Human Resource Management

MBA & BBA

Humana Resource PlanningLectures Week 3

Course Lecturer: Farhan Mir

Institute of Management Sciences BZU Multan

Copyright © Farhan Mir 2008

ObjectivesAfter studying this chapter, you should be able to:

1. Identify the advantages of integrating human resources planning and strategic planning.

2. Describe the basic approaches to human resources planning.

3. Identify the tools and techniques of HR planning

4. Overview the emerging role of HR Information Systems

Human Resources Planning

•Human Resources Planning (HRP)Process of anticipating and making provision

for the movement (flow) of people into, within, and out of an organization.

HRP’s purpose is the effective deployment of human resources through: Anticipating organizational labor supply and

demand. Providing expanded employment opportunities

for women, minorities, and the disabled. Guiding the development and training the

workforce.

Four Phases to HR Planning

• “What will we need?” Determine future HR requirements

• “What’s available?” Determine future HR availabilities

Internally Externally

• Reconcile requirements and availabilities Anticipate “gaps” Develop action plans

• Control and evaluate

Strategic Human Resource Management

•The acknowledgement that HR policies and practices have critical linkages with an organization’s overall strategy

•Central premise is that HR policies will have direct effects on an organization’s profitability

•HR must “fit” strategically with the mission of the organization

HRP and Strategic Planning

•Strategic Analysis What human resources are needed and what

are available?

•Strategic FormulationWhat is required and necessary in support of

human resources?

•Strategic ImplementationHow will the human resources be allocated?

Human Resources Human Resources PlanningPlanning

Human Resources Human Resources PlanningPlanning

StrategicStrategicPlanningPlanning

StrategicStrategicPlanningPlanning

Linking the Processes of HRP and Strategic Planning

Figure 4.1Source: Adapted from James W. Walker, “Integrating the Human Resource Function with the Business,” Human Resource Planning 14, no. 2 (1996): 59–77. Reprinted with permission.

Presentation Slide 4–1

Strategic Strategic AnalysisAnalysis

Establish the context:Establish the context:

• Business goalsBusiness goals

• Company Company strengths/weaknessesstrengths/weaknesses

• External External opportunities/threatsopportunities/threats

• Source of competitive Source of competitive advantageadvantage

Strategic Strategic AnalysisAnalysis

Establish the context:Establish the context:

• Business goalsBusiness goals

• Company Company strengths/weaknessesstrengths/weaknesses

• External External opportunities/threatsopportunities/threats

• Source of competitive Source of competitive advantageadvantage

Strategy Strategy FormulationFormulation

Clarify performance Clarify performance expectations and future expectations and future management method:management method:

• Values, guiding Values, guiding principlesprinciples

• Business missionBusiness mission

• Objectives and Objectives and prioritiespriorities

• Resource allocationsResource allocations

Strategy Strategy FormulationFormulation

Clarify performance Clarify performance expectations and future expectations and future management method:management method:

• Values, guiding Values, guiding principlesprinciples

• Business missionBusiness mission

• Objectives and Objectives and prioritiespriorities

• Resource allocationsResource allocations

Strategy Strategy ImplementationImplementation

Implement processes to Implement processes to achieve desired results:achieve desired results:

• Business goalsBusiness goals

• Company Company strengths/weaknessesstrengths/weaknesses

• External External opportunities/threatsopportunities/threats

• Source of competitive Source of competitive advantageadvantage

Strategy Strategy ImplementationImplementation

Implement processes to Implement processes to achieve desired results:achieve desired results:

• Business goalsBusiness goals

• Company Company strengths/weaknessesstrengths/weaknesses

• External External opportunities/threatsopportunities/threats

• Source of competitive Source of competitive advantageadvantage

Identify people-related Identify people-related business issuesbusiness issues

Identify people-related Identify people-related business issuesbusiness issues

Define HR strategies, Define HR strategies, objectives, and action plansobjectives, and action plans

Define HR strategies, Define HR strategies, objectives, and action plansobjectives, and action plans

Implement HR processes, Implement HR processes, policies, and practicespolicies, and practices

