1994 Planning for Human Resources

InternationalJournal ofManpower15,6

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Planning for Human Resourcesin the 1990s: Development of

an Operational ModelRachid Zeffane and Geoffrey Mayo

University of Newcastle, New South Wales, Australia

In the past decade or so, human resource management researchers andprofessionals have tended to place greater emphasis on employee attitudes andon the development of personnel strategies to search for the enhancement ofpositive employee feelings and commitment. On the whole, these strategieshave lacked sufficient concentration on the need to control the flow of personnelwithin and across organizational boundaries[1]. As a result, human resourceplanning (HRP) has taken a backward step in priority-placing within the overallhuman resource management system [2]. In the current, highly uncertain socio-economic climate, the HRP function is emerging as a focal human resourceactivity as it is increasingly becoming an essential (and very prominent)boundary spanning function[1,2]. As such, that function endorses the crucialrole of dealing with the necessary changes in the volume and make-up of theworkforce.

Fundamentally, HRP consists of a range of tasks designed to ensure that theappropriate number of the right people are in the right place at the right time. Inessence, it involves assessing current levels and utilization of staff and skills,relating the internal elements to the market demand for the organization’sproducts, and providing alternatives to match human resources withanticipated demand (see for example[3]). The planning for human resources isfundamentally a dynamic process that endeavours to monitor and manage theflow of people into, through, and out of the organization in order to achieve anequilibrium. This process has to take into consideration the total corporate planand the many environmental issues that affect the employment of people. Inbroad terms, the major factors that can influence HRP requirements can bedivided into two major sets of parameters: first the external forces, such asmarket forces, technological change, changing nature of the workforce and theemerging patterns of work arrangements, and second, the internal parameters,such as the age structure of the workforce, productivity, and labour mobility.

This article outlines some of the major issues surrounding the HRP functionin the face of the above uncertainties and changes. An operational HRP modeldesigned to cater for these is proposed and outlined. The article culminates withpractical suggestions for applying the model by means of simple spreadsheetsor a basic computerized decision support system. Resulting from suchsuggestions, the basic principles and mechanics of a software system(“RightPlan”) currently being developed are put in perspective.

International Journal of Manpower,Vol. 15 No. 6, 1994, pp. 36-56. © MCB University Press, 0143-7720

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Emerging External ForcesThe external (or environmental) forces affecting the process of HRP are many,and encompass those pertaining to the nature of the technology, the nature andtype of competition, the dominant legislation and regulation by government,and the changing social norms and expectations. At the macro socio-economiclevel, there are a number of pressures calling for changes and creating theopportunity to alter the shape, nature, and organization of work. There are alsostrong predictions that in the 1990s, an increasing proportion of the new labourentrants will be women, members of minority groups and immigrants[4,5]. Theissue of women in the workforce has also become more pertinent forappropriate human resource plans. This is even more evident when oneconsiders that by the end of the century, women will in fact make up over 50 percent of new entrants to the workforce and will bring a greater variety of theskills employers need[6]. There is, however, some agreement that jobs that canbe performed on a project basis may in fact be more suited to working mothers.This might facilitate the entry of females in certain professions, previously lessaccessible to them. The argument here is that more flexible work arrangementswill reduce employers’ fear of high turnover among females[7]. A betterunderstanding of these trends will help delineate appropriate requirements indevising well-balanced (and objective) human resource plans and employmentpolicies to address the gender issues. In this context, human resource plannersand managers must take into consideration the growing equal opportunityconstraints laid-out (and backed-up) by more forceful statutory and legalsystems[8]. Combined with other external factors, these forces and aspirationsare exerting greater pressure on human resource management in general andon the planning function in particular. In practice, they are making greaterdemand for more open communication throughout the organization, moreflexible benefit systems tailored to employees’ needs, and perhaps a muchgreater reliance on employee training/retraining schemes[9,10].

In response to such current socio-economic pressures, many companies aremaking greater use of contractors and supplementary labour to align thegrowing aspirations of employees for independence/flexibility in somepositions, with company growth. These and other developments in work-patterns have been grouped under the general term “flexibility” or “flexiblework arrangements”[11]. Flexibility, in the form of employment, incorporatestemporary work, shortened working time and functional flexibility[12]. Animportant phenomenon brought about by recent socio-economic forces is theincreasing role played by part-time work in various economies. In manycountries (including Australia) the continued growth of the service sector iscontributing to significant increases in the number of temporary and part-timejob openings[6]. As a result, part-time employment has been undergoing rapidexpansion. In some professions, temporary work is increasingly appealing topeople of all ages and levels of experience with various socio-professionalconstraints[13].


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As skill requirements are shifting, management may not always need toassume the responsibility for the substantial costs and efforts involved inretraining this group of people. The underlying argument is that, becauseminority groups may hold a variety of skills (some of which are extremelyvaluable) they can perhaps be hired through a contracting organization to meetimmediate staffing needs, without having to hire full-time employees. Job-hopping has the potential to become a very desirable mode of work for someemployees such as those with high professional profiles or those who have nodesire for continuous employment. For instance the brighter, better educatedand more innovative professionals may develop a tendency to become boredwith the more conventional work arrangements and experience the urge tomove ahead a lot faster. Downsizing has tended to lead firms to reduce thecompetent and professionally qualified as well as the less competent and lessqualified. In this respect, job-hopping seems to be a convenient and suitablealternative, particularly for those individuals with a greater need for personalcontrol.

However, dealing with job-hopping is a complex issue and the more proactivecompanies are finding (and devising) suitable ways to benefit from it[14],essentially by giving a fair appraisal to the job-hoppers. By and large, wherepositive approaches to job-hopping have been endorsed, the results have tendedto nurture a much greater impetus for creativity.

