Human Resource Planning PDF

LESSON 1- INTRODUCTION TO HUMAN RESOURCE PLANNING OVERVIEW Human Resource Planning is the critical initial step in getting the right people in the right place at the right time. It is an important component in strategic human resource management. It links HR management to the strategic plan...

LESSON 1- INTRODUCTION TO HUMAN RESOURCE PLANNING OVERVIEW Human Resource Planning is the critical initial step in getting the right people in the right place at the right time. It is an important component in strategic human resource management. It links HR management to the strategic plan of the organization. Organizations routinely complete financial plans to ensure they achieve organizational goals. While workforce plans are not as common, they are just as important. Without accurate human resource planning, the organization may not be in a position to compete in the marketplace. It is important to anticipate future staffing needs by forecasting the supply and demand of the organization’s human resources. A good human resource plan will allow you to make management decisions to support the future direction of the organization. It is also important from the budgetary point of view so that you can factor the costs of recruitment, training, management restructuring, rightsizing, among others, into your departmental budget. LEARNING OUTCOMES By the end of this lesson, you should be able to: ✓ Define HR planning ✓ Explain the HR planning process COURSE MATERIALS TOPIC 1- HUMAN RESOURCE PLANNING DEFINED Human Resource Planning is the process by which management ensures that it has the right personnel who are capable of completing those tasks that help the organization reach its objectives. It is the development of strategies for matching the size and skills of the workforce to organizational needs. HR planning also assists organization to recruit, retain and optimize the deployment of the personnel needed to meet business objectives and to respond to changes in external environment. The process involves carrying out a skills analysis of the existing workforce, carrying out manpower forecasting, and taking action to ensure that supply meets demand. This may include the development of training and retraining strategies. 1  The definition implies that HR planning banks on a process which results in developing a strategy framework in providing people assistance to company’s overall business objectives. The plan will provide answers to the following questions: ✓ How many people will be needed for the organization to meet its objectives? ✓ What jobs will these people need to fill? ✓ What knowledge, skills, and abilities will new hires be required to have? ✓ What new skills will be required of the current work force? ✓ Can the new workers be transferred or promoted from within the firm or do they need to be hired from outside? ✓ What type of training is required for workers to acquire the knowledge, skills and abilities that are needed? ✓ What type of compensation plan is required to support this talent? ✓ How will the process alter the career plans of existing employees or potential candidates? TOPIC 2- HUMAN RESOURCE PLANNING PROCESS Analyzing The first step in the planning process is to analyze the environmental factors that impact on your firm’s labor demand. Planners must understand the external business environment and the trends that occur within it. In this time of economic recession, for 2 example when the market is soft, there might be a need to recast your sales revenue plans. There might be a need to downsize your workforce as a result of a soft market. The labor market policy of the government should be factored in. In times of inflation when prices of food and other consumer products are high, there is the tendency of the government to apply the “safety net” principle. That means a new wage increase order may be issued by the Regional Tripartite Wage and Productivity Boards. How the increased labor cost would affect the firm’s pricing strategy vis-à-vis competition should be analyzed in relation to maintaining, increasing or decreasing its workforce. The overall organization direction and strategy impacts the demand for human resources. When a company is growing, it needs more people. A company that maintains its relative position in the market may not be in need of more people. Conversely, a company employing a retrenchment strategy will make a plan to reduce its manpower. On the supply side, analyzing the internal workforce will answer these questions: ✓ How many staff do we have? ✓ How are they distributed? ✓ What is the age profile? ✓ How many will leave by resignation or retirement in each of the next five years? ✓ What are the present sills of the present workforce? What new skills will be required? If there is a need to recruit, how good is the supply? What skills are required? We know that there is abundance of supply in the labor market in our country. We produce more than we can absorb. How many are qualified? We are talking here of the “best fit”. In the Business Process Outsourcing (BPO), for instance, where labor demand is high, many fresh college graduates apply but only few are taken. There is simply a mismatch between what the industry needs and what the schools produce. In the context of these demand and supply constraints on human resources, analysis is the key initial step in the planning process. Forecasting After analyzing comes forecasting. Forecasting is a science and less than an art. But it is not an exact science. Like weather forecasting, it can be subject to certain uncertainties and in