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HUMAN RESOURCE PLANNINg
Human Resource planning is at times called manpower planning
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 HRP as defined by the Institute of Personnel and Development is : The systematic
approach and continuing process of analyzing an organization’s human resource needs
under changing conditions
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It is an integral part of corporate planning and
budgeting procedures since human resources costs and forecasts both affect and are
reflected by longer-term corporate plans
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 Reilly (2003) defined workforce planning as: ‘A process in which an organization
attempts to estimate the demand for labour and evaluate the size, nature and sources of
supply which will be required to meet the demand
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This definition sees HRP as a strategic activity, i
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For our purposes, HRP will
be taken to mean any rational and planned approach for ensuring;
i
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Their retention in the organization
iii
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The improvement of staff performance
v
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It is concerned with the quality of personnel

and

with their deployment throughout the organization
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The context of HRP is dominated by;
i
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The supply of people in the labour market, and
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The time-scale involved (at least 6 months to a year, and quite possibly over a 2 to 5 year
period)
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Research conducted by the Institute for
Employment Studies (Reilly, 1999) established that there are a number of reasons why
organizations choose to engage in some form of human resource planning
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Planning for substantive reasons, that is, to have a practical effect by optimizing the use of
resources and/or making them more flexible, acquiring and nurturing skills that take time to
develop, identifying potential problems and minimizing the chances of making a bad decision
...
Planning because of the process benefits, which involves understanding the present in order
to confront the future, challenging assumptions and liberating thinking, making explicit decisions
that can later be challenged, standing back and providing an overview and ensuring that longterm thinking is not driven out by short-term focus
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Planning for organizational reasons, which involves communicating plans so as to obtain
support/adherence to them, linking HR plans to business plans so as to influence them,
(re)gaining corporate control over operating units, and coordinating and integrating
organizational decision making and actions
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Farnham (2006) explained that human resource planning is important because it encourages
employers to develop clear and explicit links between their business and HR plans and to
integrate the two more effectively
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It allows for better control over staffing costs and numbers employed, and it enables
employers to make more informed judgements about the skills and attitude mix in
organizations
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Human resource planning also provides a profile of current staff in terms of age, sex,
disability, etc so as to move towards being an equal opportunity organization
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In summary the aims/uses of HRP are to ensure that the organization:
 Obtains and retains the number of people it needs with the skills, expertise and
competencies required;
 Makes the best use of its human resources
 Is able to anticipate the problems of potential surpluses or deficits of people;
 Can develop a well- trained and flexible workforce, thus contributing to the
organization’s ability to adapt to the uncertain and changing environment; and
 Reduces its dependence on external recruitment when key skills are in short supply- this
means formulating
Achieving the aims
In order to achieve the aims of HRP it has to undertake four clear steps;
1
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Analyzing the availability and supply of people;
3
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Monitoring the implementation of the plan
The above four steps are elaborated in the following seven steps of universally accepted HRP
process;
1
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This is defining future
activity levels and initiative demanding new skills (business strategic plans ) and
assessing in broad terms where the organization is going in its environment and the
implications for human resource requirements(Scenario scanning)
2
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Forecasting the demand for human resources
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4
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Comparing forecasts of demand and supply
6
...

7
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Resourcing strategy
therefore comes in place
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N/B (Step 4 could precede step 3
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The strategic planning process
defines projected changes in the types of activities carried out by the organization and the scale
of those activities
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Human resource planning (HRP) interprets
these plans in terms of people requirements
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As Quinn Mills (1983) indicates, human resource planning is: a decision-making process that
combines three important activities:
1) Identifying and acquiring the right number of people with the proper skills,
2) Motivating them to achieve high performance, and
3) Creating interactive links between business objectives and people-planning activities
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• Demand forecasting – estimate future needs for people and competences by reference to
corporate and functional plans and forecasts of future activity levels
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The forecast will also take account
of labour market trends relating to the availability of skills and to demographics
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• Action planning – prepare plans to deal with forecast deficits through internal promotion,
training or external recruitment
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Develop retention and flexibility strategies
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For example, demand forecasts are estimates of future requirements, and these may be prepared
on the basis of assumptions about the productivity of employees
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A flow
chart of the process of human resource planning is shown in Figure1 and each of the main
activities is described below
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1 Human resource planning flow chart
SCENARIO PLANNING
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Scenario planning is simply an assessment of the environmental changes that are likely to affect
the organization so that a prediction can be made of the possible situations that may have to be
dealt with in the future
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The scenario is best based on systematic environmental scanning, possibly
using the PEST approach (an assessment of the political, economic, social and technological
factors that might affect the organization)
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DEMAND FORECASTING
Demand forecasting is the process of estimating the future numbers of people required and the
likely skills and competences they will need
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In a manufacturing company the sales budget would be translated
into a manufacturing planning the numbers and types of products to be made in each period
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Details are required of any organization plans that would result in increased or decreased
demands for employees, for example setting up a new regional organization, creating a new sales
department, decentralizing a head office function to the regions
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The demand forecasting methods for estimating the numbers of
people required are described below
...
This simply requires
managers to sit down, think about their future workloads, and decide how many people they
need
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Alternatively, a ‘top-down’ approach can be used, in
which company and departmental forecasts are prepared by top management, possibly
acting on advice from the personnel departments
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A less directive approach is for top management to prepare planning
guidelines for departmental managers, setting out the planning assumptions and the targets
they should try to meet
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Guidelines for departmental managers should be prepared that indicate broad
company assumptions about future activity levels that will affect their departments
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Armed with these guidelines, departmental managers prepare their
forecasts to a laid-down format
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Meanwhile, the personnel department, in conjunction as
necessary with planning and work study departments, prepares a company human resource
forecast
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This committee reconciles with departmental
managers any discrepancies between the two forecasts and submits the final amended forecast to
top management for approval
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b) RATIO-TREND ANALYSIS
Ratio-trend analysis 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
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Table 1: Forecast Form
Category of staff………………………………………………………………………
...
of staff to be Remarks
provided
1
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(Excluding resignations )