Implement HR processes, Implement HR processes, policies, and practicespolicies, and practices

Human Resource Planning

Strategic Planning & HR Planning at IBM

•Remember IBM World Leader in Computer Hardware & Pioneer in

Personal Computers Divided itself into 14 autonomous divisions worldwide At IBM Strategic Planning begins at Top and then

translated downwards Executives in different business areas develop strategies Then divisions create functional strategies for

development, manufacturing, marketing and service

•The linkage between Business Plans & HR Plans The HR Department plays a crucial role

HR concerns and objectives are inserted into the plans by HR specialists at divisional plans in coordination with divisional managers

FORECASTING DEMANDFORECASTING DEMANDFORECASTING DEMANDFORECASTING DEMAND

Human Resource Planning Model

ConsiderationsConsiderations• Product/service demandProduct/service demand• TechnologyTechnology• Financial resourcesFinancial resources• Absenteeism/turnoverAbsenteeism/turnover• Organizational growthOrganizational growth• Management philosophyManagement philosophy

ConsiderationsConsiderations• Product/service demandProduct/service demand• TechnologyTechnology• Financial resourcesFinancial resources• Absenteeism/turnoverAbsenteeism/turnover• Organizational growthOrganizational growth• Management philosophyManagement philosophy

TechniquesTechniques• Trend analysisTrend analysis• Managerial estimatesManagerial estimates• Delphi techniqueDelphi technique

TechniquesTechniques• Trend analysisTrend analysis• Managerial estimatesManagerial estimates• Delphi techniqueDelphi technique

TechniquesTechniques• Staffing tablesStaffing tables• Markov analysisMarkov analysis• Skills inventoriesSkills inventories• Management inventoriesManagement inventories• Replacement chartsReplacement charts• Succession PlanningSuccession Planning

TechniquesTechniques• Staffing tablesStaffing tables• Markov analysisMarkov analysis• Skills inventoriesSkills inventories• Management inventoriesManagement inventories• Replacement chartsReplacement charts• Succession PlanningSuccession Planning

External ConsiderationsExternal Considerations• Demographic changesDemographic changes• Education of the workforceEducation of the workforce• Labor MobilityLabor Mobility• Government policiesGovernment policies• Unemployment rateUnemployment rate

External ConsiderationsExternal Considerations• Demographic changesDemographic changes• Education of the workforceEducation of the workforce• Labor MobilityLabor Mobility• Government policiesGovernment policies• Unemployment rateUnemployment rate

FORECASTING SUPPLYFORECASTING SUPPLYFORECASTING SUPPLYFORECASTING SUPPLY

BALANCING BALANCING SUPPLY AND SUPPLY AND

DEMANDDEMAND

BALANCING BALANCING SUPPLY AND SUPPLY AND

DEMANDDEMAND

(Shortage) (Shortage) RecruitmentRecruitment

• Full-timeFull-time• Part-timePart-time• RecallsRecalls

(Shortage) (Shortage) RecruitmentRecruitment

• Full-timeFull-time• Part-timePart-time• RecallsRecalls

(Surplus) (Surplus) ReductionsReductions

• LayoffsLayoffs• TerminationsTerminations• DemotionsDemotions• RetirementsRetirements

(Surplus) (Surplus) ReductionsReductions

• LayoffsLayoffs• TerminationsTerminations• DemotionsDemotions• RetirementsRetirements

The Human Resource Planning Process

VariancesVariances

If SurplusIf Surplus If ShortageIf Shortage

EndEnd

EndEnd EndEnd

Comparedwith

If none

Action decisions

Layoff Retirement Termination

Overtime Recruitment Contractors

Strategic Planning

Technology forecasts Economic forecasts Market forecasts Organizational planning Investment planning Annual operating plans

HR Demand

Annual employment requirements:

• numbers

• skills

• occupation categories

HR Supply

Existing employment inventory:

After application of expected loss and attrition rates

Human Resource Planning (HRP)

