What is Human Resource Planning? Process, Importance, Factor

  • Post last modified:9 October 2021
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What is Human Resource Planning?

Human Resource Planning is a process that forecasts the company’s future manpower demand by analyzing the current supply and the gaps if any.

The ultimate mission or purpose of Human Resource Planning is to align the future human resources to future organizational strategies and needs so as to maximize the future returns on investment in human resources.

It ensures that an organization is always equipped with the right number and kind of people, at the right place and time. They should be capable of effectively and efficiently accomplish their tasks that are required to achieve the goal of the organization as a whole.

Table of Contents

Human Resource Planning Definition

According to Beach, Human Resource Planning is the process of determining & assuming that the organisation will have an adequate number of qualified persons available at the proper lines, performing jobs which meet the needs of the enterprise & which provide satisfaction for the individuals involved.

According to Stainer, “Human resource planning is the strategy for the acquisition movement & preservation of an organisation’s human resource.”

Coleman defines HRP as, “Human resource planning as the process of determining manpower requirements and arranging the means for meeting those requirements in order to carry out the integrated plan of the organisation”.

According to Geisler, “Manpower planning is the process including forecasting, developing and controlling by which a firm ensures that it has-

  • The right number of people,
  • The right kind of people,
  • At the right places,
  • At the right time,
  • Doing work for which they are economically most useful”.

Nature of Human Resource Planning

The nature of human resource planning can be understood as follows:

  1. Human Resource Planning deals with the manpower needs of an organisation.
  2. HRP helps in discovering the unused talent presently available with the organisation.
  3. HRP tells about the present inventory of manpower of the organisation.
  4. It also projects the future manpower needs of the organisation.
  5. It deals with the procurement, utilization, improvement and preservation of manpower.

Scope of Human Resource Planning

  1. It keeps the record of current manpower with the organization.
  2. Assessing the future requirements of manpower for organization objectives.
  3. To make the manpower recruitment plans.
  4. To phase out the surplus employees.
  5. To make a layout of a training programme for different categories of employees.

Features of Human Resource Planning

These are features of human resource planning:

  1. Well Defined Objectives
  2. Forecasting Future Manpower Requirements
  3. Making an Inventory of Present Manpower Resources
  4. Anticipating Manpower Problems by Projecting Present Resources into the Future
  5. Planning the Necessary Programmes

Well Defined Objectives

Organisational objectives and goals in its strategic planning and operating planning may form the objectives of human resource planning. On the basis of an organisation’s goals, human resource needs are planned.

Forecasting Future Manpower Requirements

In this, we use mathematical projections to project trends in the economic environment and development of the industry.

Making an Inventory of Present Manpower Resources

After making the inventory; assessment has to be done to the extent to which these resources are employed optimally. Procuring competent personnel as per the requirement requires positive recruitment efforts and the development of a variety of recruitment sources.

Anticipating Manpower Problems by Projecting Present Resources into the Future

Then comparing them with the forecast of requirements to determine their adequacy, both quantitatively and qualitatively.

Planning the Necessary Programmes

Proper planning of the requirement, selection, training, development, utilization, transfer, promotion, motivation and compensation should be done in order to ensure that future manpower requirements are properly met.


Requirements of Effective HRP

The following conditions should be fulfilled for the successful development and execution of hr planning:

  1. Clear understanding on the Objective
  2. Communication
  3. Alignment
  4. Top Management Support
  5. Human Resource Information System

Clear understanding on the Objective

HR managers should have a clear understanding on the objectives behind HR planning, they should very well understand its critical impact on other function of human resource management and the goal accomplishment.

Communication

Sustained and regular communication and harmonious relationship between the line managers and HR managers is absolutely essential.

Alignment

HR plans should be aligned properly with the organization’s mission, vision and strategic goals. They should fit into the present and future requirements of the organization.

Top Management Support

Active involvement and proper guidance from the top management is extremely important. Before starting the human resource planning project, the support and commitment of the top management must be ensured.