In this perspective, part time and temporary employees should therefore bean integral part of an organization’s human resource plan. Appropriate plansneed to take into consideration the intrinsic contribution that part-timers andjob hoppers can make to the overall output of the organization, particularly interms of productivity gains. However, this could turn out to be a rather intricateexercise as the parameters affecting the productivity of part-timers and jobhoppers are not always the same as those that apply to full-time employees. Fora start, it is much more difficult to secure adequate commitment from this work-force to the overall goals and values of the organization. Also, it often takes timefor this group to adjust to the new job. There is a learning process (including thepotential associated training, induction and orientation costs) that must becatered for. During the training and adjustment period, productivity (in mostcases) will be below that expected.

The combined consideration of both internal and external forces makes HRPa dynamic process that endeavours to manage the flow of people into, through,and out of the organization in order to achieve an equilibrium. Overall, anintegrated HRP system requires determining both internal and external factorsaffecting strategic plans. Through developing economic and environmentalscenarios, human resource planners attempt to identify external factors thatwill affect the organization and calculate the impacts of such change onstrategic human resource plans. In balancing out both internal and externalforces, the human resource plan will lead to a series of implementationdecisions. Such decisions may be taken in the spirit of acquiring or reducingemployment levels. The following sections outline the basic principles and the

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emerging trends in devising and implementing personnel strategies to dealwith workforce acquisitions and reductions.

Salient Internal ParametersIn the context of the supply-demand equation, a range of internal factors requireconsideration for the purpose of evaluating existing (or anticipated) supplyfrom within the organization. The supply side issues that HRP should addressinclude the organization’s policy on growth from within or by means of outsiderecruitment; the policy on pay and remunerations, and the organization’s viewon employee development. In that context, the conventional human resourceplans take into consideration a series of supply side statistics, such as company-growth, the age distribution of employees, skill levels, turnover ratios and theoverall profile/distribution of employment across job categories. Among allthese, age and retirement are emerging as important considerations inworkforce planning in the current socio-economic climate. These factors (i.e.age and retirement) are strongly related in the sense that retirement takes placeon the attainment of a certain age. Catering for age is necessary and isbecoming increasingly the subject of more elaborate mathematical modellingfor workforce planning (see for instance[15]). Additionally, HRP has to take intoconsideration the total corporate plan which would incorporate set oranticipated productivity standards[13].

The more contemporary approaches to HRP need to consider current (andanticipated/future) changes in the make-up and aspirations of the workforce.Long-term macro-level forecasts seem to suggest that people in the future willhave a greater desire for self-development and discovery[16]. These aspirationswill trigger requirements for changes in existing corporate structures andmanagement systems. As a result, human resource professionals and theirorganizations may capitalize on the advantage of potential employees who maybe more creative and self-motivated, but they also will face the problem ofdeveloping an environment that will attract and hold such individuals.

Downsizing, Resizing or Rightsizing: The Dominant Staffing Issuesof the 1990sReorganization, realignment, and restructuring seem to be the most pertinentcorporate issues of the 1990s[17]. Consequently, when an organization enjoyssustained growth in business, it needs to develop and communicate asupportive human resources strategy underlining the acquisition of theappropriate number and type of employees to support the growth. This maysimply amount to senior management outlining an overall development effortby clearly communicating what the new demands are/should be. The fulfilmentof additional staff entails engaging in the process of recruitment and selection.Where the additional in-takes are significant, this practice may be referred to as“resizing”. Conversely, in recent times there has been a greater emphasis onreducing (rather than increasing) personnel levels[18]. In fact, these changeshave resulted in an intense increase in the numbers of highly skilled, educated,


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and talented people being made redundant. This trend is commonly referred toas “downsizing”. As a distinct strategy from that of “downsizing” orconventional “resizing”, “rightsizing” advocates a strategy strictly guided by acarefully worked out human resource. It is an approach that takes intoconsideration both economic and social costs. By observing a rightsizingphilosophy the current upheavals caused by over-emphasized personneldownsizing might be significantly minimized. In other words, by pursuing ahuman resource plan mounted on the fundamental principle of rightsizing,managers can refrain from using ad hoc functional evaluation approaches tooutline their restructuring strategies[17].

Downsizing or Rightsizing?As companies face cutbacks resulting from economic downturns, tightenedbudgets, and stronger competition, a growing number of professionals,managers, and employees at various levels are being forced to join the ranks ofthe unemployed. These trends seem to revolve around the belief that the neworganization will survive by focusing on the core (or lean) staff concept[14,19,20]. To help meet the needs of both employers and former employees,many companies are turning to outplacement programmes[14,21]. Theunderlying rationale here is that, if downsizing is properly planned andmanaged with sensitivity and care, the detrimental results can be curtailed[20].

The exercise of workforce reduction has been pre-empted by a set ofmanagerial responses to fundamental structural changes such as mergers andacquisitions[22,23]. In general, the restructuring has tended to result both fromexternally oriented initiatives, such as deregulation, mergers and acquisitions,as well as internally oriented initiatives, such as technological automation andvarious workplace reforms[17,23]. In principle, organizations contemplating adownsizing decision have to undertake a serious evaluation of the corporateobjectives and the current staffing levels. Following that, they need to reachagreements among their key executives on the characteristics of theinstitution’s current business base and its future potential. If the requiredemployee reductions are substantial, it may even become necessary for theorganization to explore possibilities of accessing outside professionalassistance, perhaps in the form of specialized outplacement services[14,21,24].

Many of the individual stressors created from restructuring activities can bemitigated by way of overall organizational actions. The personal effects of arightsizing approach to restructuring on employees should be a primaryconsideration[17]. Perhaps, one way of pursuing a rightsizing approach to theprominent staffing issues is by designing an incremental HRP system. Such asystem would attempt to generate forecasts for each stage of the restructuringprocess. In the case of a merger for instance, the rightsizing approach could beundertaken by devising a pre-merger human resource plan, a plan for the firstfew months where further shifts in employment may need to take place and aplan for the remainder of the time-frame being contemplated. In essence, beforeembarking on any restructuring, it is important to make a commitment to

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communicate the critical positions and to take time to fill these with the rightpeople. During the initial phases of the restructuring process, key managers,and those involved in the strategic human resource plan, should makethemselves more available, demonstrate full commitment and participate fully,in the elaboration of a realistic (unbiased) rightsizing. In that process, theyshould be more communicative with their employees, since employmentpolicies and programmes constitute key elements to any successfulrestructuring (in the spirit of rightsizing) in the initial phase.

