MBA - III Semester

H1: HUMAN RESOURCES ACQUISITION AND DEVELOPMENT

(HR Elective)

Module #1: Human Resource Planning

Introduction
Human Resource Planning is the process of anticipating and
carrying out the movement of people into, within, and out of
the organization. Human resources planning is done to achieve
the optimum use of human resources and to have the correct
number and types of employees needed to meet organizational
goals.

Human Resource Planning (HRP) is a forward looking function.

It tries to assess human resource requirements in advance
keeping the production schedules, market fluctuations, demand
forecasts, etc., in the background. The human resource plan is
subject to revision and is tuned to the requirements of the
organisation from time to time.

Thus, it is a double-edged weapon. If used properly, it leads

not only to proper utilisation, but also reduces excessive
labour turnover and high absenteeism, and improves
productivity.

You all must have learned that nothing is as easy as it seems,

especially if it is anything to do with people, remember one
needs to take care of lots of environmental factors- internal
such as individual and team productivity, training and labor
turnover through retirements, resignations, maternity leaves
and so on; as well as external!!

That is why we need to plan in advance even for procuring

human resources, which in contrast to a general myth are not
abundant!! Thus, in the same line, we propose that
organization can achieve its goals effective through effective
contingencies of all the HR functions; for example, the
structure of an organization and the design of the job within
it affect an organization’s ability to achieve only through
the efforts of people. It is essential therefore, those jobs
within the organization be staffed with the personnel who are
qualified to perform them. Meeting these staffing needs
requires effective planning for human resources.
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Definition
Though Human Resource Planning means different things to
different people, general agreement exists on its ultimate
objectives - the most effective use of the scarce talent in
the interests of the labour and the organization.

According to Geisler, “Manpower planning (HRP) is the

process – including forecasting, developing, implementing
and controlling by which a firm ensures that it has the
right number of people and right kind of people, at the
right place, at the right time, doing things for which they
are economically most suitable”.

Decenzo and Robbins have defined HRP as “specifically,

human resource planning is the process by which an
organisation ensures that it has the right number and kind
of people, at the right place, at the right time, capable
of effectively and efficiently completing those tasks that
will help the organisation achieve its overall objectives”.

Leap and Crino have defined HRP as “Human resource planning

includes the estimation 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.”

Vetter says that it is the process by which management

determines how the organization should move from its manpower
position to its desired manpower position to carry out
integrated plan of the organization.

It can also be defined as the task of assessing and

anticipating the skill, knowledge and labor time requirements
of the organization, and initiating action to fulfill or
‘source’ those requirements. Thus, if the organization as a
whole or one of its subsystems is not performing to the
benchmark, in other words, it is declining, it may need to
plan a reduction or redeploy its existing labor force.

From the above definitions the following features of HRP

can be identified.

1. HRP is a process which includes various aspects

through which an organization tries to ensure that
right people, at right place and at right time are
available.

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2. It involves determination of future needs of manpower

in the light of organizational planning and structure.
Determination of manpower needs in advance,
facilitates managements to take up necessary actions.

3. It does take into account the manpower availability at

a future point in the organization. Therefore, it
indicates what actions can be taken to make existing
manpower suitable for future managerial positions and
the how gap between needed and available manpower can
be fulfilled.

Thus, we can summarize that: “HRP is a kind of risk

management. It involves realistically appraising the present
and anticipating the future (as far as possible) in order to
get the right people into right jobs at the right time”.

Objectives
The basic purpose of having a human resource plan is to have
an accurate estimate of the number of employees required, with
matching skill requirements to meet organisational objectives.
It provides the information about the manner in which the
existing personnel are employed, the kind of skills required
for different categories of jobs and human resource
requirements over a period of time in relation to
organisational objectives.

Human Resource Planning is required to meet the following

objectives.