Human Resource Information System

It is very important for an organization to have a strong HRIS in place while starting the Human Resource Planning process. as planning requires objective and comprehensive data for decision making. It is thus essential for an organization to maintain up-to-date and accurate HR records.

It should maintain computerized human resource information regarding the employees demographics, career progression, appraisals, skills, qualifications, experience, performance and promotion ratings etc.


Objectives of Human Resource Planning

The main objective of Human Resource Planning is to determine its future HR requirements and to plan as to how the existing HR can be utilized optimally. It aims to ensure the best fit between employees and jobs while avoiding manpower shortages and surpluses.

Further, the objectives of Human Resource Planning are discussed below:

  1. To Forecast Future Requirements for HR
  2. Realizing Organizational Goal
  3. Effective Management of Change
  4. Effective Utilization of Human Resources
  5. Promoting Employees

To Forecast Future Requirements for HR

HR Planning is essential to project the future manpower needs of an organization. If HR planning is not done effectively it can lead to overstaffing or understaffing.

Realizing Organizational Goal

The basic aim of HR planning is to have an accurate and optimum number of employees at any given point in time. They should have the skills required to accomplish each job to meet the organizational objectives.

Effective Management of Change

An organization faces constant internal and external changes e.g mergers, acquisitions, govt regulations, technology etc. These changes are to be proactively assessed from time to time so that HR plan would fit in with the strategic business objectives.

HR planning should ensure that even during such times of changes the organization should not suffer due to non-availability of qualified people.

Effective Utilization of Human Resources

HR assesses the current human resources capacity based on their competencies, skills, training, qualification etc. against the capacity needed to achieve the organizational goal.

Keeping the inventory of the existing personnel helps utilize the existing resources more effectively in relation to the job requirement. HR strategies, plans and programs are then designed, developed and implemented to close the gaps.

Promoting Employees

HR planning is required to maintain data and assess the performance of each employee. A promotion is viewed as desirable by employees as it is a form of recognition for those who make significant and effective work contribution.

HR plan continuously works on ensuring regular promotions to competent people on a justifiable basis.


Factors Affecting Human Resource Planning

Human resource planning can be very clearly defined as the process of identifying the number of people required by an organisation in terms of quantity and quality. The various factors affecting HRP are as follows:

  1. Employment
  2. Technical Changes in Society
  3. Organisational Changes
  4. Demographic Changes
  5. Shortage of Skill due to Labour Turnover
  6. Multicultural Workforce

Employment

The employment situation of any country affects HRP in different ways, i.e. in countries where there is greater unemployment; there may be more pressure on the organisation, from the government to appoint more people. Similarly, there are some organisation’s may force a shortage of skilled labour and they may have to appoint people from other countries.

Technical Changes in Society

Technology changes at a very fast pace and new people having the required knowledge are required for the organisation. In some cases, the organisation may retain existing employees and train them the new technology but in some cases, the organisations have to remove existing people and appoint new.

Organisational Changes

Changes take place within the organisation from time to time i.e. the company diversify into new products or close down business in some areas etc. In all such cases, the HRP process of appointing or removing people will change according to the situation.

Demographic Changes

Demographic changes refer to things referring to age, population, the composition of workforce etc. From every organisation, a number of people retire every year. A new batch of graduates with specialization turns out every year and this will affect the existing workforce.

Shortage of Skill due to Labour Turnover

The accuracy in human resource planning may reduce the cases of high labour turnover rate but if some error is there in the process, it will affect the organisation badly.

Multicultural Workforce

Workers from different countries and different cultural background travel to other countries in search of a job. It is very important for organisations to consider all these things when they are planning about human resources.


Human Resource Planning Process

Human Resource Planning is a process whereby organizations forecast the future personnel needs required to meet business and customer demands.

