Chapter 2: Strategic Human

Resource Planning
Learning Outcome:
1. Discuss the role of the human resource in
strategic planning;
2. Explain the two important components in
human resource planning;
3. Discuss the different kinds of planning
techniques in human resource management.

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 Human Resource Planning (HRP)
• The process of systematically reviewing
human resource requirements to ensure that
the number of employees matches the
required skills. It is the process of matching
the internal and external supplies of people
with job openings anticipated in the
organization over a specific period of time.

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 Strategic Planning
• The determination of the overall organizational purpose and
goals and how they are to be achieved.

• Human resource is the integral component of a strategic plan,

which greatly affects productivity and organizational
performance.

• After the strategic plans have been formulated, human resource

strategic planning is to be undertaken. Along this lines, strategies
are reduced to specific quantitative and qualitative human
resource plans. The HRD shall determine the total manpower
component to execute the planned strategic activities.
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 Two Important Components of
HRP
• 1. Requirement
• Forecasting human requirement involves
determining the number and types of employees
needed. The level of skills has to be determined
and matched with the plan operations.
• The analysis will reflect various factors such as
production plans, and changes in productivity
together with the introduction of new
technology if there is any.
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• The HRD, in order to forecast availability must look to
both internal and external sources.

• Internal sources – refer to existing manpower that

could be re-assigned to new positions or be promoted
to higher vacant positions.

• External source – refers to positions that is not

available inside the organization and need to be
sourced out.
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• 2. Availability
• When employee requirements have been analyzed, the
firm determines whether there is a surplus or shortage
of manpower.

• If there is a surplus, ways must be instituted to reduce

the number of employees.
• Some of these methods include restricted hiring,
reduced work hours, early retirement for old
employees, and the worst is to layoff some employees.
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• If the manpower forecast reveals shortage, the
HRD must obtain the proper quantity and
quality of workers outside the organization after
exhausting efforts to find from within.

• Human resource planning must be continuous,

as changing conditions could affect the entire
organization thereby requiring extensive
modifications of forecasts.
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 Aspects of HRP
• 1. Systematic Forecasting of Manpower Needs
• On the basis of business conditions and forecasts,
manpower needs are planned and monitored
closely.

• 2. Performance Management
• Analyzing, improving and monitoring the
performance of each employee and of the
organization as a whole.
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• 3. Career Management
• Determining, planning and monitoring the career
aspirations of each individual in the organization
and developing them for improved productivity.

• 4. Management Development
• Assessing and determining the developmental
needs of managers for future succession
requirements.
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 Advantages in Using the Elements of HR
Planning
• 1. Through a systematic planning of human
resources, a company can be better assisted in
attaining its goals and objectives.

• 2. It helps the company determine its

manpower needs and provides a method of
meeting them.

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• 3. It can be an effective means of planning the
development and growth of the employees.

• 4. It can assist in placing the employees properly

in jobs where they can maximize the use of their
skills and potentials.

• 5. It can assist the company to attract and retain

better qualified employees.
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Five Steps to Human Resource Planning
• 1. Determining the workload inputs based on the corporate
goals and objectives.

• Once the company’s objectives are known, the operating

executives can determine what they are responsible for in
the common endeavor of attaining the corporate goals.

• The kind and magnitude of workload determine the

organizational structure, the number and quality (skills) of
employees needed to man the organization or department
under a desirable level of performance

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 Several factors that should be
considered in determining work inputs:
• Business Development and Assumptions
• Corporate Planning
• Economic Forecasts
• Changes in Plans and Products
• New Product Lines
• Mergers and Consolidations

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• 2. Studying the jobs in the company and writing the job
description and job specifications.

• 3. Forecasting of manpower needs

• Determination of the number and skills of people
required for the work.
• Forecasting manpower needs comes next after
determining the work input, and is known as the
planned and logical method of determining, both
quantitatively and qualitatively, the employees needed
to man the work inputs to enable the company to
attain its goals.
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• 4. Inventory of Manpower
• An analysis of the present manpower complement
of the company to determine whether it has
enough or less or more personnel (both
quantitatively and qualitatively) than required.

• This fourth step in the planning process is the

inventory (audit) of available current manpower.

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• What happens in this step is the assessment of the skills,
career aspirations, strengths and weaknesses of each of
the current employees, their potentials and promotability.

• Each is matched against the positions forecasted in step 3.

When the current manpower is matched against forecast
of needs, positions are filled either by promotion, transfer
or assignment of qualified personnel, taking into account
the most effective method of achieving the corporate
goals.

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 The net result of this operation is that you
either find:
• Enough manpower
• Excess in the number of available manpower,
but lacking the skills required
• The number of available manpower is
insufficient, and the skills are also inadequate
to meet the needs of the work inputs.