accuracies. One can minimize errors by using some scientific methods. Human resource planners have a choice of techniques open to them. Demand forecasting Demand forecasting is the process of estimating the future numbers of people required and the likely skills and competences they will need. The ideal basis of the forecast is an annual budget and longer-term business plan, translated into activity levels for each function and department, or decisions on ‘downsizing’. In a manufacturing company the sales budget would be translated into a manufacturing plan giving the numbers and types of products to be made in each period. From this information the 3 number of hours to be worked by each skill category to make the quota for each period would be computed. Details are required of any plans or projects that would result in demands for additional employees or different skills: for example setting up a new regional organization, creating a new sales department, carrying out a major project or developing new products or services. So far as possible, plans should also be reviewed that could result in rationalization, and possibly downsizing, as a result of a cost reduction drive, a business process re-engineering exercise, new technology leading to increased productivity, or a merger or acquisition. The demand forecasting techniques that can be used to produce quantitative estimates of future requirements are described below. Managerial or expert judgement This is the most typical method of forecasting and may be linked to some form of scenario planning. It simply requires managers or specialists to sit down, think about future workloads, and decide how many people are needed. This can be no more than guesswork unless there is reliable evidence available of forecast increases in activity levels or new demands for skills. Ratio trend analysis This is carried out by studying past ratios between, say, the number of direct (production) workers and indirect (support) workers in a manufacturing plant, and forecasting future ratios, having made some allowance for changes in organization or methods. Activity level forecasts are then used to determine (in this example) direct labor requirements, and the forecast ratio of indirects to directs would be used to calculate the number of indirect workers needed. Work study techniques Work study techniques can be used when it is possible to apply work measurement to calculate how long operations should take and the number of people required. Work study techniques for direct workers can be combined with ratio trend analysis to calculate the number of indirect workers needed. Forecasting skill and competence requirements Forecasting skill requirements is largely a matter of managerial judgement. This judgement should, however, be exercised on the basis of a careful analysis of the impact of projected product market developments and the introduction of new technology, either information technology or computerized manufacturing. Supply forecasting Supply forecasting measures the number of people likely to be available from within and outside the organization, having allowed for attrition (labor wastage and retirements), 4 absenteeism, internal movements and promotions, and changes in hours and other conditions of work. The forecast will be based on: ✓ an analysis of existing human resources in terms of numbers in each occupation, skills and potential; ✓ forecast losses to existing resources through attrition (the analysis of labor wastage as described in the next main section of this chapter is an important aspect of human resource planning because it provides the basis for plans to improve retention rates); ✓ forecast changes to existing resources through internal promotions; ✓ effect of changing conditions of work and absenteeism; ✓ sources of supply from within the organization; ✓ sources of supply from outside the organization in the national and local labor markets. Internal Supply Considerations Turnover rate is very important factor to be considered in your internal manpower supply. While it is true that our average turnover in the Philippines is low compared with fully developed countries, people who are expected to leave the company must be considered if you want your human resource planning to be complete. There are two kinds of turnover: resignation and dismissal Resignation can be due to: ✓ Accepting a job elsewhere ✓ Poor health ✓ Putting one’s own business, taking up further studies or raising a family ✓ Migrating abroad ✓ Accepting a voluntary retrenchment ✓ Relocating to another place Dismissal can be due to: ✓ Misconduct ✓ Forcible resignation due to poor performance or other reasons by paying separation pay or “ex gratia” ✓ Authorized causes under the law such as retrenchment due to losses or to avoid losses, automation, retirement, or sickness that will incapacitate employee for more than six (6) months as certified to by a competent public physician. Planning There are several elements to human resource planning and all are equally important. The first is the actual planning of the workforce. Even in a small business, specialized skill sets are not always easy to source and planning for a growing workforce is critical. Planning for a reduction in the workforce is also intensive and requires strategic 5 thinking to work through temporary or permanent layoffs. Legal planning and process building are used to shield the company from legal ramifications for discrimination of workplace misconduct. The human resources department is responsible for educating and training employees on company policy, they handle legal