Age groups

5
7

7

Under 25

30

25-34
35-44
2

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(b) Less expected transfer in promotions, and new
appointments already made

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45 and over 10
(Dates to be

(a) Expected retirements, transfers out, and

promotions during the year
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Expected staff losses due to normal wastage of 1
existing staff

15

5

Estimated by age
groups:
Under 25

12

25-35

2

35-45

1

45 and over Short service

5
...
Total staff to be provided during period

30

of

25
2+3+4

above)
5 to be recruited
by 1st February –
others

to

be

programmed later
Activity level forecasts are then used to determine, in this example, direct labour requirements,
and the forecast ration of indirect to directs would be used to calculate the number of indirect
workers needed
...
The starting point in a
manufacturing company is the production budget prepared in term s of volumes of saleable
products for the company as a whole, or volumes of output for individual departments
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The standard hours per unit of
output are then multiplied by the planned volume of units to be produced to give the total
planned hours for the period
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Allowance may have to be made
for absenteeism and forecast levels of idle time
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 Number of direct workers required (planned hours divided by productive hours per
person year = 500 workers)
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D) MODELLING
Mathematical modeling techniques using computers can help in the preparation of demand
and supply forecast
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This
judgment 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 production methods such as manufacturing
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requirements planning (MRP2) or computer integrated manufacturing (CIM), or some form of
automation or robotics
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The supply analysis covers the
following areas:
• Existing number of people employed by occupation, skill and potential
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• Potential changes to existing resources through internal promotions
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• Sources of supply from within the organization
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TECHNIQUES USED TO FORECAST SUPPLIES OF HUMAN RESOURCES
Techniques used for forecasting human resource supply may be classified as either quantitative
or qualitative, although the distinction is sometimes unclear
...
Thus,
classifications of techniques as either supply or demand, as well as quantitative or qualitative,
must be arbitrary to some extent
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The category of
qualitative supply forecasting techniques includes replacement charts or succession planning
and supervisory estimates
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However, they are not really forecasting techniques even
though inventories provide the database from which forecasts of internal supplies of human
resources are derived
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In addition, the current utilization of
these techniques will be discussed
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Replacement Charts