1. Forecast personnel requirements: HR planning is essential

to determine the future manpower needs in an
organisation. In the absence of such plan, it would be
difficult to have the services of right kind of people at
the right time.
2. Cope with Changes: HR Planning is required to cope with
changes in market conditions, technology, products and
government regulations in an effective way. These changes
may often require the services of people with the
requisite technical knowledge and training. In the
absence of an HR plan, we may not be in a position to
enlist their services in time.
3. Using existing manpower productively: By keeping an
inventory of existing personnel in an enterprise by
skill, level, training, educational qualifications, work
experience it will be possible to utilize the existing
resource more usefully in relation to the job
requirements. This also helps in decreasing the wage and
salary costs in the long run.

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4. Promote employees in a systematic manner: HR planning

provides useful information on the basis of which
management decides on the promotion of eligible personnel
in the organisation. In the absence of HR plan, it may be
difficult to ensure regular promotions to competent
people on a justifiable basis.

Importance
Human Resource Planning is a highly important and useful
activity. If uses properly, it offers a number of benefits:

1. Reservoir of Talent: The organisation can have a

reservoir of talent at any point of time. People with
requisite skills are readily available to carryout the
assigned tasks.
2. Prepare people for Future: People can be trained,
motivated and developed in advance and this helps in
meeting future needs for high-quality employee quire
easily. Likewise, human resource shortages can also be me
comfortably, when people quit the organisation for
various reasons, through proper human resource planning.
3. Expand or Contract: If the organisation wants to expand
its scale of operations, it can go ahead easily. Advance
planning ensures a continuous supply of people with
requisite skills who can handle challenging jobs easily.
4. Cut Costs: Planning facilitates the preparation of an
appropriate HR budget for each department or division.
This, in turn, helps in controlling manpower costs by
avoiding shortages/excesses in manpower supply. The
physical facilities such as canteen, quarters, school,
medical help, etc., can also be planned in advance.
5. Succession Planning: HRP as pointed out previously
prepares people for future challenges. The ‘stars’ can be
picked up and kept ready for future promotions whenever
they arise. All multinational companies for example, have
this policy of having ‘hot list’ of promising candidates
prepared in advance e.g., HLL, P&C, Godrej etc., Such
candidates are rolled over various jobs and assessed and
assisted continuously. When the time comes, such people
‘switch hats’ quickly and replace their respective bosses
without any problem.

You must have understood the importance of planning in

general. In designing an environment for the effective
performance of individuals working together in groups, a
manager’s most essential task is to see that everyone
understands the groups’ purposes and objective and its
methods of attaining them.

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Purpose
If group effort is to be effective, people must know what
they are expected to accomplish. This is the purpose of
planning! It is the most basic of the managerial functions.
It bridges the gap from where we are to where we want to
be. It makes it possible for things to happen which would
otherwise not happen.

• Ensures optimum use of manpower and capitalize on the

strength of HR. The organization can have a reservoir of
talent at any point of time. People skills are readily
available to carry out the assigned tasks, if the
information is collected and arranged beforehand.

• Forecast future requirements (this is done by keeping

track of the employee turnover.) and provides control
measures about availability of HR labor time. If, for
example the organization wants to expand its scale of
operations, it can go ahead easily. Advance planning
ensures a continuous supply of people with requisite
skills who can handle challenging jobs easily.

• Help determine recruitment/induction levels. Let me

explain this with an example: you as a manager want to
determine what kind of induction the organization will
require at such and such date. If you have a ready HR
plan, you will have fairly good idea what kind of people
are being recruited and at what position. Thus you can
successfully plan your induction level.

• Know the cost of manpower if there is a new project is

being taken up, example: in cases of expansions or a new
factory, one would naturally requires more human
resources, hence a budgetary allocation can be made in
advance for this upcoming corporate strategic move.
Planning facilitates preparation of an appropriate
manpower budget for each department or division. This, in
turn, helps in controlling manpower costs by avoiding
shortages/excesses in manpower supply.

• Assist in productivity bargaining. For example, if a firm

is going fully automated, it can negotiate for lesser
workers as required for the same amount of the job by
using the manpower predictions regarding the same. It can
offer higher incentives (VRS) to smoothen the process of
voluntary layoffs.

