Chapter 3: HUMAN RESOURCE

PLANNING
Introduction
Just as planning for financial, plant, and equipment need is important, so too is
planning for personnel needs. Human resource planning or HRP is an HRM practice
that helps managers in predicting the various HR needs relating to acquiring,
positioning, and utilizing employees. Overall, the aim of HRP is to aid managers in
placing employees where they fit (qualifications-wise), so as to help the company
achieve its goals. further, it estimates the number and type of workers to successfully
implement the overall plan of the organization.

Learning Outcomes
After reading this CHAPTER, YOU MUST be able to:
1. Define human resource planning and its relations to strategic planning;
2. Discuss the step-by-step process of HR planning;
3. Explain the factors that affect HR planning;
4. Show how to forecast HR demand and supply;
5. Differentiate the quantitative and qualitative approaches to forecasting and
cite examples; and
6. Describe how to deal with undersupply of human resource and cite
alternative courses of action to help organization deal with it.

Learning Contents
1.1 HUMAN RESOURCE PLANNING (HRP) AND
STRATEGIC PLANNING
Human Resource Planning is also defined as an HR undertaking that ascertains
the company’s present and subsequent HR needs. It serves as a link between human
resource management and the entire strategic plan of the organization. Strategic
planning is an organization’s process of formulating and implementing its strategies
and assessing on heir effects on internal and external environment of the firm. The
main objective of this relationship is to make sure that Human Resource Management
activities are taken into consideration prior to formulating the corporate plan.

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 Exhibit 3.1 – 1: Activities that serve as the link between human resource
planning and the company’s strategic plan.
Corporate Strategic Plan Human Resource Planning

 Know the purpose of your  Formulate management

existence philosophy
 Specify long-term goals  Create a healthy company
 Define your values and culture
principles  Outline code of conduct
 Opportunities and threats  Demographic trends
 Environmental scanning  Outside supply of labor
 Industry / competitor  Competitor benchmarking
analysis  Personality and competencies
 Strengths and weaknesses  Predict HR availability and
 Forecast demand for suitability
employees  Effectiveness and efficiency
 Resources, people, process,  Productivity improvement
systems programs
 Competitive strategy  External
 Action plan fit/alignment/internal fit
 Strategy alignment  Analyze demand and supply
 Design, structure, and gap
systems among others  Termination and separation
 Allocate resources  Enhancement programs
 Leadership, communication /  Measure effectiveness of
change initiatives
 Assessment of goals  Keeping track of activities
 Alignment of strategies to
goals
 Alignment of strategies to
goals
 Providing feedback

Companies do not take off by themselves. Practically every strategic planning

decision has to take into consideration the people issues related to it. In other words,
once the company has formulated its strategies, top-level management should make a
decision as to the number and type of people who will implement the strategy.
Obviously then, strategic planning and human resources.

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 1.2 THE PROCESS OF HUMAN RESOURCE PLANNING

Figure 3.2 – 1: Step – by – step processes of human resource planning

Organizational mission, Current Organizational mission,

goals, objectives, and manpower goals, objectives, and
strategic requirements inventory strategic requirements

Employee plan Manpower gaps

Decide action

1. Understanding the organizational mission, goals, objectives, and strategic

requirements.
2. Conduct a head count of present employees.
3. Know the future demand of the employees. Conduct a skill inventory each year
to approximately the need for manpower for existing positions. Investigate the
sources of supply of human resources. The sources can come from academic
institutions, and people from other organizations seeking employment.
4. Determine the number of employees you currently have a how many you
actually need. Study the gap between demand and supply.
5. Estimate the possible increase or decrease in human resources. The increase
may come from new hires, contingent workers, transfers, re-instated employees.
Decreases may come from resignation, retirement, study leaves, dismissal, lay-
off, job abandonment, death, and other factors.
6. Decide whether to hire or to downsize. If the number of employee is more than
what is needed, then there is an oversupply of personnel. The action will be to
downsize. If the number of employees is less than what is needed, then there is
an undersupply of manpower. The action will be to recruit additional manpower.

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 1.3 FACTORS AFFECTING HUMAN RESOURCE PLANNING

1. Company’s goals, objectives, and strategies.

2. Time spent for planning HR needs.
3. Uncertainties of business activities.
4. Exactness of forecasting manpower needs.
5. Structural design of the company.
6. Internal and external availability of manpower.
7. Preparation period of positioning talents.
The abovementioned consequences are essential requirements for human
resource planning to be effective; otherwise, plans will become useless and
meaningless.