Human Resource Planning Process usually consists of the following steps:

  1. Forecasting Manpower Need
  2. Assessing Current Manpower Inventory
  3. Identifying Manpower Gap
  4. Formulating Manpower Plan

Forecasting Manpower Need

HR Planning ensures that a predetermined number of people with correct qualification and skill sets are available for the future. This needs to be done to guarantee the availability of the human resources needed by an organization to meet its strategic business objectives.

The basis of forecasting is that the annual budgets and long term projections are divided into activity levels for each function and department. This further helps in determining the quality and quantity of personnel required to perform those activities effectively.

Assessing Current Manpower Inventory

The next step in HR Planning is to estimate the quantity and quality of employees available within the organization to fill the positions. In case of internal labour supply the HRIS (human resource information system) is referred to, HRIS uses computers for collecting, storing, maintaining and updating data from time to time of its employees.

In order to foresee and estimate the absenteeism, turnover and attrition rate historical trends are recorded and examined. This gives an idea of an approximate time period when the important positions might fall vacant and the number of employees who will be present in the various positions within the organization at any given point in time.

Identifying Manpower Gap

Once the number and type of employees needed are determined and the supply of manpower is estimated, a reconciliation of the two will determine the quantitative and qualitative gaps in the organization.

It will throw a light on the number of people to be recruited or make the organization aware whether there has been overstaffing. This forms the foundation of preparing an HR plan.

Formulating Manpower Plan

Once the human resource requirements and necessary changes to be applied are identified, they need to be translated into a concrete HR plan supported by policies, programs, strategies etc. Below are some of the plans and strategies implemented to achieve the goals:

  1. Recruitment and selection plan: Recruitment and selection is the process of hiring the right number and type of people at the right place and at the right time. To do this there are plans charted out to recruit the right people. After recruitment, the selection process is also professionally designed.

  2. Redeployment and training: To keep the employees abreast with the changing technology or product lines they should be imparted new skills.

  3. Alternatives to Hiring: There are other alternatives that can be undertaken as an alternative to hiring additional employees for e.g encouraging employees nearing retirement to extend their years of service by rewarding late retirements, rehire, launching overtime schemes by paying a higher commission for overtime etc.

  4. Retention Plans: Various retention plans are implemented to avoid attrition in an organization. Organizations might increase the wages, provide better career opportunities, improve the working conditions, avoid hiring unstable recruits etc.

  5. Downsizing Plan: Organizations resort to downsizing plans when the supply of manpower exceeds the demand and there is a surplus in the staff. In such a case staff is underutilized and there is a need for trimming the labour force. Example: voluntary retirement schemes to the employees, laying off the redundant staff etc.

Barriers to Human Resource Planning

Planners face significant barriers while formulating an HRP. The major ones are the following:

  1. People always question the importance of making HR practices future-oriented. For this, the role assigned to HR practitioners in the formulation of organisational strategies.

    Their argument is simple; there are people when needed. The organisation offer an attractive package of benefits to them to quit when you find them in surplus.


  2. HR practitioners are perceived as experts in handling personnel matter i.e. complete planning of human resources but are not experts in managing a business.

    The personnel plan conceived and formulated by the HR practitioners when involved with the organisational plan might make the overall strategic plan itself defective.


  3. HR information provided often is incompatible with the information used in strategy formulation. The strategic planning efforts have long been oriented towards financial forecasting often to the exclusion of other types of information.


  4. There are high chances of conflict may exist between short-term and long-term HR needs say for example, there arises a conflict between the pressure to get work done on time and long-term needs, such as preparing people for assuming greater responsibilities.


  5. There is a conflict between a quantitative and qualitative approach to HRP because some people view HRP as a number game designed to track the flow of people across the departments. These people will follow a strictly quantitative approach to planning.

    Others take a qualitative approach and focus on individual employee concerns such as promotability and career development aspects but best results would accrue if there is a balance between the quantitative and qualitative approaches.


  6. Non-involvement of operating managers renders HRP ineffective and it is not strictly an HR department function. Successful planning needs a co-coordinated effort on the part of operating managers and HR personnel.