• Help assess accommodation requirements (?? - You must be

wondering how that can be related to HRP? A good HRP can

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assist in solving many problems of the firm, from day to

day ones to very strategic ones, too.) for example: an
organization decides to establish its production center
in a remote area, an accurate HR plan can help it to
decide how many people will be required there, and thus
start the process of establishing a township for them in
advance. The physical facilities such as canteen, school,
medical help, etc., can also be planned in advance.

Various Factors Affecting HR Planning

Human Resource Planning at the enterprise level, to a large
extent is influenced by a number of factors outside the
enterprise. The human resource planner has to take into
account with varying degrees of uncertainty political,
social, economic and technological factors which will have
some influence on the planning process. Some of the factors
are:

1. Government Influence
The central Government also plays a role in stimulating
companies to plan their manpower resources systematically.
The planning commission, the Ministry of Labour, and the
Institute of Applied Manpower Research have made
projections from time to time on manpower demand and supply
for various skill categories, supervisors and managers,
over a given time span. Government departments require
companies to supply data on their manpower for various
purposes, such as data compilations or competence to
execute certain contracts. While providing the data,
companies have had to develop inventories of their
personnel, based on the various skill category
classifications, which have been used for their own
internal manpower planning. The government has also fixed
manpower quota for SC/ST and monitors the same.

2. Social Factors
Sometimes pressure of public opinion (trade unions,
political parties and government) may pressurize to create
more employment and also at times “sons of the soil”
theory.

3. Economic Factors
The vagaries (unpredictable changes) of the business
environment are another important factor. Sudden rise and
fall of demand for a product cannot be easily estimated.
These may be the result of government taxation policies, or

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import restrictions. Sometimes recession and boom also may

necessitate change in HR requirements.

Technological Changes
Change in the method of production and distribution of
products and services and in management techniques can be
called technological changes. The introduction of automatic
controls or mechnaisation of the materials handling process
are examples of technological changes. Changes of this type
may also require a change in the skills of employees, as
well as changes in number of personnel required. Automatic
control drastically reduces and changes the type of skill
needed. For example because of the introduction of
computers, the skills requirements of almost all the jobs
have changed substantially.

Significance
HRP is of primary nature and it precedes all other HRM
functions. Without HRP no other function can be undertaken
in any meaningful way. HRP contributes in the following
ways in managing resources in an organization.

1. Defining Future Personnel need

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

2. Coping with changes

In the Indian and international business arena fast changes
are taking place. 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 premiums 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.

3. 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 as eventuality by
taking proper HRP.

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4. 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.

5. 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 of 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, it approves 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.

HUMAN RESOURCE PLANNING PROCESS

This consists of series of activities as follows:

1. Forecasting
Forecasting of future manpower is an important step. It
could be done in terms of mathematical projection of trends
in the economy and developments in the industry, or of
judgment estimates based upon specific future plans of the
company.

2. Inventory
Inventory of the present manpower resources and the degree
to which these resources are employed optimally should be
assessed.

3. Anticipating problems

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Anticipating manpower problems by projecting present

resources into the future and comparing them with the
forecast of the requirements, adequacy both quantitatively
and qualitatively should be estimated.

4. Planning
Planning for recruitment, selection, training, deployment,
utilization, transfer, promotion, development, motivation
and compensation is to be undertaken for manpower
requirement.

Human Resource Planning

Taking direction from organizational objectives and plans
and above policy consideration human resource plan is
prepared. The planning process consists of two major
activities: forecasting needs of human resources and
forecasting supply of human resources.

Action Plans
Various action plans are devised to bridge the human
resource gap. If there is surplus of human resources either
because of improper HRP in the past or because of change of
organsiational plan, such as disinvestment of business or
closing down some businesses because of various reasons,
action plans may be devised to reduce their size through
layoff, voluntary retirement etc. If there is shortage of
human resources, action plans may be devised to recruit
additional personnel.