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• 5. Improvement Plans
• Determination of the appropriate steps to implement
the HRP in order to insure that the company has the
right number and right quality of people, properly
assigned to jobs for which they are most useful.

• This includes action plans to improve the capabilities

of current personnel thru training and development.

• This plan can be part and parcel of the total

development program which covers career planning,
management development programs, succession
programs, etc.
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Planning Techniques in HR Management
• 1. Skills Inventory

• This approach involves the listing of all the skills

possessed by the workforce and they are made to
related to the requirements of the organization.

• This technique requires detailed information of

the experience and training of every individual in
the organization.
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• 2. Ratio Analysis

• This is a technique wherein the personnel who are

promotable to the higher positions are identified
together with their backup or understudy.

• There should be a ratio that will ensure that promotions

will not create any void. To accomplish this, recruitment
must support the backup requirements. At the same
time, training must be done to develop the backup ratio.

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• 3. Cascade Approach

• Under this approach the setting of objectives flows

from the top to bottom in the organization so that
everyone gets a chance to make his contribution.

• This approach results in the formulation of a plan

wherein the objectives of the rank and file get included
in the blueprint for action. The plan is then a
participatory planning output.
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• 4. Replacement Approach

• Under this approach, HRP is done to have a

body of manpower in the organization that is
ready to take over existing jobs on a one-to-
one basis within the organization. This
approach calls for year-round acceptance of
applications for possible replacements.

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• 5. Commitment Planning Approach

• This technique involves the supervisors and personnel

in every component of the organization on the
identification of needs in terms, skills, replacements,
policy, working conditions and promotion so that
human resource in the organization may be up to the
challenge of current and future operations. The units
thus become conscious of their needs and aware of the
ways the human resource requirements can be met.

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• 6. Successor Planning Approach

• The approach know as successor planning takes into

consideration the different components of the old plan
and increase them proportionately by the desired
expansion rate stated by management. The cost of doing
the activities is likewise increased. Any new concern is set
up at a starting scale and viewed in proportion with other
comparable aspects of the existing plan. This approach
also enables the personnel staff to get by without having
to ask much from management which, in turn, does not
expect much from the HR staff in terms of radical change.24
 Common Weaknesses in Human Resource
Planning
• 1. Over-Planning

• A plan is likely to fail through an inherent

weakness of having covered too many aspects
of personnel management at the very early
stage of HRP in the firm or government office.

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• 2. Technique Overload

• The use of so many techniques sometimes

leads to the gathering of so much information.
Then the techniques do not get to be applied
effectively. This makes the techniques serve
as a trap rather than a means for action.

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• 3. Bias for the quantitative

• There are planners in HRM who sometimes

make the mistake of being drawn towards
emphasizing the quantitative aspects of
personnel management to the neglect of the
qualitative side.

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• 4. Isolation of the Planners

• When top management has a low regard for

human resource activities and for the HR staff,
they give little encouragement to HRP
activities, ignore the plan and withdraw
support for plan implementation.

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• 5. Isolation from Organization Objectives

• When HRP is pursued for its own sake or for a

narrow viewpoint of concentrating on HRD,
the effort leads to the formulation of a plan
that does not interphase with organizational
development.

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• 6. Lack of Line Supervisor’s Inputs

• Any plan to develop the personnel and to

improve the conditions of work must use the
feedback from the line supervisors since they
are the ones who are handling the personnel
in the organization.

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Four Basic Terms of Manpower Forecasting
– Long Term Trend
– Cyclical Variations
– Seasonal Variations
– Random Variations

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• 1. Long Term Trend

• Long term forecasting is usually done for a

period of five years or more depending on the
company operations and customer demands.

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 Demand Patterns
Figure 13.1 – Patterns of Demand
Quantity

Time

(a) Trend: Data consistently increase or decrease

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• 2. Cyclical Variations

• This refers to reasonable and predictable movements that

occur over a period of one year or more.

• This cyclical movement may be due to economic

conditions, political instability, peace and order, loss in
customer demands, and societal pressures.

• This variations typically last for one to five years.

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 Demand Patterns
Figure 13.1 – Patterns of Demand
Quantity

| | | | | |

Years
(b) Cyclical: Data reveal gradual increases and decreases
over extended periods
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• 3. Seasonal Variations

• This is a reasonable prediction change over a

period of one year. This covers firms who
manufacture seasonal products and hire
temporary workers for temporary increase in
demand, like Christmas and other special
occasions.