Overall, and even more so recently, workforce reductions have tended to beexercised in the form of voluntary early retirement financial incentivescommonly known as “golden handshakes”. This strategy tends to emphasize(and wrongly so) costs more than anything else[25]. There is, in fact, littleevidence to suggest that when downsizing has been approached in this way,those who were retained were necessarily more productive. For instance, astudy of 148 managers in the Bell System telephone company revealed nomeaningful difference in overall job performance between those who retired andthose who stayed[26]. Companies with greater vision seem to be refraining fromusing golden handshakes as an easy way to free the company of anyoutstanding/unresolved economic problems. With the large number ofdownsizings that have occurred in recent years, the more proactive companiesare finding it more rewarding to investigate and scrutinize the rationales fortheir layoff procedures well in advance. In this light, a formal and moresystematic human resource plan which incorporates the fundamental criteriaand principles underlying early retirement programmes would prove quitevaluable. Such a plan is vital in determining which jobs are essential and whichare not, and in subsequently deciding whether terminations should besimultaneous or implemented using a phase-down approach. At least, with aformal human resource plan, employees are less inclined to feel that thedownsizing exercise has been undertaken in an ad hoc fashion. Further, theywill hence be less likely to perceive the associated managerial actions as a mereset of parsimonious decisions taken in a vacuum. In addition, the adoption andimplementation of more formal and systematic HRP could also help alleviatepotential repercussions of the downsizing process and minimize the risk oflawsuits revolving around equal opportunities[27]. The HRP function shouldtake the lead in introducing and facilitating the transition.

Resizing or RightsizingAccording to some, there are strong indications that the corporate downsizingwhich has dominated much of the 1980s and the early 1990s has reached itsthreshold and may well be slowing down[28]. Some argue that because therationale for downsizing has stemmed primarily from a new focus on workforceproductivity, rather than purely economic conditions, it is bound to reach its endbefore the turn of the century[4,26]. More recently, a strong belief seems toprevail that in the late 1990s, organizations may in fact have to resort to asignificant resizing. Managers at some companies have begun to adopt a new


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approach built around the need to attempt to cut the workload, and not just theworkforce[25]. Resizing generally leads to new organizational structures andwould require a carefully designed and elaborate human resource plan aimed atreshaping the organization by expanding the existing parts of the firm into newparts[18]. For instance, executives at companies like H. J. Heinz Co. (Pittsburgh,Pennsylvania) are discovering that it is possible for a company to be both leanand fit while advocating up-sizing. By emphasizing quality, Heinz managershave learned to turn conventional cost-cutting logic upside down. Among theirdiscoveries is that adding workers can boost effectiveness, as can slowing downa production line. The key is to question long-held assumptions about the waythings work, a process Heinz managers call “paradigm busting”. The majorlesson learned was that some costs just cannot be cut[14]. Many of thecompanies that have downsized in the early 1980s are, in fact, already findingthat they are paying for their lack of experienced managers and employees. Fora growing number of those companies, the short term solution has been tobring back retired managers and other older employees or contract labour.Companies that once thought they could dispense with older, higher paidworkers are now rethinking some of their notions about how much it costs tohave older people on the payroll. Many companies are now quickly realizingthat the managers they will need for the future are the ones they have now.

Managers in the 1990s are increasingly expected to perform more complexstrategic analyses with fewer staff. As a result developments of appropriatesoftware to support the human resource function are still in great need.Technology in the form of mathematical models for HRP has long beenavailable to support HRP. Moreover, recent developments in microcomputer andsoftware capabilities allow human resource practitioners to reduce theirdependency on systems professionals to implement such technology. Lee andBiles[29] developed a microcomputer-based personnel planning model todemonstrate how readily existing technology can be implemented. Lotus 1-2-3,the most widely used spreadsheet package, was selected for the software and aMarkov model for the mathematics. Walker[3] proposed an integrated modelthat brings together a conceptual, easy-to-use system, or workstation, thatmakes it possible to perform several vital HRP activities on one microcomputer.

Information systems, in the area of personnel planning, have tended to focusmainly on employee supply-demand analyses. With the above outlinedconstraints faced by corporations in the 1990s, further elaborations on thesesystems are warranted. The new systems will require data entries not only onemployees, but also on the organization, gender constraints, legal constraints,labour-market forces, demographics, financial constraints, alternativeemployment policies, outplacement costs, downsizing costs, employee morale,turnover intentions, potential applicants, as well as a variety of otherinformation potentially available from external data bases, to name just a few.Many new technologies have already been developed to assist the HRPfunction. Most of these technologies are computer-based and make use ofmainframe systems, personal computers and microprocessors, information

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centres, multiuser systems and local area networks, artificial intelligence/expertsystems, and decision support models. Because these have not all been proven,users should refrain from opting for the latest system or package merelybecause it is new. These programs can substantially reduce the time required toperform a wide range of analyses while increasing its product’s complexity andsophistication. Some may even include the ability to model the microeconomicsof an entire industry by way of catering for “S-curve” type functions formanaging and setting goals[30].