aspects of the employee relationship like workers compensation and they communicate with every department in the business. Human resources also works as a bridge between employees and payroll by ensuring contracts are executed and honored. Effective planning in the human resources department leaves the managers in position to focus on meeting goals that are responsible for driving revenue rather than spending time dealing with administrative issues and employee paperwork. With all of the planning required, you might wonder who is actually responsible and what goes into human resource planning. The number of people in the human resource department ultimately depends on the company size. A small company of 5-10 people might have a single HR administrator while a large company of one-thousand employees will have twenty or more. It all depends on the company and their needs. A business with large seasonal hiring needs may have more HR folks on staff to handle the intensive training and paperwork required for on-boarding with regularity. A company with a very stable staff and little turnover will require a smaller HR department. Human Resources management is offered as a degree path at many institutions and it sets the stage for a career dedicated to HR. Numerous certification programs are also available to qualify individuals coming from other fields. It's not uncommon for employees with administrative and management experience to make the transition into human resources. They can do this through certification training programs. The certification courses open the door to employees with undergraduate degrees in related fields but not a dedicate human resources degree. The experience from a business management degree for example will combine well with an HR certificate. To reach the human resources manager level, employees will often work within and HR role for three to five years. Planning for Growth The company stands to gain returns by scaling a workforce quickly. If a plan is in place, the company can bid on bigger contracts and effectively grow without being understaffed. The planning aspect applies to the additions of permanent employees, temporary employees and contract workers. A temporary growth opportunity often calls for seasonal or contract labor to avoid a cycle of hiring and firing. Planning to meet these expectations falls on human resources. When a company needs to grow quickly or add a large seasonal workforce, human resources must plan for the hiring and manage recruiting. Recruiting fairs, advertising and other recruiting events are largely responsible for locating the workforce and placing them in jobs while still following company policies and procedures. A large retailer may hire thousands of employees for the holiday season on temporary work arrangements. Despite being temporary, human resources is still responsible for educating each employee on company policies, workplace safety guidelines and their role within the company. This is 6 often done in the form of a contract where the employee signs off after receiving the training and agrees to follow the company policies. This holds the employee responsible for their actions at work and protects the company from legal actions if they fail to comply. It's especially important when large numbers of new people are entering the workplace simultaneously. Not only does the human resource planning and training help the new employees understand their roles and the rules, it reduces chaos and guides everyone into position so they can begin working and executing their daily tasks. Growth planning is also a requirement to receive contracts in many cases. Government contracts are one common example where the company must prove they can access the workforce necessary to complete a contract. Any large scale, contract based business deal is a candidate for human resources planning of this nature. Failing to demonstrate an ability to access and hire a qualified workforce may remove the company from the running for a contract. Scaling Down When you think about what is involved in human resource planning, scaling down and laying off employees does not always come to mind. It is however a critical aspect of planning. A business can lose a key client or account that results in a larger workforce than necessary. This can capsize a business financially and scaling down becomes an unfortunate necessity. Laying off employees can happen in a temporary or permanent fashion. Layoffs come with some legal consequences if handled improperly and the human resources department must ensure each layoff is justified and handled properly. They must work through the employee pool and determine who must leave based on input from management. Determining layoffs is based on seniority, immediate need and financial resource planning. Some employees will require severance packages and unemployment benefit eligibility notification and guidance. Contracts for a severance are built by the legal team and the human resource department. A HR manager is often present during the individual or group layoff announcement to ensure everything is handled properly. Planning throughout a layoff process is not only prudent for the company, it ensures the employees have the maximum notice possible, access to unemployment benefits and a genuine ability to move forward with their lives while seeking new work. They should also understand why the layoffs happened so their is no lame on their shoulders. Sometimes, business just goes in the wrong direction. Communicating this difficult message effectively requires an excellent human resources