18 Human Resource Management

Unit II : Human Resource Planning

Notes
Structure:
2.1 Introduction
2.2 Need for HR Planning
2.3 Forms of HR Planning
2.4 Techniques of Forecasting
2.5 Process of HR Planning
2.6 Factors in HR Planning
2.7 Linkage of HR Plan to Corporate Plan
2.8 Summary
2.9 Check Your Progress Questions
2.10 Further Reading

Objectives:
After reading this unit, you should be able to:
 Understand the need of Human Resource Planning
 Understand the forms of Human Resource Planning
 Know the techniques of Human Resource Forecasting
 Understand the process of Human Resource Planning
 Understand the bases of Human Resource Planning
 Know the factors of Human Resource Planning
 Understand the linkage of Human Resource Planning to Corporate Planning

2.1 Introduction
Since an organisation’s performance and resulting productivity are directly proportional to
the quality of its human resources, there must be a mechanism in the organisation whereby
the right type of people in right number could be made available as and when the necessity
arises. That is why recruitment is preceded by human resource planning, i.e., determining the
kind of personnel desired, as well as specifying the number of personnel required for each job
at different times.

Human resource planning is the process, including forecasting, developing and

controlling, by which a firm ensures that it has the right number of people and the
right kind of people at the right places at the right time doing things for which they
are economically most useful. According to Terry L.Leap and Micheal D. Crino, “ HR
Planning includes estimation of how many qualified people are necessary to carry out
the assigned activities, how many people will be available and what, if anything, must
be done to ensure that personnel supply equals personnel demand at the appropriate
point in the future.

2.2 Need For Human Resource Planning

Human Resource Planning is essential for every organisation because:
 It helps in detailing the number and kind of personnel required for carrying out
the operations or rendering services or conducting business in an organisation.
 It spells out the qualifications, skills, expertise, knowledge, experience, physical
abilities, occupation groups, etc., of personnel required in an organisation.
 It gives adequate lead time for recruitment, selection, training and development
Amity Directorate of Distance & Online Education
Human Resource Management 19
of personnel, because HR planning anticipates the need for various types of
skill requirement and levels of personnel, well in advance. Notes
 It can be instrumental in reducing the cost of production, as, through it, the
labour can be effectively controlled and utilised.
 It is necessary because there is a constant need for replacing people who
retire, die, resign or get physically incapable for reporting for duty, or are
promoted or dismissed from service.
 It helps in meeting the fresh demands of personnel caused due to business
growth or expansion of the organisation.

2.3 Forms of HR Planning

HR planning can be of two types:
i) Short-term
This mainly aims at two things, viz., (1) matching employees to their present
jobs, and (2) filling unexpected vacancies from amongst the existing
employees, in a short period.
ii) Long-term
Though long-term HR planning can be of any long duration, five-year period
appears to be more reasonable. However, this five-year HR plan should be a
rolling plan. In other words, every year a five-year HR plan should be made.
Only in this way, the plan can be kept realistic and functioning.
In the long-term HR planning, we may include three types of programmes: (1)
Forecasting manpower requirement, (2) Matching people with requirements,
and (3) Planning individual development.

2.4 Techniques of Forecasting HR Demand

There are two basic techniques of forecasting HR demand, quantitative and qualitative.
In their work, ‘Strategic Human Resources Planning and Management’, W.J. Rothwell and
H.C. Kazanas, have mentioned the following quantitative and qualitative methods of HR
forecasting:

Methods of HR Forecasting
i) Quantitative Methods of Forecasting HR Demand
Methods Description
Moving Averages data about HR
average demand from recent periods
and projects these into the
future.
Exponential Forecasters can vary weights
smoothing for HR demand assigned to
different past time periods
used to project future HR
demand.
Trends Numbers of people hired of
projections requested demand placed on
one axis; time, on the other.
A straight line is plotted from
past to future to predict HR
demand.
Advantage Disadvantage
Simplicity Data easily Seasonal or cyclical
available. patterns may be
ignored. Relies on
past data.
May be used to take into Mathematical
account factors ignored complexity. Choice
by the moving average of weights may be
method (for example, arbitrary.
cyclical patterns).
Easily explained to Rough estimates.
managers. Easily Relies on past data.
prepared by HR
planners.