Systematic Approaches to Human Resource PlanningThe above trends and constraints clearly suggest that HRP models and systemsmust become essential tools for the modern human resource manager. Further,systematic human resource plans constitute an essential contribution to thesuccessful implementation of a rightsizing approach to employment levels andstructures[31]. In practice, different models have been developed toaccommodate different types of constraints and the kind of policies underwhich the planning system might operate. While pursuing this perspectivehowever, the majority of existing models have tended to put more emphasis onfinancial constraints and on the need to contain labour costs[32-34]. Suchmodels may describe the constituent components of the personnel systemusing, for example, survival analysis techniques. Most of the available modelsconcentrate either on estimating the grade-wise (or job-level) distributions offuture personnel structures, given the existing structure and promotion (ordemotion) policies, or on deriving policies towards promotion (or demotion),given the required future structure. It is often suggested that a more useful wayis to look at the personnel system as a whole, using a variety of methods, suchas the Markov chain matrix. In essence, Markov models are descriptive flow-models that readily permit the testing of various policies (or personneldecisions scenarios). Estimations of the parameters of models based on theMarkov approach, for sampling frames appropriate to personnel data, form animportant part of the backbone of the methodologies suggested in this area. Infact all indications are that human resource plans based on Markov models arebeing used more and more extensively, particularly in large organizations[35].There are different versions of the basic Markov model as it applies to HRP. Allof the versions are basically simple to use and easy to implement (see forexample[36]). The more advanced (and more quantitative) Markov-based HRPmodels available in the literature have attempted to deal with howorganizational and environmental changes take place and how they maysubsequently affect the overall personnel plan. Gass[37] provides an extensive(and useful) review of the fundamental quantitative elements contained in thesemodels. The existing models emphasize transition rates and internal-externalmobility. The result of this emphasis is that very few models have taken aserious look at the emerging trends in the make-up of the workforce and in thechanging patterns of work (including the role of flexitime and part-time work).


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Among the very few models that have attempted to integrate the emerging(and increasing) role of part-time and flexible employment is that ofBechtold[38]. Bechtold developed a tractable set of integer programmingmodels for the days-off scheduling of a mix of full and part-time employees whowork in a multiple-objective, multiple-location setting. The inherent flexibilityof the implicit modelling approach he adopted was demonstrated by thepresentation of different modifications of the basic models. These modifications(or series of iterations) allowed the use of preference weights on the number ofemployee workdays per week or the minimization of payroll costs wheredifferential pay rates existed. In essence, any systematic human resource modelneeds to accommodate time-varying future requirements taking into accountinternal mobility and the long-term strategic objectives. By approximateestimates of the learning curve and the incorporation of the workers’ quit rate(turnover), a systematic model can be a useful tool. In using such a model, asubsequent sensitivity analysis (and reasonable estimates) can be performed onvarious seniority levels, and demonstrates the effects of changing the internalparameter on the overall personnel structure and on the required recruitmentrates. Although complex, this analysis can be easily dealt with byimplementing a computerized system.

In general, a computerized HRP model places the human resourcepractitioner in complete control of the analytical process. The model may alsoserve as a teaching/learning tool that can assist in the task of explaining thecrucial role of HRP in the face of current socio-economic changes. Nissan’s UKoperation uses computerized personnel systems extensively for planning andcontrol purposes. Computerization within the company’s personnel functionbegan in late 1985 with the installation of a personnel information system using“Percom” software. A later linkage of Lotus’ “Symphony” spreadsheet softwareto the personnel data-base enabled graphics, modelling, budgeting, andforecasting capabilities. In-house creation of a computerized recruitmentmanagement system was a recent development[39]. Similar developments havealso been undertaken in the health service[40].

Also, integral to HRP is the formulation of policies to bridge the gap betweenforecasted human resource supply and demand. A cost-based model, derivedfrom matrix-based (or box-flow) HRP systems can be appropriately modelled byway of simple spreadsheets or database format. When formulated in simplespreadsheet formats, these systems are capable of providing quick calculationsof the effects of personnel policies on staffing levels in various grades over time.If all appropriate cost-elements are entered, such systems may also provideuseful estimates of the costs of each alternative policy. In so doing, they enablethe implementors of plans to choose between alternative policies on a moreobjective, rather than subjective, basis[41]. Ultimately, the cumulation andintegration of the set of spreadsheets could be translated into a moresophisticated in-house database (or object oriented decision support) system toenable timely and more effective personnel planning decisions. The systemwould feature (and simulate) a series of scenarios pertaining to the levels of

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personnel flows under different constraints. In the initial phases, thespreadsheet format would also allow for the types and levels of constraints tobe introduced in an incremental or simultaneous fashion so that the effects onrequired personnel policies could be appreciated and their costs appropriatelyestimated at various stages. In general, the different scenarios lead to a numberof alternative staffing strategies which reflect the major trade-offs thatmanagers should consider when selecting the appropriate personnel policies.The resulting strategies may include decisions on recruitment and selection,natural attrition, induced redeployment, involuntary redeployment, layoff withoutplacement assistance, layoff without outplacement assistance, etc. Aframework may then subsequently be drawn to cater for potential featurespertaining to workforce under-supply or over-supply. That framework couldalso take into account the context of the under-supply or over-supply and itsinfluence on alternative managerial choices in devising resizing, downsizing orrightsizing strategies. For example, in implementing personnel plans, humanresource professionals must often screen large numbers of applicants forposition openings or possible retrenchments. This involves evaluating theapplicants’ qualifications and recommending who should be interviewed. Thisresponsibility can be aided by a set of screening matrices that make use of asimple personal computer. With such a system, human resource personnel caneasily check to see if an applicant meets the criteria the position requires. Thematrix results in a list of applicants ranked by qualifications. It is clearlyindicated whose overall skills and experience match or exceed the position’srequirements. The matrix can also serve as a framework for evaluatinginterviews and recalculating rankings.

Towards a Simple Matrix Model Typically, very few practical models have considered the contemporary internaland external issues faced by organizations in attempting to develop systematichuman resource plans. In general, while many important technical andapplication developments have been made in this field, current models do notsufficiently address the emerging issues faced by many corporations as theyface the socio-economic challenges of the 1990s. Even where contemporarytrends and variables have been included, the models themselves have proved tobe too complex and cumbersome to be of any practical use to managers andhuman resource professionals. Also, the typical HRP models rarely incorporatethe potential effects of the much broader constraints, such as equal opportunityin employment (EEO) and other employment legislation, on expected demandsfor given outputs, objectives and capacity[42,43]. In the current socio-economicenvironment, some form of systematic HRP is imperative in all organizations.Elaborate mathematical models and related computer-based algorithms arenow available that can help human resource planners analyse future goals andestablish trade-offs among often conflicting goals. The model suggested heretakes the human resource requirements for future periods as inputs, which aredetermined by the changes that take place in the system, and based on the cost


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data, generates optimal personnel policies (recruitment or workforcereductions) for future periods.