Human Resource Demand Forecasting Techniques

In order to assess the number of employees required at any given time in future, organizations apply various manpower demand forecasting techniques. The basis of the forecast is the annual budget and long term corporate plans, which is then converted into the man-hours required to achieve them and finally the number of employees required to complete those man-hours.

Forecasting techniques vary from organization to organization. An organization may follow more than one technique which can be simple or complex, the most commonly used techniques are discussed below.

  1. Managerial Judgment
  2. Ratio-Trend Analysis
  3. Regression Analysis
  4. Work- Study Technique
  5. Delphi Technique

Managerial Judgment

In this forecasting method the experience and judgment of the managers is used to forecast the demand for labour. It can be bottom-up forecasting in which the line managers submit their manpower proposal to top managers who analyze the same and ultimately forecast the human resource requirement for the overall organization on the basis of proposals of the departmental needs.

The other approach is the top down forecasting method. In this approach the top managers meet and discuss the current business scenario, the future challenges expected and how these trends would impact the business and forecasts the human resource requirements for the entire organization and various departments.

This information is supplied to various departmental heads for their review and approval. A participative approach is the most preferred approach in which management and departmental heads meet and unanimously decide about the future human resource requirements.

Ratio-Trend Analysis

Under this forecasting technique, the demand for human resources/manpower is estimated on the basis of ration of production level and the number of employees required to achieve that production level in the past. While doing so the provisions are made for any possible changes expected in the processes, product line, structure of the organization. A simple example given below

Estimated production for next year = 140000 units

Ratio as per analysis – 1:200 (1 employee produced 200 units in the past in a span of one year)

Estimated number of workers needed on the basis of ratio trend of 1:200 = 700 workers

Regression Analysis

Similar to ratio-trend analysis this model is also based on the relationship between a dependent variable (sales volume) and the independent variable (employee size). However, this model is based on mathematical and statistical techniques for estimating future demand.

A regression line is drawn in a diagram which depicts the relationship between the dependent variable to be predicted (e.g manpower/human resources) and the independent variable (e.g sales, total production, workload etc)

Work- Study Technique

This technique is also known as workload analysis. This technique is used where the workload is easily measurable. The company first considers the production budget prepared in terms of volumes of the saleable product. The budgeted volumes are then translated into the number of man-hours required to produce per unit.

Thus demand of human resources is forecasted on the basis of estimated total production and contribution of each employee in producing each unit items. Allowances will have to be made for absenteeism, labour turnover and idle time.

Let us assume that the estimated production of an organization is 300000 units. The average man-hrs required to produce each unit is 2 hrs. The past experience shows that the workability of each employee in man hrs is 1500 hrs per annum. The workload and demand of human resources can be calculated as below :

  • Budgeted total annual production= 300000 units
  • Average man hrs needed to produce each unit= 2hrs
  • Calculated man hrs needed to meet Budgeted production= 300000*2 = 600000 hrs
  • Man hrs that can be invested by each employee per year= 1500 hr
  • Approximate numbers of workers needed = 600000/1500= 400

Delphi Technique

Delphi technique is also a very important technique used for estimating demand for human resources. It takes into consideration the human resources requirements given by a group of experts i.e managers.

A small group or panel of ten or fewer experts is identified. Each expert is asked to give their individual judgments on the issue, they are asked to provide answers to a structured questionnaire or even interviewed. After which the human resource planning expert acts as an intermediary, collects all the responses, summarizes them and send the report back to the experts.

This process is continued until all the experts agree on estimated human resource requirements. In the entire process there is no interaction between the experts, they do not meet face to face but exchange notes through anonymous questionnaires.


Importance of HRP

  1. Defining Future Personnel Need
  2. Coping with Changes
  3. Providing Base for Developing Talents
  4. High Cost of Investment in HR
  5. Creating Involvement of Top Management in HRM
  6. HRP and Responsibilities Involved

Defining Future Personnel Need

Planning defines future personnel need and this becomes basis of recruiting and developing personnel. In its absence there is a likelihood of a mismatch between personnel needed and personnel available.