• Six steps of effective HRP environmental scanning—identify and anticipate sources of threats

and opportunities, scanning the external environment (competitors, regulation) and internal environment ( strategy, technology, culture)

labor analysis—project how business needs will affect HR needs, using qualitative methods (e.g., Delphi, nominal) and quantitative methods (trend analysis, simple and multiple linear regression analysis)

supply analysis—project resource availability from internal and external sources

gap analysis—reconcile the forecast of labor supply and demand action programming—implement the recommended solution from

the gap analysis evaluation—monitor the effects of the HRP by defining and

measuring critical criteria (e.g., turnover costs, break-even costs of new hires)

HRP and Environmental Scanning

•Environmental ScanningThe systematic monitoring of the major external

forces influencing the organization. Economic factors: general and regional conditions Competitive trends: new processes, services, and

innovations Technological changes: robotics and office

automation Political and legislative issues: laws and

administrative rulings Social concerns: child care and educational

priorities Demographic trends: age, composition,and

literacy

Forecasting Demand for Employees

Quantitative MethodsQuantitative MethodsQuantitative MethodsQuantitative Methods

Qualitative MethodsQualitative MethodsQualitative MethodsQualitative Methods

Forecasting DemandForecasting DemandForecasting DemandForecasting Demand

Qualitative Approaches to Demand Forecasting

•Management ForecastsThe opinions (judgments) of supervisors,

department managers, experts, or others knowledgeable about the organization’s future employment needs.

•Delphi TechniqueAn attempt to decrease the subjectivity of

forecasts by soliciting and summarizing the judgments of a preselected group of individuals.

The final forecast represents a composite group judgment.

Quantitative Approach: Trend Analysis

•Forecasting labor demand based on an organizational index such as sales: Select a business factor that best predicts human

resources needs. Plot the business factor in relation to the number of

employees to determine the labor productivity ratio. Compute the productivity ratio for the past five years. Calculate human resources demand by multiplying the

business factor by the productivity ratio. Project human resources demand out to the target

year(s).

Example of Trend Analysis of HR Demand

Figure 4.4

1997 $2,351 14.33 164

1998 $2,613 11.12 235

1999 $2,935 8.34 352

2000 $3,306 10.02 330

2001 $3,613 11.12 325

2002 $3,748 11.12 337

2003 $3,880 12.52 310

2004* $4,095 12.52 327

2005* $4,283 12.52 342

2006* $4,446 12.52 355

BUSINESS LABOR = HUMAN RESOURCES

FACTOR PRODUCTIVITY DEMANDYEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

*Projected figures

Forecasting Supply of Employees: Internal Labor Supply

•Staffing Tables•Markov Analysis•Skill Inventories•Replacement Charts•Succession Planning

Forecasting Internal Labor Supply

•Staffing TablesGraphic representations of all organizational

jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements.

•Markov AnalysisA method for tracking the pattern of employee

movements through various jobs.

Forecasting Labor Supply

•Succession Planning Technique that identifies specific people to fill future

openings in key positions throughout the organization Organizational Replacement Charts

Charts that shows both incumbents and potential replacements for given positions within the organization

•Commitment Manpower Planning Systematic approach to HR planning designed to get

managers and their subordinates thinking about and involved in human resource planning

Action Plans

• Managers must develop complete action plan to accomplish HR objectives

• Adding Human Resources Ad hoc Placement

Temporary & Outsourcing

Permanent• Reducing Human

Resources Downsizing Layoffs, termination Other approaches

Reclassification Transfers Work Sharing

Internal Methods of Locating Qualified Job Candidates

•Human Resources Information Systems (HRIS)Database systems containing the records and

qualifications of each employee that can be accessed to identify and screen candidates for an internal job opening.

•Job Posting and BiddingPosting vacancy notices and maintaining lists

of employees looking for upgraded positions.

Human Resource Information Systems (HRIS)

•Integrated approach to acquiring, storing, analyzing, and controlling the flow of information about an organizationUseful in nearly all HRM functionsCan increase efficiency and response times of

labor/time intensive human resource activities

HRIS Applications

•Clerical Applications•Applicant information•Basic Employee Records• Job Database•Sub Modules based on functions

Training Turnover Analysis Succession Planning Benefits Management Monitoring functions

Attendance

A Common HRIS