Amity Directorate of Distance & Online Education

20
Regression Mathematical formula used
Notes to relate staffing to several
variables (for example,
output, product mix, per
capita productivity).
Linear progra Assesses required staffing
mming level that matches the
desired output levels, subject
to certain constraints (for
example, budget, cost).
Actuarial Relates turnover to such
models factors as age and seniority.
simulations
Simulations Uses scenarios to test the
effect of various personnel
policies.
Probability Defines “ state” in the
matrixes organisation-such as strategy patterns. Helps perform
levels, performance ratings. turnover analysis.
Identifies time period.
First-order Multiply number of people
Markov in each job category
model by the probability of
movement between job/
position categories. Model
assumes that current job/
position category is the chief
determinant of movement.
Semi-Markov Same as the first-order
model Markov model except that
probability of movement
is determined by (1) job/
position category and (2) the
individual’s length of stay in
the job class.
ii) Qualitative Methods of forecasting HR Demand or Supply
Methods Description
Delphi A group of experts
technique exchanges several rounds
of estimates of HR demand
or supply, normally without
meeting face to face.
Feedback from other experts
is used by each individual
to fine-tune his or her
independent estimate.
Nominal A small group of experts
group meets face to face.
technique. After a procedure that
involves open discussion
and private assessments, the
group reaches a judgment
concerning future HR
demand or supply.
Amity Directorate of Distance & Online Education
Human Resource Management
Can include many Mathematical
variables. Efficient use of complexity. Requires
all available data. large sample sizes.
Relies on past data.
Assesses what should Managers are
be in the future, not what sceptical of highly
probably will be. sophisticated
methodology.
Numerous
assumptions must
be made.
Reflects the past trends. May not be accurate
in individual cases.
Useful for considering Accuracy varies.
alternative HR
programmes.
Helps identify career • Requires some
mathematical
sophistication.
• Accuracy varies.
Adequate for considering • Not adequate
alternative effects of for long-term
various HR strategies. forecasts.
• Requires
mathematical
sophistication
More inclusive than the • Not very useful
first-order Markov model. for considering
alternative effects
of various HR
strategies.
• Requires
mathematical
sophistication.
Advantage Disadvantage
Can involve key decision Highly subjective.
makers in the process. Judgments may
Can focus on what is not efficiently use
expected or desired in objective data.
future.
Not bound to the past.
Same as for Delphi Same as for Delphi
technique. Group technique. Group
discussions can facilitate pressure may lead
exchange of ideas and to less accurate
greater acceptance of assessments that
results by participants. could be obtained
through other
means.
Human Resource Management 21

2.5 Process of Human Resource Planning Notes

Human resource planning process is a very complex and multi-step process and
embraces within its folds the following:

Identifing Objectives

Assessing Business Plan

Forecasting future manpower requirements

Manpower audit

Job Analysis

Developing HR Plan

(Fig. 2.2: Process of Human Resource Planning)

(i) Objectives of the HR planning:

Some of the most common objectives of a human resource plan are as follows:
 Making correct estimates of manpower requirements
 Making a sound recruitment and selection policy
 Making sound training and development policy
 Managing the human resource, according to the requirement of the
organisation.
 Maintaining production level
 Maintaining good human and industrial relations
 Getting information about the matter in which existing human resources are
deployed
 Making proper and effective use of the existing human resources.
ii) Business Plan
Having determined the objectives of the organisation, the next important step in
the process of HR planning is to prepare the business plan, i.e., to arrive at the scale
of business activity over a period of time to facilitate estimation of the structure and
size of the organisation from time to time. This is to be done, keeping in view all the
factors of the internal and external environment.

iii) Forecasting future human resource requirements

A lot of forecasting techniques, many of which are highly mathematical, statistical
and sophisticated, have been developed. For the forecast to be useful, the future
human resource estimates should be made as follows:
 The functional category

Amity Directorate of Distance & Online Education

22 Human Resource Management

 The number required

Notes  The levels at which they are required

Experience has revealed that it is always better, if it is feasible, to procure the

desired human resource from within the organisation, even if it involves some
expenditure on the training and development of personnel. It creates a sense of
belongingness towards the organisation among the workers, and promotional
opportunities serve the purpose of potential incentives and make the personnel
feel involved in the affairs of the organisation. Internal promotions are specially
recommended for jobs at the higher level, involving greater responsibilities.
However, in case of jobs at the lower level, we can tap external sources. Therefore,
a thorough knowledge of and close liaison with the labour market is necessary on
the part of HR manager, because labour market is usually unorganised and highly
unstructured, mostly dealing in illiterate, immobile and ignorant workers, varied rate
of wages for the same job, and various methods of recruitment of labour and so on.

iv ) HR Audit
Having determined the HR needs of the organisation over a period of time,
the next step in the process of HR planning is to audit the existing HR in the
organisation. The primary objective of auditing the existing HR is to know what
exists in the stock and what is needed to be added to that stock, i.e., it gives an
indication of the gap that needs to be filled through external sources. For this, it is
very essential that Human Resource Information System, which is one of the most
important ingredients of the Human Resource Planning process, should be very
effective so that every scrap of information about the HR could be gathered. For this
purpose, we can prepare ‘skill inventory’ or ‘organisation charts’.