Principles and Basic Mechanics of the Proposed Model The proposed model emphasizes a matrix approach espousing the fundamentalprinciples and mechanics of Markov chains theory. However, unlike previousmodels based on that theory, the suggested model caters for a number ofinternal and external constraints by way of a series of incremental andsimultaneous iterations. The basic operational mechanics of the model consistof a core matrix featuring personnel forecasts by levels of employment (or jobcategory), and a series of peripheral matrices representing the factorconstraints affecting changes in the core matrix. Figure 1 illustrates the basicrelationships and the fundamental principles of the model.

In essence, each cell of the peripheral matrices features coefficients (ratios orprobabilities) for each type of constraint and for each job category or level ofemployment. The interface of each peripheral matrix with the elements withinthe core matrix produces a new set of forecasts for each level of employment orjob category. The mechanics governing the interactions between the peripheralmatrices and the core matrix should be based on the Markov chain principles.Each peripheral matrix may be taken in turn and its effect on the employmentdistributions (or structure) within the core matrix evaluated. In this sense, the

ExternalforcesCore matrix

Productivityratios

Paystructure ratios

Absenteeismrates

Age distributioncoefficients

Age distributioncoefficients

Gender/minority groups ratios

Other costsstructures

Mobilityrates

Full-timers

Partratios

Figure 1.Principles Guiding theProposed Model

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model is incremental. That is, it assumes that each peripheral matrix (orconstraint) is taken one at a time to forecast employment (in the core matrix)and further (or additional) constraints are brought in incrementally to includetheir effect (and hence the required changes) in the previous forecast. However,the model as a whole is also simultaneous in the sense that it ultimately takesinto account all of the above core and peripheral matrices interfacing in aninteractive fashion. By way of analogy, we could refer to the application of thehuman (hence external) force to a semi-automatic ratchet-tool where eachadjustment of the ratchet itself (signalled by a clicking) forces a new adjustmentof the object at the centre (in this case the bolt itself; in our case the core matrix).The analogy would be more complete if we were to conceive that several“ratchet-type” forces (in our case the peripheral forces/matrices) were operatingaround a core (i.e. the forecasts generated in the core matrix) simultaneously.

To conform with the above principles, the operational application of themodel necessitates the fulfilment of a series of steps. As explained above, eachstep takes into account a specific type of constraint. Typically, all models thatfollow the Markov principle attempt, in the first instance, to derive personnelforecasts on the basis of estimated mobility rates. In accord with previousresearch and models in this area, the proposed model also assumes that theforecasts based on mobility rates should be featured at the start of the process.

The model also factors in a series of internal constraints, featured in a matrixformat (peripheral matrices in the overall model). The added strength of themodel is that it is able to take into account a series of forces likely to affect themake-up and distribution of the personnel structure across the different jobcategories. Among these forces are aspects such as productivity ratios(representing output expectations and constraints); the anticipated paystructure and other personnel cost constraints; the age distribution; theabsenteeism rates; the anticipated/desired proportions of part-timers andcontract employees; the anticipated/required gender distribution and theanticipated proportion of minority groups (including immigrants andhandicapped). Each of these forces would in itself reflect required adjustmentsto wider (external) forces. For instance, the anticipated (estimated) ratios ofemployment of females (versus males) would follow constraints generated bythe relevant equal opportunity legislation. Similarly, for the employment ofother minority groups. Also, the productivity rates and pay rates (by category)would be determined (at least in part) by the dominant economic forces,including the prevailing industrial relations climate. Again, in a similar fashion,changes in the type/nature of the labour market would constrain the make-up ofthe workforce, for instance in terms of the opportunities/possibilities ofemploying various proportions of part-timers and contract employees in eachgiven job category. All in all, these external forces constitute an additional outerlayer affecting the peripheral matrices discussed above. Among the majorexternal forces that may be featured in this (i.e. the outer layer) are the overalleconomic and market forces (including the labour market) and thelegislative/governmental framework.


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Basic MechanicsThe operationalization of the above model requires undertaking a series offundamental steps that constitute the building blocks of the model. Hence, anunderstanding of these three steps is essential to gain an overall insight into thefundamental mechanics of the model.

Step 1 : The first step attempts to forecast personnel needs based onsufficient knowledge of mobility rates across different levels of employment aswell as turnover rates. It rests on the simple principle that once the internal andexternal personnel mobility rates for each employment level or job category areappropriately known/estimated for a given period, a workforce surplus (ordeficit) for each employment level (or job category) could be derived. Thesurplus (or deficit) would initially assume steady-state (i.e. no change) in theanticipated output for the forecast period. Then, by taking into account andinserting, the desired (or anticipated) output levels, the surplus/deficit for eachjob category (employment level) could subsequently be determined.

The basic mechanics involved in this step may be illustrated by way of a verysimple example:

Assume an organization has three job levels, or job categories, in total,these being (1) managers, (2) engineers and (3) technicians. Assume thathistorical data on each of these three levels has revealed that over a period of(say) five years, the following mobility rates tend to occur : (1) for themanagers’ group, 80 per cent remain as managers and 20 per cent exit theorganization; (2) for the engineers’ group, 80 per cent remain at that level, 10per cent get promoted to managerial positions, 5 per cent get demoted to thelevel of technician and 5 per cent exit the organization; (3) for the group oftechnicians, 80 per cent remain as technicians, 5 per cent get promoted to theposition of engineer and 15 per cent exit the organization. These mobilityrates are shown in the “mobility rates” matrix represented in Figure 2.