Replacement charts describe a company’s organizational structure in terms of individuals
occupying various managerial and professional positions
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The individual’s age also may be included for estimating retirement dates
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Thus, the replacement chart, which is likely to be computerized, provides a
description of how vacancies can be filled from the internal labor market
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In determining the time when potential managerial replacements
will be ready to take on higher-level responsibilities, an assessment of their current skills must be
conducted and matched against those required for higher-level positions
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Thus, the assessment should include not only the skills that will be
required for vertical moves, but also the skills to move horizontally, typically toward the broader
orientation and responsibilities of general management
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Beginning with the individual contributor end of
the continuum and moving toward the managerial end, employees would be assessed against
skill requirements for the following tracks: technical development, technical application,
technical management, operations management, and business management
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Before the number of qualified replacements for a current or future
position can be determined, there must be a means of comparing potential replacement
candidates with the position’s requirements
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One important component of the
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company’s system is its human resource inventory, which is based on supervisory estimates of
individual employees’ capabilities of performing various job tasks
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The job
requirements, in terms of tasks and employees’ characteristics and capabilities to perform
these tasks, are combined in a document called a talent bank, which is similar to a
replacement chart
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An interesting side benefit of the company’s system is that career paths have become better
understood and the company now does a better job in career counseling
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The company,
which has had 165 consecutive quarters of growth in its net income, has 117,000 employees
in 60 divisions
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The example also indicates the confidentiality with which such information is
treated and the security measures that are applied to the end result of the process
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Knight’s [the CEO] management style, it is the “Organization Room,”
an unmarked chamber at Emerson’s headquarters to which only a few people have a key
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Each magnet displays, in tiny print and color coding, date of
hire, date of birth, international experience, a photo-graph, and postgraduate degrees
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When a key job becomes open, Mr
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Succession planning although similar to replacement planning and the use of replacement
charts, succession planning tends to be directed toward a longer-range time horizon and is
more focused on development
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Succession planning involves more
elaborate planning for skill development of potential replacements, is more systematic in
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the assessment of potential replacements and their developmental needs, and generally
applies to higher levels of managerial positions
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, which has annual sales in excess of $1 billion, the succession plan involves
only approximately 300 key jobs
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Succession planning in this case involved the
assessment of managers occupying positions as plant managers
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Prior to these efforts, the division suffered from problems related to employee
dissatisfaction, autocratic management styles, and the aftermath of downsizing
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Following the assessment,
managers were provided detailed individual feedback on areas in which they needed further
development
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In some companies, succession planning also incorporates developmental planning for
high-potential managers while they are still in lower-level positions
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Additionally, succession planning also may be concerned with the future requirements of
executive positions since the necessary personal skills and characteristics may differ
substantially from current requirements
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Nonetheless, current executives may be hesitant to make
selection decisions on projections of future skill requirements that are difficult to quantify
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Before, when executives were selecting successors in their
own image, the data were less important, since they could use their own intuition, a sense
that “he’s one of us
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To the extent that succession planning is
participatory and plans are incorporated into career development sessions, there may be
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reduced turnover of valued managers
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While there are important benefits of succession planning, there are increasing concerns
about the ability of traditional succession planning to produce qualified successors,
particularly on a position-by-position basis
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Of course, events such as acquisitions and mergers also can make such
plans meaningless and increase the level of top management turnover
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” In cases wherein change in the strategic direction of the organization is
needed, succession plans become less important
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Such executives
are less likely to be subject to the influences of escalating commitment and are more inclined
to have a different vision
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Fortunately, some of the complexity of the details of succession
planning can be handled with computer software
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2
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However, the application of Markov analysis to human resource forecasting changed the
situation by providing a practical and versatile technique for forecasting internal supply
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Markov models have an advantage of being
relatively simple to understand, although they can be quantitatively sophisticated
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Such moves include moves into the organization, moves
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from one job to another, and exit moves
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Essentially, Markov models begin with
distributions of the number of employees in various job categories at a starting point in time
...
The transition
probabilities in each row of the matrix must total to 1
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Table 2: Markov Model

Markov models cannot take into account more than one move per time period
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Although not reflected in this example, the jobs also could be arrayed in terms of their
hierarchical level, with Job 1 being lower in the job hierarchy than Job 2, and so on
...
The number of
employees for each job in the forecasted distribution is the sum of each of these levels of
employment as multiplied by the column’s transition probabilities
...
Fig 2 Markov
Model for Forecasting Supply Note: Numbers of employees in each job in Time 2 are
rounded off to the nearest whole number
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For example, transition probabilities from Job 1 to
Job 2 might be determined by computing the percentage of employees in Job 1 who
make such a move over a one-year time period
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For example, if there are only two employees in a job and one leaves, a
transition probability based on the number remaining would be only
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This could be a very
misleading transition probability
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Accordingly, the
forecaster may want to compute an average percentage of employees making such moves
over several years (e
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, from three to five years) in order to obtain a more stable transition
probability
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Unfortunately, the downside is that the impact of recent trends will be muted to the extent
that such recent data are averaged in with data from earlier years
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Human resource forecasters can obtain the proper balance
between slower and quicker tracking transition probabilities through a process of trial and
error
...
He or she could experiment with transition probabilities
based on movements for one year prior to that, an average of the two previous years, an
average of the three previous years, and so on, and compare these fore-casts with what
actually happened
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Of
course, any use of historical data assumes that certain conditions of the past will remain in
the future, which may not be true
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Heneman and Sandver have pointed out that, through applications of matrix
algebra, forecasts for multiple years into the future can be developed
...
Iterative approaches provide an alternative for extending Markov analysis forecasts
several years into the future
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This process is then repeated for a forecast of another year into the future and can be
performed on computerized spreadsheets
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Aside from use in forecasting, Markov analysis also can be used for audits of the
human resource function to determine whether there are any irregularities in the flow of
employees through an organization’s different positions
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Likewise, Markov analysis may have applicability in the development of
affirmative action goals because it can be used to forecast the internal supply of minorities
and females that will be available in various positions at some point in the future
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Researchers also have demonstrated
the feasibility of using a combination of Markov analysis and human resource accounting to
forecast and depreciate the future value of an acquired firm’s human resources
...
For example, a large computer
manufacturer with many years of forecasting experience uses demand specifications with
Markov models
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By working backward, the forecaster then determines the
magnitude of the transition probabilities that will be needed to create the flow of employees
from the existing distribution into the desired future distribution
...
Transition rates also can be changed to reflect changes in
such policies
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Another example of an application of Markov analysis is provided by the experiences of the
Weyerhaeuser Company
...
The model was used to forecast the number of employees in a
specialty, on a corporate-wide basis, that would be available from the company’s internal
labor supply
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During this phase, the model was used for decisions on a daily basis
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Fortunately,
information from the model helped decision makers discover that the solution to the problem
could come from attrition of current employees
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In subsequent years, the company used
the technique to examine flows of exempt personnel within its separate divisions
...