1.4 FORECASTING: A KEY COMPONENTS TO SUCCESSFUL HUMAN

RESOURCE PLANNING
In the present – day competition, firms do not have the luxury of avoiding
human resource forecasting in they want to improve organizational efficiency.
Forecasting involves predicting the company’s future human resource needs. This
process could be challenging and complex, but definitely vital to the long-term
performance of an organization. Doing this requires a serious study of the strengths
and deficiencies of the HR team so they won’t end up experiencing surpluses or
shortages of people. Managers need to regularly predict their HR needs and the core
competencies of the firm as part of their strategic planning activity. They should focus
on these three major considerations: (a) predicting demand for labor; (b) predicting
supply of labor; and (c) reconciling the gap between demand and supply of
labor. Being deliberately mindful to each will help managers attain their human
resource needs, thus improving organizational effectiveness and increasing
profitability.
(a) Predicting a Firm’s Demand for Employees
Predicting the need for labor has been an essential indicator of a company’s
progress. No matter the size, the company will need to conduct a forecast of its
labor needs.

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 A complete forecast should append recent data, previous experiences, and other
probabilities to be able to come up with a sensible and responsive HR plan.

There are two methods of predicting HR needs: quantitative and qualitative.

Organizational needs will eventually determine which method to use; however,
no matter which method is selected, predicting HR needs should never be
ignored, even by small companies.

Quantitative Approaches – predict method covers the use of numerical

information of mathematical procedures in analyzing data. The most commonly
used approaches are trend analysis, ratio analysis, and regression analysis.

Trend Analysis is based on the concept that what has happened in

the past will give the HR officer an idea what will take place in the
future. Trend analysis ties past employment flows to subsequent
labor needs. Managers chart trends that affect the number of
employees based on certain variables such as sales volume and
employee count during a certain business period.

Table___. Sample Trend Analysis

YEAR 2009 2010 2011 2012 2013
Business
Factor Sales 10,500,000 8,800,000 7,900,000 9,600,000 10,200,200
Volume (Php)
No. of 240 200 165 215 ?
Employees

Ratio Analysis is the process of anticipating future HR demands by

calculating the precise ratio between certain variables. This method
is concerned more accurate than trend analysis.

in determining a student-teacher ratio, let’s assume that a

university has 12,000bstudents and 400 professors; thus, the
student-teacher ratio is computed as 12,000/400 or 30:1. The ratio
indicates that for every 30 students, the institution needs 1
professor. If the university anticipates student enrollment to
increase by 1,500 students next year it would need to hire 50
(1500/30) additional professors (assuming that none of the 500
current professors leave prior to next year).

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 Regression Analysis is identical to both trend and ratio analysis in
such a way that forecasts are based upon the relation between
certain predictors like sales volume and scatter diagram. It then
calculates a regression line which goes through the middle of the
marks on the scatter diagram. Proper interpretation of the
regression line will enable the company to determine the number of
employees needed for each predictor or variable.

Qualitative Approaches. Unlike the quantitative methods that predict the workforce
size through numerical information, qualitative methods predict future HR needs
based on the opinions or gut feel of some selected members of the organization outside
experts or others concerned with the future labor need for the company. This method
is often seen as subjective and judgmental hence, biases are mostly likely to occur.
The Delphi technique is a type of qualitative forecasting method that aims to minimize
biases of forecast by seeking expert opinions and summing up their decisions. This is
done by presenting a certain business scenario to experts. A set of questions will be
asked from these experts and the reasons behind their opinions. The final forecast is
obtained once the panel of experts have converged toward the right decision.
Preferably, companies should use quantitative and qualitative method these two
complement each other and no doubt will result in a more accurate forecast of
manpower needs.

3.5 PREDICTING THE SUPPY OF EMPLOYEES

If the demand projection has been made, the company gets a better picture of
the number and type of positions it will need to execute the work at a specific time.
Decisions will then be finalized on which positions will be filled on a certain future
time. This process is known as supply forecasting.
First, the organization forms a cluster showing the line of positions from which
employees can anticipate growth. The cluster may include job title, functions, and
degree of autonomy. For example, the Marketing group may include job titles such as
Marketing Manager, Advertising Head, and Sales and Promo Officer. The Information
Technology (IT) group may be clustered as Creative and Animation Officer, Software
and Network Engineer, and Web Analytic Engineer.

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 Second, within each work group, state which of the incumbents will stay in
their current positions, how may are listed for possible transfer, promotion, and
retirement. Above all, the organization should also pay attention to possible mergers,
buy-outs, and acquisitions.

OUTCOME OF THE HR PROCESS

Once the HR planning activity is accomplished, the company should set and
carry out HRM practices that will aid the managers in handling the possibility of
occurrence of either an undersupply or oversupply of personnel.

DEALING WITH WORKFORCE OVERSUPPLY

If there are more workers than jobs, the first action is to downsize, which
typically refers to pay-off. However, due to some undesirable effects of lay-offs,
managers may consider option such as:
- Suspending hiring - Reduce pay
- Set limits to overtime - Job sharing
- Avoid contingent workers - Retirement
- Offer career breaks line study leave

DEALING WITH WORFORCE UNDERSUPPLY

An undersupply of personnel indicates that there are more jobs than workers. If
this happens, the first move of the company should be to hire additional employees.
However, the company may consider the following alternatives:
- Encourage overtime - job re-assignment
- Create another work shift - Strengthen retention program

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