefit by having more free time at their disposal and maintaining employment. A more recent twist on the concept of job sharing is whether jobs can be shared with artificial intelligence. In a 2018 blog, author Ceilidh Higgins described how technologies such as building information management systems enable her as an architect to focus on design rather than on repetitive tasks as an architect.62 Work sharing programs are also used to avoid layoffs. A major initiative is the federal work-sharing program administered by ESDC. It allows employees to voluntarily reduce their hours to spread available work around.63 Page 76 The major advantage claimed for job sharing is increased productivity from workers who are not fatigued. Problems arise from the increased paperwork and administrative burden associated with two employees doing the job of one. Another problem is that of benefits. HR specialists are forced to decide whether job sharers should be given benefits equal with other employees or benefits that are scaled-down in proportion to the employee’s hours. Employers may also need to pay for a crossover day.64 Using Part-Time Employees Eliminating full-time positions and replacing them with part-time positions, thus reducing the total work hours and labour costs, is another strategy used in several settings. Very often, part-time employees are paid no benefits. The significant decrease in total benefit costs, especially health care and pensions, provides a great incentive for employers to make more use of regular part-time work. Employers that do pay benefits tend to be in the public sector, such as health care facilities and municipal governments. Another advantage of part-time work is that it increases flexibility so that employers can match the workforce with peak demands. Part-time employment is also popular for a few other reasons, such as the following:  The higher demand in the service industries, which employ more than 40 percent of all part-timers65 The need for cost-cutting Part-time work has public costs. Part-time employees have limited entitlement to government-run employment insurance and disability benefits, resulting in potentially serious financial problems should they be unable to work. Without disability benefits they have no income and may end up on the welfare rolls. In some settings, converting full-time to part-time work may be fraught with legal challenges as well. Strategies to Manage Shortages of Employees A labour shortage occurs when there is not enough qualified talent to fill the demand for labour and organizations cannot fill their open positions. A skills shortage refers to specific skills that the organization requires. It occurs when the demand for workers with specific skills exceeds the available supply of workers with these specialized skills. Because labour and skills are different concepts, it is possible for an organization to simultaneously have a labour surplus and a skills shortage (e.g., too many employees with an inappropriate skill set). Organizations that are effective at HR planning utilize a variety of staffing strategies to ensure that they have the right people with the right skills at the right place and at the right time. There are several staffing options available to choose from, depending on the sense of urgency, economic conditions, and productivity gains. The staffing options to consider are as follows: hire employees, contract out the work to another firm, develop existing employees, and leverage existing work arrangements. A summary of these options is shown in Figure 3-9. FIGURE 3-9 Alternative Staffing Strategies Table Summary: Summary Develop Hire Source Service Existing Work Employees Employees Providers Arrangements Internally Full-time Overtime  Part-time Independent Replacement Flexible contractor charts schedules Temporary Third party Succession Flexible planning time and Outsource location Career Crowdsource development Flex policies Float and transfer Hire Employees One way to address a labour shortage is simply to hire an employee to fill the open position. However, whether to hire a full-time or part-time employee or an internal or an external candidate is an important decision that managers make. A more fulsome discussion of the hiring process is found later in the text. Full-Time Employees For several positions, hiring full-time employees is the only alternative. This may be the case for key roles such as the CEO. Many organizations are averse to this strategy since it incurs additional fixed costs. Hiring full-time staff also requires a more detailed look at their competencies in terms of the organization’s long-term strategies. Full-time work in Canada is defined as more than 30 hours per week.66 Page 77 Some organizations have sought to mitigate some of the risk of hiring full-time employees by bringing them on first as probationary employees. These employees are hired on a full-time basis but can be released from the organization at any time during their probationary period for any reason. This enables organizations to more effectively assess the skill set of full-time employees before committing indefinitely to them. For instance, a probation period of 90 days is outlined in legislation in Alberta.67 Part-Time Employees An increasingly popular strategy for meeting human resource needs is to use part-time employees. Part-time employees are an