Now assume that, at the start of the planning period, the organization has100 managers, 200 engineers and 600 technicians. By applying the abovecoefficients (or mobility rates) to the staffing levels, for each job category, inorder to estimate the expected staffing levels at the end of the planningperiod, the appropriate calculations are shown in the second matrix labelled“staffing forecasts” shown in Figure 2.

According to these estimates, there are now: 100 managers, 190 engineersand 490 technicians. This makes our total staffing level 780. This also showsthat according to these estimates, at the end of the planning period there willbe a deficit of 120 individuals. According to these same estimates, to maintainthe overall staffing level at 900 (i.e. no change in output levels and outputscomposition), we need to recruit 10 engineers to maintain the level at 200, and110 technicians to get back to the 600 we had at the start of the period.However, if we anticipate an increase in activities (outputs) then we need toincrease the number of recruits in the appropriate categories to meet ourneeds. Changes in the make-up of the outputs could also mean that we need toaccount for the appropriate allocation of each job category across product

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groups. This exercise may be slightly more complex, but could be achievedmore systematically if (say) expected productivity-rates for each product-group, by job category, were available. Hence, assuming no required change inthe make-up of the outputs, if we wish to increase our overall staffing levels to1,000, then we would need to hire 100 employees in addition to the above 120.In this case, the allocation of the extra 100 employees across the three jobcategories would be achieved on approximations of the existing proportionsacross the three job groups. This would give us an allocation of 11 (i.e. 100/900(or approximately 11 per cent) of the 100) to the management group; 22 (i.e.200/900 (or approximately 22 per cent) of the 100) to the engineering groupand 67 (i.e. 600/900 (or approximately 67 per cent)) to the group of technicians.In reality, the decisions on these allocations require more minuteconsiderations and are based on productivity rates. Further, these allocationsshould take into consideration potential (and anticipated) changes in thevolumes as well as the make-up of the outputs (or services), in the case of aservice organization. As mentioned above, these could be further refined andfine-tuned by taking into consideration other internal forces (such as expectedredundancy rates in each position in different locations); various marketforces affecting different products/services and even the power-distributionacross the different job categories (i.e. intra-organizational dynamics). Thisclearly requires consideration of other matrix-based coefficients representingdifferent constraints.

Managers

Engineers

Technicians

Estimated mobility ratesManagers

0.80

0.10

Engineers

0.80

Technicians

0.05

Exits

0.05

0.05 0.80

– –

–

0.20

0.15

Managers

Staffing forecastsManagers

80

Engineers Technicians Exits

– – 20

Present staffing

100

Engineers 20 160 10 10200

Technicians – 30 480 90600

Totals 100 190 490 120900

Deficit (hire) – 10 110

Figure 2.Staffing ForecastsBased on Mobility

Rates


50

What is important to note is that the above example clearly indicates that, giventhe matrix format of the estimates, initially, a very simple spreadsheet caneasily be built around this example. The spreadsheet could then be used tointroduce a variety of different scenarios on the mobility rates and test theirimplications on staffing surpluses/deficits by category.

At the heart of this step is the need to determine the estimated mobility ratesacross different levels and out of the organization (or exit-rates, turnover-ratesfor each level). These rates could be derived from historical data perhaps byusing simple probabilistic, or stochastic, estimates for a given time period. Witha human resource information system already in place, it would be easy toderive these estimates by linking the human resource plan to the appropriatedatabase featuring periodic staff mobility across employment levels and thenumber of exits. There is also the need to estimate the expected output for theforecast period. Here, the actual outputs, in terms of volume of business/services,could be used. Also, an average productivity ratio for each level of employmentcould be derived and inserted in the matrix to balance out the objectives (outputlevels) and overall manning levels for each job category. In organizations whereoutput levels are monitored by way of a computerized system, it would be easyto link-up the periodic data and estimates from the system to the operationalhuman resource plan.

Step 2: This step consists of emulating all of the other relevant forces (orconstraints) by way of separate matrices featuring existing/anticipatedcoefficients. The procedure followed in deriving the forecasts, from each matrix,is very similar to that explained in Step 1. The coefficients of each peripheralmatrix would be applied to the resultant matrix from each preceding step togenerate further forecasts that take into account the newly introducedconstraints. As explained earlier, the constraints featured in the (peripheral)matrices could be applied to each set of the generated forecasts in anincremental fashion (i.e. in stages) or simultaneously through the aid of acomputer-assisted package such as the one described below (i.e. RightPlan”.

Step 3: This step provides forecasts by category of employment. Where newrecruits are needed, it could also incorporate job analysis of the positions to befilled which would then trigger appropriate job specifications for each of theseas well as training needs. The aim is to highlight the alternative humanresource policies and actions to be undertaken to implement a rightsizinghuman resource planning approach. Each alternative could be weighed againsta set of criteria. The main criteria for the model are those which underline theprinciple of “rightsizing”, which takes into consideration both economic andsocial costs. For instance, in the case where a decision to reduce employmentlevels is being contemplated, all costs to the organization (including socialcosts) of such reductions on the morale of the remaining employees (or stayers)should be taken into account. Because these implications tend to haverepercussions on employee productivity, there are economic costs involved too.For example, in a rightsizing philosophy, outplacement activities/responsibilitiesand their related costs should be borne by the employer. These need to be taken

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into account before any decision on staff reductions is fully espoused. This stepwill also evaluate training needs associated with each of the alternativedecisions being contemplated.

However, because the above model is incremental, it does not specificallyaddress the issue of potential interactions between constraints. For example, itis possible that absenteeism rates will decrease as pay is increased.Nevertheless, we foresee that this limitation of the model could potentially beovercome by incorporating the interactive effects in the final, fully developed,model. This might prove complex, but could be appropriately addressed by thedevelopment of suitable software.