3
...

These models reflect the movement or flow of employees through companies as they are
“pulled” upward to fill vacancies in higher-level job categories
...

Renewal models, in their simplest form, can use age cohorts of employees as the focus of
analysis
...
When greater rates of change are expected,
shorter time periods may be used
...
Rates of attrition can be obtained from
historical data and typically differ across the age cohorts
...
In addition to “aging” employee cohorts
and adjusting age cohorts for attrition, renewal models also may be configured in accordance
with the job classification hierarchy and also may reflect the hiring of new employees and
promotions of current employees into different job categories
...
Starting with the top of the job
hierarchy, the human resource planner can work downward through each job category, in a
stepwise manner, to determine the number of employees that must be promoted from the
lower classifications and the flow policies that will be needed to supply such numbers
...
Renewal
models also can be run with different specifications of promotion rates so that their
differential impacts can be determined
...
Additionally, renewal models can be applied to specific
populations, such as minorities and females, so that a company’s future affirmative action
status may be forecasted
...
Computer Simulation
It is sometimes stated that computer simulations are the most useful forecasting
techniques for guiding business decisions
...
Through this process, the forecaster can determine variations in
forecasted values according to different formulations of future conditions and can plan
alternative courses of actions to reduce uncertainty and manage risk
...
By running sensitivity analyses,
forecasters can gain an understanding of the impact of inaccurate assumptions
...

An example of a strategic application of a combination of computer simulation and
attrition analysis to forecast supplies of human resources is provided by the experiences
of two public school districts in British Columbia
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Attrition
estimates were based on historical rates, which differed according to age cohorts and by
school district
...
By using specific procedures to estimate the supply and demand
for teachers, those factors which influenced the district’s ability to balance supply and
demand became more visible and explicit
...
The results of this survey are presented in Table 1 in terms of the percentage of
companies using such supply forecasting techniques
...
7
percent) and human resource inventories (66
...
At the other end of the spectrum, only
7
...
1 percent used Markov analysis/network
flow models
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Nonetheless, many companies have human resource forecasters, often possessing
doctoral degrees, who do sophisticated, large-scale organization-wide forecasts of their

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organizations’ internal supplies of human resources
...
For these applications, Markov models are probably still very
important forecasting techniques
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6 percent of the responding companies
reported the use of regression analysis for forecasts of human resource supplies, the technique’s
direct applicability as a supply fore-casting technique is not readily apparent and its use in this
application may be overstated
...
7 66
...
5
27
...
1 9
...
6 6
...
1 4
...
Greer, Dana L
...
“Adapting Human Resource Planning in a Changing Business Environment,” Human
Resource Management 28, no
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FORECAST OF FUTURE REQUIREMENTS
To forecast future requirements it is necessary to analyze the demand and supply forecasts to
identify any deficits or surpluses
...
It can
be set out as follows:
1
...
Annual level of turnover 10%
3
...
Balance at end year 63
5
...
Number to be obtained during year (5 _ 4) 12
Action planning
Action plans are derived from the broad resourcing strategies and the more detailed analysis of
demand and supply factors
...
The planning activities start with the identification of internal resources available now or
which could be made available through learning and development programmes
...
Recruitment plans need to be prepared
...
You have been asked to oppose the motion, ‘Human resource planning is impossible or at least
a waste of time in a situation where the future is so unpredictable
...

2
...
From your manufacturing director: ‘What methods are available for me to forecast the future
demand for skilled staff in my production departments? We have a pretty good idea of what the
order book will look like over the next three years and can deploy some reasonably sophisticated
operational planning procedures
...
’
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