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 Demand Patterns
Figure 13.1 – Patterns of Demand

Year 1
Quantity

Year 2

| | | | | | | | | | | |

Months

(c) Seasonal: Data consistently show peaks and valleys

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• 4. Random Variations

• This is one occasion where there is no special

pattern and it is quite difficult to predict or
determine. The HR practitioner must be careful
in his manpower forecast especially in the
hiring of employees. Along this line, temporary
workers are hired instead of regular workforce.

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 Human Resource Forecasting Techniques

• 1. The Zero-Base Forecasting Approach

• It uses the organizations’ current level of

employment as the starting point for
determining future staffing needs. The usual
reference point is the organizational structure
pattern based on company production
forecast on market and customer demands.

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• 2. The Bottom-Up Approach

• This forecast uses the progression upward method

from the lower organization units to ultimately
provide the aggregate forecast of employment
needs. The starting point is the number of current
employees and the progress in operation
requirements as the company improves its
operation to meet increasing customer demand.

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• 3. Use of Predictor Variables

• This method uses the past employment levels to predict

future requirements. Predictor variables are known
factors that have an impact on employment.

• Sales volume determines employment levels. As

production increases, demand for manpower increases.

• It uses regression analyses to predict one item, which is

known as the independent variable (current
employment level) through the other item (sales
volume) that is dependent variable.
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 Linear Regression
• A dependent variable is related to one or more
independent variables by a linear equation
• The independent variables are assumed to “cause” the
results observed in the past
• Simple linear regression model is a straight line

Y = a + bX
where
Y = dependent variable
X = independent variable
a = Y-intercept of the line
b = slope of the line

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 Linear Regression
Deviation, Regression
Y or error equation:
Y = a + bX
Estimate of
Y from
regression
Dependent variable

equation
Actual
value
of Y

Value of X used
to estimate Y

X
Independent variable

Figure 13.2 – Linear Regression Line Relative to Actual Data

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• 4. Simulation

• It is a technique for the testing of alternatives on

mathematical models representing the real world
situation.

• The purpose of this model is to permit the human

resource manager to gain considerable insights into a
particular problem before making actual decisions.

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 The Important Elements in Strategic Human
Resource Planning

• 1. Organizational Goals
• – HRP process should be tied up with the organizational
strategic goals. It must rest on solid foundation of
information about sales forecasts, market trends,
technological advances, and major changes in processes
and productivity.

• - Considerable effort should be devoled to securing reliable

data on business trends and needs in terms of quantity and
quality of labor as the basic input for human resource
planning.
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• 2. Human Resource Forecast
• - forecasting of human resource needs based on business
strategies, production plans, and the various indicators of
change in technology and the organization’s operating
methods.

• - utilizing data and reliable ratios in forecasting

• - includes indirect and direct labor and adjusting the same

with productivity trends.

• - result is the spread sheet of employees in terms of

numbers, mix, cost, new skills, and job categories and
numbers and levels of managers needed to accomplish the
organizations’ strategic goals.
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• Human Resource Forecast – is the most
challenging part in the planning process
because it requires creative and highly
participative approaches in dealing with
business and technical uncertainties several
years in the future.

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• 3. Employee Information
• - maintaining accurate information concerning the
composition, assignments, and the capabilities of the
current workforce.

• - includes job classification, age, gender, status,

organizational level, rate of pay and functions.

• Include the employee’s resume – skills, education,

training, career interest and other important personal
data that could be used in the movement or transfer
of employees.
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• 4. Human Resource Availability Projections
• - estimating the number of current employees and those
that could be available in the future.

• - By projecting, the past data about the size, organization,

and composition of the workforce and about turnover,
aging, and hiring, availability at a specific future date can be
estimated.

• - the result could paint the picture of the organization’s

current human resources and how they can be expected to
evolve over time in terms of turnover, retirement,
obsolescence, promotability, and other relevant
characteristics.
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• 5. Analyzing and Evaluating Human Resource
Gaps
• - comparing what is needed with what is
available in terms of numbers, mix, skills and
technologies.

• - This comparison permits the HR manager to

determine gaps and evaluate where the most
serious mismatches likely appear.
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 This type of analysis should help
management address issues such as:
• A. Are there imbalances developing between
projected human resources needs and
availability?
• B. what is the effect of current productivity trends
and pay rates on the workforce levels and costs?
• C. Do turnover problems exist in certain jobs or
age levels?
• D. Are there problems of career blockage and
obsolescence?
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 Strategy Evaluation and Control
• The final component to the strategic management
process

• The monitoring makes it possible for the company to

identify problem areas and either revise existing
structures or strategies or device new ones.

• Emergent strategies appear as well as the critical

nature of human resources in competitive advantage.