attractive option to the employer since using them adds flexibility in scheduling. Traditionally, part-timers have been employed by service businesses, such as restaurants and retail stores, that experience considerable fluctuation in demand during peak and off-peak times. However, more recently, many firms, after a downsizing or restructuring, employ part-timers to provide services that had previously been offered by full-timers. For example, in the past, United Parcel Service created 25-hour-per-week part-time jobs for shipping clerks and supervisors who sort packages at its distribution centres.68 Employment of part-timers reduces overall payroll costs since part-timers are, typically, not eligible for several of the expensive benefits offered to the full-time workforce. However, there are variations across provinces, and the HR manager should carefully check the legal requirements before introducing new policies. For example, Saskatchewan has extended a number of benefits to part-time workers under specific conditions: In Saskatchewan, a full-time employee is anyone who works 30 hours or more per week. All businesses with 10 or more full-time equivalent employees must provide benefits to eligible part-time employees. To qualify, part-time employees must have been employed for 26 consecutive weeks and have worked 390 hours in those 26 weeks. To maintain eligibility, the employee should work for at least 780 hours in a calendar year. Eligible benefits include dental plans, group life, accidental death or dismemberment plans, and prescription drug plans.69 Contract Out the Work The next alternative that organizations may consider to manage a labour shortage is to enter into a service agreement with a contract (or contingent) worker. A contract worker is a freelancer who is not part of the regular workforce and who provides goods or services to another entity under the terms of a specific contract. Contractors are not employees of an organization. They are governed under contract law, not employment legislation. The contractor typically invoices the organization, and the organization pays for these services via the accounting function. The contractor’s “contract” ends when the services that they had agreed to provide are complete and the services have been delivered. On occasion, organizations will choose to engage a consultant who, by definition, is a professional who provides expert advice and counsel in a particular area. Contractors determine their own work hours, typically have their own offices, and can work on multiple contracts at the same time. They can hire other persons to perform the work, they are not eligible for benefits, and they provide their own equipment and supplies. The Canada Revenue Agency has provided a number of tests that can be used to determine whether someone is a contractor. They are strict and assess companies’ practices to ensure that the relationship is at arm’s length. The tests are related to control, ownership of tools, chance of profit, and risk of loss and payment (see Figure 3-10). FIGURE 3-10 Key Tests to Determine Contractor/Employee Status Table Summary: Summary Is the person under the direction and control of another with respect to the time the person works, where the person works, and the way in which the work is done? Control The greater the control, the more likely that the person is a contractor. The contractor determines the result. For an employee, the employer has the right to determine the way the task is carried out. Does the person use the tools, space, supplies, and/or equipment owned by someone else? If so, Ownership of Tools this may be an indicator. Contractors supply their own tools. Does the person make a profit? A person who profits could be a contractor. If the Profit person’s income is the difference between the cost of providing the service and the price charged, then the person is deemed an independent contractor.  Risk of Loss An employee has no risk of loss. If the person risks losing money if the cost of doing the job is more than the price charged, then they can be considered to have contractor status. Does the individual need to complete the work personally? Subcontracting If the individual does not need to complete the work personally and can hire someone else to do it, they are considered to be a contractor. Outsourcing The term outsourcing has been used extensively in the past decade. Outsourcing work refers to a formal agreement an organization makes with a third party to perform a service rather than using internal resources. Outsourcing or “contracting out” work is typically associated with work that is noncore to that organization and one where the outsourcing firm has special skills, technology, and expertise to manage this work. Outsourcing is a business decision made by executives and human resource leaders. It allows the organization to save money, improve quality, or free company resources for other activities so that the organization can focus on those activities that it does best. Offshoring, a subset of outsourcing, also implies transferring jobs to another country by hiring local subcontractors. Page 78 Outsourcing can often be a source of disruption in organizations, as evidenced by the backlash toward CIBC when it announced it was outsourcing some Canadian operations to India.70 Human resource management plays a significant role when