Coping with Changes

In the Indian and international business arena fast changes are taking place. The liberalization of economy has brought vast changes in India. At the international level there is growing global competition. Every organization is trying to compete on the basis of technology and managerial talents. In this war only those companies will survive which adopt a formal, meticulous HRP.

Change in technology has attached more premium to knowledge and skills resulting into surplus manpower in some areas and shortage in other areas. HRP helps in creating a balance in such a situation because manpower needs and availability could be identified much in advance.

Providing Base for Developing Talents

Jobs are becoming more and more knowledge-oriented. This has resulted into changed profile of manpower. Therefore an organization must be ready to face such an eventuality by taking proper HRP.

High Cost of Investment in HR

The cost of acquiring, developing and retaining personnel is increasing much faster than the average rate of inflation. This increasing cost may be taken care of by proper HRP which provides the way for effective utilization of such talents. In fact, such a high cost has forced many companies to have a relook at their HRM functions and particularly HRP and to align these with new situations.

Creating Involvement of Top Management in HRM

Systematic HRP forces top management of an organization to participate actively in total HRM functions, an area that has been neglected by most the companies until recently.

HRP and Responsibilities Involved

Formulation of human resource plans is a shared task between top management, line managers and HR department. Top management is involved in HRP process because ultimately, only it approves the various plans to the organisation as a whole.

According to Udai Pareek, “It is the top management responsibility to project shared vision and strategic plans of the organization into long-term vision and short-term goals. The projected vision and plans are then translated into human resource requirements for their respective departments by the managers. Detailed analysis of required competencies in terms of levels and numbers are developed by personnel department.


Barriers to HRP

Planners face significant barriers while formulating an HRP. The major ones are the following:

  1. People always question the importance of making HR practices future oriented. For this, the role assigned to HR practitioners in formulation of organisational strategies. Their argument is simple; there are people when needed. The organisation offer attractive package of benefits to them to quit when you find them in surplus.

  2. HR practitioners are perceived as experts in handling personnel matter i.e. complete planning of human resources, but are not experts in managing business. The personnel plan conceived and formulated by the HR practitioners when involved with organisational plan, might make the overall strategic plan itself defective.

  3. HR information provided often is incompatible with the information used in strategy formulation. The strategic planning efforts have long been oriented towards financial forecasting often to the exclusion of other types of information.

  4. There are high chances of conflict may exist between short-term and long-term HR needs say for example, there arises a conflict between the pressure to get work done on time and long-term needs, such as preparing people for assuming greater responsibilities.

    Many managers are of the belief when they pursue the whole process that HR needs can be met immediately because skills are available on the market as long as wages and salaries are competitive. These managers fail to recognize that by resorting to hiring or promoting depending on short-term needs alone, long-term issues are neglected and the purpose will not be solved.

  5. There is conflict between quantitative and qualitative approach to HRP because some people view HRP as a number game designed to track the flow of people across the departments. These people will follow a strictly quantitative approach to planning. Others take a qualitative approach and focus on individual employee concerns such as promotabilty and career development aspects but best results would accrue if there is a balance between the quantitative and qualitative approaches.

  6. Non-involvement of operating managers renders HRP ineffective and it is not strictly an HR department function. Successful planning needs a co-coordinated effort on the part of operating managers and HR personnel.

Summary

Human Resource Planning is a process that forecasts the company’s future manpower demand by analyzing the current supply and the gaps if any.


The process of human resource planning starts with forecasting manpower needs, assessing the current manpower supply, identifying the gap between the two and then formulating and implementing the plans to fill the gap.


Reference

  1. Walker J.W. (1992) Human Resource Planning, 1990s Style. In: Schweiger D.M., Papenfuß K. (eds) Human Resource Planning. Gabler Verlag

  2. P.Reilly, “Human Resource Planning”, The Institute of Employment Studies, London 1997

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