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 HR Role in Providing Competitive Advantage
• HR can provide strategic competitive advantage in two ways:
• A. emergent strategies
• – consist of strategies that evolve from the grassroots of the
organization and can be thought of as what the organization actually do.

• - mostly identified with people in the lower level of the management

hierarchy

• - it is usually the lower level rank and file employees who provide ideas
for new markets, new products and new strategies being at the front line
of operations.

• - HRM should make sure that the information is systematically arranged

and should contain the data needed.
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• B. Intended Strategies
• - results of the rational decision-making by top
management as they develop strategic plans.

• - a pattern of plans that integrates an organization’s major

goals, policies and action sequences into a cohesive whole.

• - the new focus on strategic HRM role is directed primarily

on intended strategies.

• - the task is to formulate business related issues relevant

to strategy formulation and then development of HR
systems that can aid in the implementation of the strategic
plan.
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Human Resource Information System (HRIS)

• - any organized approach to obtaining relevant

and timely information on which to base
human resource decisions.
• - an effective HRIS is crucial to sound human
resource decision-making.

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 HRIS is designed to provide
information that is - SMART

a. Systematic
• - information must be systematically arranged
and contain the needed data

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 b. Management-Oriented
• - the data and information are essential tools
for effective manpower planning, retention,
development and separation of employees.

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 c. Applicable
• - the data and information stored in file must be
applicable in making human resource decisions.

• - irrelevant data must be discarded.

• Information must be updated from time to time to be

relevant to current manpower needs and requirements.

• - a manager must be able to rely on the accuracy of the

information provided.
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 d. Result-Oriented
• - the results from the information and the
decisions derived thereat must be both
acceptable to management and the
employees’ concern.

• - the end results must contribute to greater

company productivity and employees
satisfaction.

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 e. Time Bound
• - relevant human resource information are
necessary for effective decision-making.

• - the needs for timely decisions are crucial to

the effective management of human
resources.

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• The absence of these characteristics reduces
the effectiveness of HRIS and complicates the
decision-making process.

• Conversely, a system processing all these

characteristics enhances the ease and
accuracy of the decision-making process.

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 An effective HRIS also produces and
forecasts several important reports related
to business operations.

a. Routine Reports

• - these are human resource data summarized on

scheduled bases, like current manpower status,
regular employees, contractual employees,
supervisors and managerial employees on a regular
payroll.
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 b. Exception Reports
• - this information may contain confidential
data that are available only for managerial
decision-making and needs immediate
attention.

• - this may pertain to violations of existing

company rules and procedures, policies and
management programs.

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 c. On Demand Reports
• - management may demand some reports for
analysis.

• - this may pertain to productivity index,

individual performance records, and other
information that may lead to downsizing, and
other personnel actions.

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 d. Manpower Forecasts
• - applies to predictive models based on specific
situations.

• - this may cover increase or decrease in manpower

requirements due to seasonal demand or increase in
customer orders.

• - HR managers must be able to provide timely

information and ready manpower to answer the need
of company operations.
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 Software Applications for HRM
• - the advent of the different HRM software
applications has made the human resource
managers’ function for decision-making just a
click on the computer programs.

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 The Major HR Functions are:

1. Staffing Applications
• - common applications used in the area of
staffing include the following:
• A. Applicant recruiting and tracking
• B. DOLE reporting requirements
• C. Developing a master employee data base
• D. Staffing applications for decision-making

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2. Human Resource Planning Applications

• - this involves company specific application in

determining future employee turnover,
growth rate and promotion patterns, and
other personnel movements.

• - this includes the following applications:

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 a. Work-Force Profile Analysis
• - work-force labor supply and demand
analysis, or work-force profile analysis review.

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 b. Work-Force Dynamic Analysis
• - number of new hires, transfers and
promotions, number still needed in the future
and those about to retire, job classification of
employees for promotions and those
departments that lack basic skills for the job.

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 c. Human Resource Planning for Decision-
Making
• - this application pertains to information
about employees who are about to retire, job
classification of employees for promotions and
those departments that lack basic skills for the
job.

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d. Performance Management Applications

• - employee performance ratings, disciplinary

actions, work-rule violations and the daily
productivity index could now be stored in the
computer data base as bases for management
decisions.

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e. Training and Development Applications

• - These are used primarily to track down the

need for employees’ training programs,
courses to attend, certified skills, and
educational qualifications.

• - Career applications assess the employees’

career interests, work values, and career
goals.

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f. Compensation and Benefits Applications

• - These include payroll, job evaluation, salary

survey, salary planning and analysis, executive
compensation planning and management
benefits.

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Assignment:
½ sheet of paper

• Read the case study and answer questions 1-4

on page 38-39 of the book Human Resources
Management by Pereda and Pereda.
Copyright 2008.

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