HR is outsourced. It must focus on service delivery and ensure that the transition is seamless. Ultimately, human resource management has direct responsibility for service quality and results, and it must manage the vendor to ensure that the service is value-added and that business objectives are met. Crowdsourcing—A Novel Way to “Source Talent” Crowdsourcing is a term that describes how companies meet their resource requirements by taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call. In this model, the organization has a need for human resources. It then communicates this need to the public via the Internet. It is an open call to interested parties on the web who decide, based on their own interests and their own time, whether they want to help the organization with its problem, provide a service, or fill the need in some way. A large network of potential labour exists. These individuals use their time to help the company solve their problems. The work is done outside the traditional company walls. If the organization feels that the contribution is valuable, the organization will pay the contributors for their efforts in some way. In outsourcing, the organization typically sends out a formal request for proposal (RFP), and it reviews potential vendors before deciding on the best one. Typically, lower-paid professionals do the work itself. In crowdsourcing, the problem is communicated through the net or social networks for those individuals who are interested to respond. The main advantage of crowdsourcing is that innovative ideas can be explored at a relatively low cost. Furthermore, it also helps reduce costs and makes use of the crowd to communicate its requirements. In 2014, McDonald’s crowdsourced new ideas for burgers that the public would like to see in store.71 Co-sourcing A recent trend in technology and audit services is co-sourcing, a form of contracting that brings together an external team to support and work with an organization’s internal team to achieve the goals of the organization. A co-sourcing model represents more of a collaboration than a contracting out of business goals. Page 79 Develop Employees Internally Another option to be considered, which can address a shortage in human capital, looks at leveraging the current supply of existing employees within an organization. This option considers the strength of an organization’s internal workforce with respect to the skills and knowledge employees possess and the future skills and knowledge employees will need for the organization to meet its human capital requirements. Organizations use various mechanisms, such as promotions and replacement charts and succession and career plans, to ascertain employees’ interests, the types of training and development required, and when employees will be ready to fill a future labour requirement. Organizations utilize their internal HR-related processes to facilitate these activities, optimizing their human resources’ talent pool. Chapter 7 will discuss this option in more detail. Create Flexible Work Arrangements The last staffing option focuses on the various types of work arrangements. A work arrangement refers to a firm’s use of work hours, schedules, and location to ensure that the goals of the organization and the needs of employees are optimally met. We will be discussing three types of arrangements: overtime, flexible retirement, and float and transfer. Flexible work arrangements were widely adopted during the early phases of the COVID-19 global health crisis to enable both organizations and employees to adapt to a widespread remote work situation.72 These types of arrangements are all based on choices: The organization can make a choice to offer these options to the employees, and the employees make a choice whether to accept. In this reciprocal relationship, both the employer and employees typically receive a benefit as a result. For example, if employees agree to overtime, then they will receive money or time off in lieu, and the organization will be able to meet its staffing shortage. Overtime A popular strategy is to ask existing employees to work beyond normal hours. Indeed, even during a non-shortage situation, regular overtime has become a fact of life in many firms that do not want to incur additional fixed expenses of hiring permanent employees. In many organizations, employees—especially, supervisory and managerial staff—are expected to work overtime, most of it unpaid. The culture of the organization requires the employee to put in the extra effort without expecting any reward. This is particularly so in nonunionized settings. This, however, can have detrimental effects on employee morale. Higher employee fatigue, stress levels, accident and wastage rates, and so on, are some of the unwanted consequences of using overtime on a recurring basis. Recognizing this fact, some progressive employers have gone against the mainstream—namely reducing the number of work hours—and ended up improving their productivity levels and competitiveness in the labour market. One U.S. manufacturer’s experience is noteworthy: Metro Plastics Technologies Inc. in Columbus, Indiana, could not fill eight vacancies in its plant as the unemployment rate in the area hovered between 1 percent and 3 percent. To get a recruiting advantage, it adopted an innovative “30-hour work week for 40-hour pay” strategy under which