Techniques for forecasting Resource Needs

The following techniques are usually used for forecasting
the manpower needs.

1. Managerial Judgement Method

2. Delphi Technique
3. Work-study Technique
4. Ratio-trend Analysis
5. Statistical and Mathematical Models.

Managerial Judgement Method

This is a conventional method of human resources
forecasting method. In this method mangers prepare the
forecast of human resource needs of various categories in
their own departments on their past experiences. This
method can be applied in two alternatives, top-down
approach or bottom-up approach. In top-down approach, top
management prepares human resource plan for the

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organization as a whole with the assistance of HR

department. This plan is circulated among various
departments with an advice to make necessary amendments
whenever required with justification. After receiving the
document from various departments, human resource needs of
various departments are finalized usually in a committee
meeting of department heads.

Delphi Technique
This technique is named after the ancient Greek Oracle at
the city of Delphi where Greek used to pray for information
about the future. In the present world Delphi Technique is
used in group decision making in small groups. The problem
and questions relating to HR requirement and related issues
will be circulated to the expert group. Their suggestions
and replies will be sent to others and if needed queries
made and final decision is taken. This exercise is repeated
until some consensus is reached. Delphi technique is quite
useful where the problem cannot be solved by using
analytical technique but its solution requires subjective
judgements on a collective basis.

Delphi technique can be used for forecasting human resource

needs in two forms. First, it can be used to know the
trends for changing job profile and consequently, the
changing personnel profile across the country or at
international level secondly, this technique can be used to
solicit views of experts in different functional areas of
an organization about the changing profile of personnel in
their respective departments in the light of changing
environment. Such views are collected and summarized by HR
department to arrive at a decision about the types of
personnel needed in future.

Work study Technique

Work study technique is based on the volume operation and
work efficiency of personnel. Volume of operation is
derived from the organizational plan documents and
increase/decrease in operation can be measured. Work
efficiency or productivity is measured by time and motion
study which specifies standard output per unit of time, say
per hour. Thus, the number of operatives required to
complete specified volume of operation is Standard output
per hour x Standard hours per person Planned Output.

However, standard output per hour is not always a constant

factor. Over a period of time it may increase due to

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training and higher technology. In this way required

personnel may worked out.

Ratio – Trend Analysis

Under this method, the main emphasis is on the ratios
between production/sales level and direct operatives;
ratios between direct operatives and other personnel say
supervisory and managerial personnel. These ratios are
worked out for a number of years based on the past records
of the organization and future trends are projected on
these ratios.

Such ratios can be worked out for various categories of

personnel such as ratio of supervisors and middle
management personnel, ratio of middle management personnel
and. higher level management for a comprehensive forecast
of human resource needs.

Forecasting of HR supply
Forecasting of human resource supply is another important
ingredient of HRP.

After forecasting human resource needs, it is only logical

to determine how these needs can be met. For a new
organization all personnel that are needed have to be
procured from outside. But in an existing organisation,
existing personnel are a source for higher positions.
Armstrong has defined “Manpower supply forecasting measures
that number of people likely to be available from within
and outside an organization, after movements and
promotions, wastage and changes in work hours, and other
conditions of work”.

Identification of Human Resource Gap

Human resource gap is the difference between human
resources required at a particular point of time and the
human resources being available at that particular time.
This gap can be identified on the basis of forecasts for
human resources. Based on the analysis of this gap, action
plans must be developed to overcome this gap. In the end it
may result in reducing the personnel or increasing and
recruiting the personnel in different categories.

Short-term Human Resource Planning

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This may arise due to certain immediate vacancies that have

fallen due to sudden increased production and large new
orders necessitating more personnel.

Long – term HR planning

This is based on projections and long term expansion
programmes. There will be sufficient time for deep
contemplation, programming, recruiting and selection. Both
quantitative and qualitative aspects of human resources
could be taken care of in long – term planning and proper
tuning.

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