team that really understands the process. Productivity and Employee Wellness Productivity in the workplace is measured by managers and department heads but human resource planning can influence productivity through employee wellness programs and initiatives that create a healthy and happy workplace where individuals have the energy and positive attitudes required to succeed. Every workplace is different but human resources departments plan to ensure employees have the minimum number of breaks required by law. Additionally, they can introduce 7 incentive programs, health programs, gym membership discounts and general wellness programs to create a healthy and productive workplace. Even the layout of furniture, introduction of plants to an office and change in the lighting can have a major impact on employee wellness. Measuring productivity before and after the implementation of each program can demonstrate increases in output. Building a healthy workplace also cuts down on sick days and improves the long term capabilities of each employee. The human resource planning behind wellness and productivity programs can increase the bottom line in the long run while improving morale in the workplace. HR acts as a communication tool with employees as well. They can survey employees while ensuring that no repercussions will be executed for undesirable answers. The ability to collect honest employee feedback functions as a key identifier for weak points in the business. The human resources department can essentially uncover hidden issues that employees are not comfortable resolving otherwise. The survey process can have a major positive impact on driving a more successful business. In addition to basic wellness and creating a positive work-space, human resources is responsible for addressing mental health. They are a neutral resource and field reports of harassment and workplace misconduct. This outlet is important for developing a safe place of work for everyone. If a trend of harassment or misconduct develops, the department is responsible for planning a course of action to resolve the issue. If they have done the planning necessary to build an employee handbook with policies that each employee has learned and signed in a contract, taking action is easy to justify from a legal and logical point of view. In order to manage conflict and practice conflict resolution however, advanced planning must take place to define clear boundaries and draw an actionable road map to effectively handle those situations. Management Succession Planning Sometimes called executive succession is a key component of human resource planning. Because of its highly confidential nature, the document is normally separated from the main human resource planning. Its access is limited only to the key executives, or executive committee and the top HR executive. Replacement candidates must be identified for middle and top management levels. Unlike the general human resource planning where the focus is on entry-level positions and number of bodies in general, management succession planning focuses on specific individual managers. A good example of highly successful succession planning is Proctor and Gamble. “If I get on a plane and it goes down, there will be somebody in this seat the next morning”, writer Mina Kimes quoted Lafley, top performing CEO of P&G, A.G, while sitting in his Cincinnati office. What makes Lafley confident is a rigorous leadership program called Build From Within. It “microscopically tracks the performance of every manager, making sure that he is ready for the next slot. At P&G says Lafley, each of the top 50 jobs already has three replacement candidates lined up. Lafley is extremely happy with their policy of promotion from within versus his experience of 50% fail rate when they used headhunters in the past. 8 Implementation and Evaluation of the HR Plan The final step in the HR planning process is the implementation and evaluation of results. Success is gauged on whether the plan was able to avoid a labor shortage or surplus. As stated earlier, forecasting is not an exact science. It should therefore give allowance for errors. The important thing is to determine which of the planning part contributed to the success or failure. Evaluation feedback serves as diagnosis of where the process failed and how to prevent it in the future. A good example of the type of diagnostic work to be done was one big multinational company in the Philippines, In the economic debacle that followed after the Benigno Aquino assassination 1983, the company forecasted a low demand of their products and services for the next three years which by calculation needed downsizing of its labor force by 35%. To make the voluntary retrenchment attractive to fifteen years and up service employees who were in the highest salary bracket, it offered a severance incentive of two and a half months pay per year of service plus whatever retirement credits they had at the time. It turned out that the forecast of product and service demands was underestimated. The result was disastrous. The smaller work force could not keep up with the subsequent demand. Stretching the working hours of the smaller work force increased significantly the overtime cost and exacted a toll on their health. Worse was, they had to hire form outside to replace those who availed of the voluntary retrenchment at higher salaries. Those who walked away with lucrative buyouts who were relatively young sought employment with competitor companies. ACTIVITIES/ASSESSMENTS 1. What is HR planning? 2. Illustrate and explain the HR planning process 9