an employee had to put in only 30 hours a week instead of the traditional 40 hours. A single newspaper ad brought hundreds of qualified applicants to the firm and the firm was able to fill the vacancies immediately. The benefits did not stop there. Within two years, customer returns had fallen by 72 percent and many internal costs had dropped dramatically. The same results have been reported in a number of other plants, in a variety of industries.73 Flexible Retirement Another opportunity for firms to manage shortages is to target those employees who are close to retirement with a view to extending their contributions. The challenge has been how to balance the needs of these employees with the needs of the organization. A relatively new approach to managing retirement is called flexible retirement. This is an approach to optimizing the talent of these recent retirees, thus extending their contributions and continuing their engagement in organizational activities. These “retiree- return” programs provide retirees with the opportunity to work after they have retired, with significant flexibility in terms of how they work, what they work on, when they work, and where. These programs are flexible in the sense that they take into account the retirees’ needs and tailor the work accordingly. These programs typically begin prior to retirement and continue after the employee has officially retired. One can say that these retirees take on an active retiree status, whereby they continue their involvement in the organizations long after they have officially retired. Page 80 The benefits are substantial as the organization will be able to retain its intellectual capital long after employees have left the organization. The firm will be able to retain its talent to fill unexpected gaps; institutional knowledge and transfer of this knowledge will not be lost; and the organization will be able to control its labour costs, as retirees do not receive any additional benefits. It is projected that phased retirement programs will double over the next several years, from 26 to 55 percent. However, employers have a duty to accommodate workers who suffer from age-related health issues as age is a protected ground from discrimination.74 Float and Transfer Another flexible arrangement that organizations use to manage shifts in work is to use a flexible policy that enables full-time resources to be transferred when needed; or, if the need is for a very short time, they float the worker. These organizations rely on their training programs to ensure that their employees are cross-trained and that they can secure these resources when they need them and for the length of time necessary. Another term that we can use to describe this arrangement is job rotation. For example, Fidelity Investments Canada uses this arrangement to cover leaves and develop a talent pipeline.75 That said, job rotation is not without its challenges. Arrangements such as the above not only enhance organizational flexibility and efficiency and help reduce costs, but also enable HR departments to better respond to employee needs. To ensure that HR is actually achieving these goals, evaluation and measurement must be an integral part of the HRP process. Spotlight on ETHICS Cutting Costs When carrying out human resource management activities, HR planners often face ethical challenges. Consider the following two situations and respond to them. Once you have written down your answers, compare them with those of your team or classmates. Are there differences in your approaches? What facts and arguments seem to justify one action over the other? Facing fierce price-based competition, your firm, which employs over 470 people, has been trying to reduce costs in a variety of ways. 1. One action currently being considered is to move Production Unit 1 from its present location in an interior Canadian town to a developing country. Your manufacturing unit is the sole employer in that town and currently employs 128 people. Most of the employees are semi-skilled and would find it hard to find employment elsewhere. You know that many employees are the sole income earner for their family. Your firm located in this town because of a variety of tax advantages and subsidies the province offered to you for the first two years of your operations. Under those terms, your firm was  expected to operate for a minimum period of four years. This is your sixth year in the province. 2. Your firm is also considering converting a number of your full-time employees in the head office and Production Unit 2 to a part-time workforce. (You may assume that this is legal in the province where you are employed.) Approximately 200 people will be affected by this plan. This can generate significant savings for your firm since a number of benefits currently offered to full-time employees need not be offered anymore to the part-timers. You realize that a number of your employees depend on the company benefits to take care of their children and the elderly in the family. Program Measurement and Evaluation Page 81 A major goal of human resource measurement is to enhance decisions about human capital and to connect human resources to strategy. The final step in the process is to evaluate workforce planning activities. In many ways, workforce planning assessment serves as a starting point. As noted earlier, goals must be