Software Application: RightPlan a System in the MakingThe fundamental principles of the above model can easily be set to operate on aPC (Personal Computer) while retaining power similar to systems running on amainframe. The computerized system may also be appropriately integratedwith existing computerized inventories of employee skills and knowledge suchas those outlined by Gorman and Schwers[44]. Appropriate developments of thesystem require obtaining and updating data as well as designing questionnairesfor general and specific criteria. The more popular database systems such asthe “Manpower Planning Inventory” and “StaffPlan”[45] might also prove auseful complement in adoption and implementation of the proposed system inlarge organizations. To cater for the more complex situations, the computerizedapplication of our model requires sufficient sophistication to allow anassessment of detailed staffing needs for a wider range of possible sub-units. Inthe case where the sub-units are decentralized (cost/profit-centres) withdifferent/independent needs, a variety of independent sub-systemsincorporating the above scenarios could be devised for each profit/cost centre.These could then subsequently be aggregated to form an overall corporatesystem that interacts with other corporate data-sources. It could then allow apersonal computer to model a relatively complex situation and to spell outhuman resource consequences of each alternative strategic decision within eachsub-system and produce an overall corporate plan.

A spreadsheet-based (and ultimately, a database decision support system)software would be ideal in this case, and the matrix should begin with abudgeted staffing model for a reasonable time period. The matrix will initiallyincorporate average mobility-rates (or probabilities) across the differentemployment levels to generate the number of employees remaining at each levelafter the mobility rates have been estimated. In taking account of the overallmovements (based on historically estimated mobility rates), net surpluses (ordeficits) in employment levels could be determined. Initially, the system couldbe designed to establish surpluses (or deficits) assuming that there will be nochange in the required output levels at the end of the forecasting period coveredby the mobility rates. Subsequently, the anticipated output levels can beintroduced in the matrix to determine the resulting staffing deficits (or gains) atthe end of the period. By varying the output requirements the system will allow


52

management to locate the point where the addition of more staff is needed anddetermine the potential effects of these additions on overall productivity.

Additionally, the matrices can be designed to suit the existing organizationstructure and may even cater for different types of products or geographicalareas. Further, absenteeism and other special time off (such as times to beallocated for training and development; health and safety, union activities, etc.)could subsequently be factored into the system. A summary of results fromeach scenario could be obtained following the design of a template.

Figure 3 shows how RightPlan could be integrated with other databases thatmay be mounted on a mainframe or on a network involving the use ofminicomputers. The dotted arrows signify that the impact of the forces aremeasured only indirectly via their effect on the constraints.

Concluding RemarksHuman resource managers can learn valuable lessons from the most recentrecession about the need to remain lean and to cultivate solutions focusing onthe spirit of rightsizing[19]. One of the primary roles of managers in thissituation is to support and guide top managers during the transition in order toreduce any of the human resource management difficulties they mayexperience. Typically, in advocating and following a rightsizing strategy, the

Core matrix

RightPlan

Strategicplan

Strategicplan

Human resourceinformation

system(database)

Economic/market

database

Accounting/finance

database

Legal statutoryrequirements

data

Figure 3.Linking the System(RightPlan) to OtherExternal InfoSources/Systems

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human resource function would endeavour to establish the criteria that willguide the fundamental human resource plan and to lay down the parametersthat may be used as a basis for evaluating staff members. By observing thisbasic, but fundamental, step, the current upheavals caused by over-emphasizedpersonnel downsizing can be somewhat minimized. As outlined in our model,this is because careful and timely HRP can instigate observance of the requiredethical and legal standards by the organization, and will help key managers inworking to preserve worker dignity. This step might also ease the intricate taskof deciding on which workers are to leave and which are to stay. In this process,by pursuing a human resource plan mounted on the fundamental principle ofrightsizing, managers can refrain from using ad hoc functional evaluationapproaches to outline their restructuring strategies[17]. Clearly, these functionalapproaches might in fact lead to more drastic actions and might in the endprove counterproductive in resolving the key human resource issues. They tendto be perceived by employees as reactionary since they may be seen as merestrategies for targeting specific functions and not others. As part of theplanning process, it is also important that the human resource functionattempts to prioritize the necessary steps and then agree on a timetable forcompleting each phase of the plan[46]. As the above model suggests, byassessing the potential of each individual in an organization, a determinationcan be made of the actual ratio of people with upward potential to people withlateral potential. In attempting to address the above, and other recurrent, issues,the more dynamic models should lend themselves to a computer application asthis will enhance speed and precision as well as greater standardization. In thisperspective, because of its simplicity, and hence greater accessibility to a widerspectrum of employees, the simple spreadsheet format continues to be a veryuseful way of putting complex planning models into practice. The aboveproposed model holds high potential in this regard.

Remaining constantly aware of employees’ strengths and weaknesses andcatering for them in planning future needs should form a primary thrust ofhuman resource management[47,48]. In applying the proposed model,managers are able to take stock of the realities of all constraints, internal as wellas external, before embarking on any personnel policy with significantimplications on employment levels and hence (potentially) employees’ morale.In implementing the model, managers should realize that, for logical reasons,the underlying philosophy of an effective human resource plan ought to begoverned by a spirit of rightsizing. Further, and as Richards-Carpenter[2]suggested, human resource managers need to solve four major personnelplanning issues. First, because personnel planning is not a trivial activity,training is needed on both the interpretation of personnel data and thetranslation of the findings into effective policy. Second, because personnelplanning takes time and resources, managers must be prepared to commit theirenergies to it. Third, line managers need to understand what personnelplanning is, how it works, and how they can employ it to help achieve theirobjectives. Fourth, personnel managers must determine how personnel


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planning fits into the culture of a personnel activity. The proposed modelfacilitates compliance with all of these. In gearing the plan to fulfil the above,managers should also make sure that the human resource plan coincides withthe dominant, or desired, organization culture. In doing so, they must ensurethat the underlying rationales of the personnel plan incorporate (and combine)elements of independence from the employees’ standpoint with those ofinterdependence from the environmental standpoint. Objective, formal andsystematic personnel planning systems, such as RightPlan can offer substantialcontributions to this endeavour.