From the information thus collected, we should prepare a ‘manning table’, clearly
indicating:
(i) the number of the employees in each category in the organisation, and
(ii) each employee’s information card or a ‘personal inventory’ classifying
personnel into different groups and also relevant information about each
individual worker which can be computerised and necessary results, specially
fitness for promotion, obtained to be utilised at the appropriate time.

v) Job Analysis
Once HR auditing is done and a list of future vacancies over a period of time is
prepared, it is essential to prepare a job analysis. This analysis provides information
about the nature of the job (job description) and the characteristics and qualifications
that are desirable in the job holder (job specification).

vi) Developing a Human Resource Plan

After having done job analysis, the next step in the process of human resource
planning is to work out a plan identifying the sources of human resource supply so that
these can be tapped, as and when required. These sources may comprise:
i) Internal sources, and
ii) External sources.

Bases of HR planning
The future requirements of human resource depend upon a number of factors. The
forecast of HRs depends upon the following:
i) The economic forecast
ii) Sales forecast
iii) Expansion programmes, and
Amity Directorate of Distance & Online Education
Human Resource Management 23
iv) The employee market forecast.
Notes
2.6 Factors in Human Resource Planning
The following are the main factors involved in human resource planning:

A) Workforce analysis: The job and manpower requirements must be quantified,

as well as described. The effectiveness of human resource planning can be increased
by forecasting HR requirements of different categories of personnel. For this, the
following are necessary:
i) Economic forecasts,
ii) Production estimates,
iii) Expansion programmes,
iv) Work standards,
v) Existing HR inventory,
vi) Labour turnover rate,
vii) Retirement and resignations, and
viii) Changes in management.
B) Work-load analysis: Workload analysis is a technical aspect of human
resource planning. It involves:
i) Demand analysis,
ii) Establishing work standards, and
iii) Nature and composition of existing workforce.

Thus, you will find that if human resource planning is done properly and effectively, it
will prove instrumental in the accomplishment of organisational goals.

2.7 Linkage of Human Resource Plan To The Corporate Plan

In creating a human resource plan, it has to be ensured that it is an integral part of
the corporate plan. It has to mesh with plans in other functional areas. The relationship
of human resource plan with the corporate plan can be exhibited as follows:
Corporate Plan

Finance Plan Human Resource Plan Production Plan Marketing Plan

Forecasting Recruitment Training

Whom When How

(Fig. 2.3: Linkage of HR Plan to Corporate Plan)

Thus, HR Planning should be unified, comprehensive and an integral part of the

total corporate plan. HR manager provides inputs, like internal HR competencies, HR
competency constraints, environmental constraints, etc., to the corporate strategists. In
turn, corporate strategists communicate their needs and constraints to the HR manager.
The corporate strategic plan, thus, incorporates both the HR plan and other functional
plans.
Amity Directorate of Distance & Online Education
24 Human Resource Management

Notes 2.8 Summary

Having pointed out that HRP is a process of forecasting, developing and
controlling by which a firm ensures that it has the right number of people and the
right kind of people at the right places at the right time and doing things to which they
are economically most useful, its need and forms have been explained. Both the
quantitative techniques (like moving average, exponential smoothing, trend projections,
regression, linear programming, actuarial models simulations, simulations, Probability
matrixes, First-order Markov model, Semi-Markov model) and the qualitative techniques
(like Delphi technique, normal group technique) of HR forecasting have been discussed
in brief. Thereafter, the process of HRP, which comprises several stages like objectives
of HRP, business plan, forecasting future manpower requirements, HR audit, job
analysis, and developing a HR Plan, has been discussed in detail. The bases of HRP
and also the factors in HRP, viz; work force analysis and work load analysis, have also
been explained, followed by the discussion on linkage of HR Plan to the corporate plan.

2.9 Check Your Progress

 Why should an organisation go for HR Planning? Also explain, in brief, forms of HR
planning.
 Identify and discuss the techniques of forecasting the requirement of human
resources in an organisation.
 Explain, in detail, the process of HR planning.
 What are the factors involved in HR planning? Discuss in detail.

2.10 Short Answer Questions

1. Define HR planning.
2. What are the forms of planning?
3. Should the HR plan have linkage with the corporate plan?
4. What are the two main categories of forecasting HR demand?
5. What is the main objective of HR audit?

2.11 Long Answer Questions

1. Identify and discuss the stages involved in the process of HR planning.

2. “HR planning is a must for the survival and growth of an organisation.” Discuss, in
detail, the quantitative methods of forecasting HR demand

2.12 Further Reading

 Armstrong, M., 2004, Human Resource Management Practice, Kogan Page India,
New Delhi.
 Dessler, G,1988, Human Resource Management, Prentice-Hall of India Private Ltd.,
New Delhi.
 Aswathappa, K., 2008, Human Resource Management, Tata Mc Graw-Hill, New
Delhi.
 Cascio, W.F., 2006 Managing Human Resources, Tata Mc Graw-Hill Pub. Co. Ltd.,
New Delhi.
 Sharma, D.C. and Sharma R.C., 1988, Personnel Management and Industrial
Relations, S.J. Publications, Meerut.

Amity Directorate of Distance & Online Education