established for workforce planning to occur. Inherent in these goals is defining what success looks like for workforce planning and how it will be measured.76 For instance, the goal of workforce planning may be to reduce vacancy times for key roles in an organization. Alternatively, a measure of effectiveness might be the percent of internal versus external candidates who are hired within a given year. To measure human capital effectively, the planner is responsible for evaluating its processes and continuously improving the technical and strategic aspects of this process. Even with the best planning, however, context may impact plans and outcomes significantly. Take Target Canada, for instance. In 2015, after posting billion dollar losses and filing for creditor protection, Target Canada moved to close all 133 Canadian locations. These closures would result in the loss of 17,600 full- and part-time jobs across the country. This represents one of the largest mass layoffs in Canadian history.77 Improvement must be evident from year to year based on human resource planning. To ensure continuous improvement, all processes must be measured, a baseline developed, and initiatives put in place. It is imperative that the human resource professional use key business metrics and develop a thorough understanding of how human resource planning can contribute to the bottom line. Evaluation is dependent on the criteria the organization uses to discern whether the human resource planning function is effective. Typically, processes are measured in terms of time and cost associated with their deployment. For example, a measure might be the time it took to find an appropriate resource to fill a particular position and include the cost of recruiting and time to interview. There are a variety of mechanisms or tools that can be used to ascertain this value, and the ability to do this in a comprehensive way largely depends on the organization’s level of technological sophistication and the robust nature of the tools chosen. A 2015 Harvard Business Review article cited talent-related concerns as the primary issues facing CEOs.78 It is no surprise, therefore, that human resource planning is a key function of human resource professionals. Technology influences have added further complexity to the planning environment. At the same time, technology is enabling human resource professionals to be more effective in contributing to organizational strategy and success. One such technology arena is data analytics and evidence- informed decision making. Having begun out of a need to support payroll in the 1940s,79 modern day human resource information systems (HRIS) provide human resource professionals with live-time data and business intelligence to make effective decisions. LO6 Human Resource Information Systems A human resource information system (HRIS) is used to collect, record, store, analyze, and retrieve data concerning an organization’s human resources. This is most often done at the enterprise level (i.e., organization-wide). These systems are comprised of different software applications that work with various relational databases or data lakes. All good human resource decisions require timely and accurate information. A good HRIS enables the HR department to be responsive to its customers’ needs and is critical for the effective functioning of the HR department and the larger organization. The major stakeholders who use the information from an HRIS are HR professionals, managers, and employees. Each of these “customers” expects a responsive HR department that can provide accurate and timely information. The larger the organization and the more dynamic an organization’s environments, the greater the need for a sophisticated HRIS. HRIS Functions—Breadth and Size Not all HRISs are the same. In fact, there are many different systems to choose from, depending on the organizational requirements. Key considerations that organizations take into account when deciding on an appropriate HRIS to match their needs include the following: The size of the organization What information needs to be captured The volume of information transmitted The firm’s objectives Managerial decision needs The importance of reporting capability Technical capabilities Available resources Page 82 Typically, a small firm may begin with a simple HRIS as its information needs are very basic and used solely for the purposes of HR administration. The type of employee information captured may include the employee name, address, emergency contact, employment status, which position the employee holds, how much the employee is paid, benefit coverage, and birth date. The technology is also low tech as these firms typically use generic software applications like Excel, and their entire database is maintained on one computer or a few networked computers and in one database. The application itself is “nonrelational,” meaning that information on employee name, home address, job title, pay rate, and so on, will have to be separately entered into the payroll file, the benefits file, performance appraisal records, and several other places. Any change in employee information will have to be updated separately in each file. The probability of an error in inputting information is very high in nonrelational systems. The probability of delays and inconsistencies in information updating is also hi