In the current socio-economic environment the human resource function isforced to become more directly involved in the overall business activities,including strategy implementation and reorganization. In so doing, the functionis also changing the nature and role of HRP and various practices to respond tochanging business demands. RightPlan provides suitable and practical scopesto account for these changes in a systematic and more convincing way.

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1, 1989, pp. 55-61.2. Richards-Carpenter, C., “Manpower Planning Makes a Comeback”, Personnel

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9. Alevras, J. and Frigeri, A., “Picking up the Pieces after Downsizing”, Training andDevelopment Journal, Vol. 41 No. 9, 1987, pp. 29-31.

10. Manzini, A.O., “Integrating Human Resource Planning and Development: The Unificationof Strategic, Operational, and Human Resource Planning Systems”, Human ResourcePlanning, Vol. 11 No. 2, 1988, pp. 79-94.

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15. Mohapatra, P.K.J., Mandal, P. and Saha, B.K., “Modelling Age and Retirement in ManpowerPlanning”, International Journal of Manpower, Vol. 11 No. 6, 1990, pp. 27-31.

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18. Zeffane, R., “Organizational Structures: Design in the Nineties”, Leadership andOrganization Development Journal, Vol. 13 No. 6, 1992, pp. 18-23.

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23. Somers, M.J. and Bird, K., “Managing the Transition Phase of Mergers”, Journal ofManagerial Psychology, Vol. 5 No. 4, 1990, pp. 38-42.

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26. Fisher, A.B., “The Downside of Downsizing”, Fortune, Vol. 117 No. 11, 1988, pp. 42-52.27. Stone, L.D., “How to Ease the Pain of Difficult Downsizing Choices”, Human Resources

Professional, Vol. 3 No. 2, 1991, pp. 21-5.28. Evans, R., “Surviving the Skills Shortage: Equal Opportunities in Recruitment and

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Resource Planning, Vol. 11 No. 4, 1988, pp. 293-315.30. Berman, S.J. and Kautz, R.F., “Compete! A Sophisticated Tool that Facilitates Strategic

Analysis”, Planning Review, Vol. 18 No. 4, 1990, pp. 35-9.31. Graham, R.G. and Tuan, C., “An Empirical Analysis of Manpower Planning in Hong

Kong”, International Journal of Manpower, Vol. 9 No. 1, 1988, pp. 21-7.32. Dawson, C., Barrett, V. and Ross, J., “A Case of a Financial Approach to Manpower

Planning in the NHS”, Personnel Review, Vol. 19 No. 4, 1990, pp. 16-25.33. Rao, P.P., “A Dynamic Programming Approach to Determine Optimal Manpower

Recruitment Policies”, Journal of the Operational Research Society, Vol. 4 No. 10, 1990,pp. 983-8.

34. Uwakweh, B.O. and Maloney, W.F., “Conceptual Model for Manpower Planning for theConstruction Industry in Developing Countries”, Construction Management & Economics,Vol. 9 No. 5, 1991, pp. 451-65.

35. Raghavendra, B.G., “A Bivariate Model for Markov Manpower Planning Systems”, Journalof the Operational Research Society, Vol. 42 No. 7, 1991, pp. 565-70.

36. McClean, S., “Manpower Planning Models and Their Estimation”, European Journal ofOperational Research, Vol. 51 No. 2, 1991, pp. 179-87.

37. Gass, S.I., “Military Manpower Planning Models”, Computers & Operations Research, Vol.18 No. 1, 1991, pp. 65-73.

38. Bechtold, S.E., “Implicit Optimal and Heuristic Labor Staffing in a Multiobjective,Multilocation Environment”, Decision Sciences, Vol. 19 No. 2, 1988, pp. 353-72.


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39. Carolin, B. and Evans, A., “Computers as a Strategic Personnel Tool”, PersonnelManagement, Vol. 20 No. 7, 1988, pp. 40-3.

40. Bergmann, C. and Johnson, J., “Managing Staffing with a Personal Computer – Part II”,Nursing Management, Vol. 19 No. 8, 1988, pp. 55-61.

41. Greenhalgh, L., Lawrence, A.T. and Sutton, R.I., “Determinants of Work Force ReductionStrategies in Declining Organizations”, Academy of Management Review, Vol. 13 No. 2,pp. 241-54.

42. Gerchak, Y., Parlar, M. and Sengupta, S., “On Manpower Planning in the Presence ofLearning”, Engineering Costs & Production Economics, Vol. 20 No. 3, 1990, pp. 295-303.

43. Towill, D.R., “Forecasting Learning Curves”, International Journal of Forecasting, Vol. 6No. 1, 1990, pp. 25-38.

44. Gorman, S. and Schwers, A., “Tapping Internal Talent with a PC”, Personnel, Vol. 66 No. 12,1989, pp. 49-53.

45. Jorssen, V.G., “Planning for Manpower Requirements: STAFFPLAN – An AnalyticalModel”, International Journal of Manpower, Vol. 10 No. 4, 1989, pp. 3-14.

46. McCune, J.T., Beatty, R.W. and Montagno, R.V., “Downsizing: Practices in ManufacturingFirms”, Human Resource Management, Vol. 27 No. 2, 1988, pp. 145-61.

47. Mayo, A., “Linking Manpower Planning and Management Development”, Industrial &Commercial Training, Vol. 22 No. 3, 1990, pp. 3-12.

48. Margerison, C., “Management Development Policies and Practices”, Journal of EuropeanIndustrial Training, Vol. 15 No. 4, 1991, pp. 29-31.

Further ReadingMcEnery, J.M. and Lifter, M.L., “Demands for Change: Interfacing Environmental Pressures and

the Personnel Process”, Public Personnel Management, Vol. 16 No. 1, 1987, pp. 61-87.

Documents

1994 Planning for Human Resources