Human Resource Planning

Human resource planning is a combination of forecasting staffing needs and strategic planning. It involves planning, developing, implementing, administering, and performing ongoing evaluation and assessment of recruiting, hiring, orientation, and organizational exit to ensure that the workforce will meet the organization’s goals and objectives. The typical role of an HR professional performing the staffing function is selecting appropriate employees to meet the needs of the organization, training them for future needs, developing their careers, and retaining them as staff so the organization will not spend time and money replacing them. In essence, HR planning results in strategies for staffing to ensure that both short- and long-term organizational objectives are met.

Strategic HR management refers to an organization’s use of employees to obtain a competitive advantage over competitors in the marketplace. Through formally contributing to company-wide strategic planning efforts or by being knowledgeable about concerns facing the organization, an HR professional can be strategic about HR planning. When an HR professional hires a productive employee, that action in itself is contributing to the organization’s bottom line. High productivity leads to higher competitive advantage and profitability. Other HR activities that add value to an organization’s competitive advantage are compensation, benefits, performance management systems, and job design. Yet many in HR perform these tasks without ever tying them to the organization’s competitive advantage.

The Society for Human Resource Management (SHRM) believes that there are three major roles in HR—strategic, operational, and administrative—and that strategic HR activities include change management, organizational culture and structure management, and performance management system development. Strategic HR includes HR planning, and part of that is forecasting. Forecasting involves identifying expected future staffing conditions based on information about the past and the present. Forecasting staffing needs is a four-step process: demand analysis, supply analysis, reconciliation of the budget, and strategic analysis.

Demand analysis consists of obtaining or creating a forecast for the organization’s demand for future employees. This can be accomplished simply by requesting future staff estimates from managers within the organization. For this type of forecasting to be effective, an organization must consider all the various conditions and issues that might arise. When forecasting their future staffing needs, managers should consider any new or different skill sets required, structure changes in the organization, contract labor (temporary workers) needed, and identify any positions that can be eliminated, combined, or changed. The organization’s size and budget should also be considered when conducting a demand analysis. Another method for forecasting is to conduct a statistical analysis of the potential need for the organization’s products and/or services (normally, a greater demand for the product or service means more need for staff). This type of analysis should be conducted in conjunction with formal strategic planning.

Supply analysis includes a review of the current workforce, the future demographic makeup of the labor force, current and future productivity needs, and the organizational structure. An organization should also consider issues such as internal promotions, diversity of the workforce, transfers, retirements, layoffs, training and retraining, voluntary and involuntary separations, health care costs, and many other factors. It is also important to review corporate trends such as sales and productivity over time to forecast future staffing needs.

Reconciliation of the budget is vital in this process as well. The forecast should be presented in dollars and should include how much the staffing forecast will cost the organization.

Last is strategic analysis. Not only should HR professionals review current supply and demand when forecasting staffing needs, but they should also consider replacement planning and succession planning.

Succession Planning as Part of HR Planning

The horrific events of September 11,2001, actually caused organizations to place more emphasis on succession planning. A succession plan allows an organization to fill open leadership positions with internal candidates who have been developed and prepared for those roles. Succession planning is a systematic way of planning for the replacement of key leaders in an organization. However, limiting a succession plan to the replacement of only the “chief officers” would not constitute sound business. Ideally, a succession plan should cover several layers of leadership, down to at least the supervisory levels. The organization should determine which positions should be included in the succession plan. Potential leaders must then be identified and prepared, through career development activities, to take on those roles. It is not enough to select people in the organization who seem “right” for the job. Not only should the experience and duties be considered, but also the personality, leadership skills, and readiness for taking on key leadership roles.

Several “hopefuls” should be identified for each position to be filled. This allows the potential leaders to be groomed, trained, and mentored for the possibility of filling the positions the organization has identified as key. When the time comes for these positions to be filled, there will be several people from which to choose, all of whom have had time to develop and prepare for the new role.

To prepare these potential leaders, the gap must be determined between their current performance levels and skills and what preparation they need to be ready for the new role when it is available. This is called a gap analysis. This information can help determine what training, experience, and mentoring are needed. Once the potential leaders have been identified, a career-development plan for each person should be designed that will close or narrow the gap.

Role of Training in HR Planning

Training activities are important in the HR planning process. All employees should have a career-development plan—even those in entry-level positions. No one wants to feel that promotion is not possible. All employees should receive training with respect to their current jobs, potential future jobs, customer service, roles in the organization, and the organization’s role in the market. All employees must understand how they fit into the “big picture” as well as how the organization fits into the marketplace.

Forecasting Methods

An HR forecast is a guess or estimate and can be based on simple assumptions of what the future may hold or on complex computer statistical models. On the simple end, a forecast may be based on asking all supervisors or managers how many employees they expect to hire in the next year or so. This is called a managerial estimate. Another method is the Delphi technique, in which each member of a group of experts, without ever having met in person, individually provides forecasts until all members of the group agree on one model forecast. A similar method is known as the nominal group technique, but in this situation, the group of experts meets face-to-face to recommend the best forecast. There are several statistical or mathematical methods of forecasting. Statistical forecasting is completed through either regression analysis or simulation. Simulations are “what if” scenarios allowing the organization to speculate on the future. On the complex end, a forecast may be based on statistical regression analysis. Regression analysis is used to project future needs on a comparison of employment level and one or more variables related to employment, such as gross sales.

An HR forecast should cover three time periods: short-term, intermediate, and long-term. A short-term forecast would cover a period of less than or up to one year. An intermediate forecast would cover one to five years, and a long-term forecast would cover beyond five years. Forecasting, however, is not strategic planning. Forecasting is a way to predict, by reviewing current and past business trends (such as sales), what the future trends will be. Strategic planning is much more—it is a plan to prepare an organization for the future. Part of strategic planning, however, is HR planning.

Strategic Planning

Strategic planning is an essential activity for any successful organization, and one in which HR should be involved, since employees are an essential part of any business. If the HR professional expects to develop a meaningful staffing plan, then this involvement is a must. Sometimes, the HR professional is also the organization’s strategic planning leader, bringing all of the planning together into a substantial whole.

An organization does not have to go through the entire strategic-planning process to conduct human resource planning, but it is a good idea. As part of the strategic planning process, an environmental scan is conducted to monitor four environments: macro, industry, competitive, and internal/organizational. Issues to consider when conducting an environmental scan are demographics, technology, economics, political factors such as government regulations, and competition in the marketplace.

During the environmental scan, an organization should look specifically at the following:

• Government regulations related to HR; local, state, and federal tax legislation; pension regulations; tax benefits for training programs; and tax credit programs for employee benefits
• Economic issues related to HR, such as labor economics (unemployment rate, local skill shortages, employability)
• Local and regional competition and other geographic concerns related to HR, such as migration into or out of the area, new local companies that could recruit the organization’s employees, and competitors’ pay rates and benefits
• Demographic and social conditions related to HR, such as the local availability of diverse candidates; the number of temporary, seasonal, or part-time candidates; the flexibility of the local workforce (ability to perform shift work, etc.); basic and special skills; corporate social responsibility; ethics; unions; turnover trends; immigration and migration; and shifts in occupational trends
• Technological factors related to HR, such as the ability to telecommute, technological skills of potential and current employees, and use of new technology and machines in the workplace

When conducting the internal assessment of an organization’s workforce, the HR professional should perform a job audit to determine the jobs that currently exist, how many employees are needed to do those jobs, how essential those jobs are, and the positions needed by the organization to perform future work.

This information should be stored in the HR information system (HRIS), which is a database of employee names, jobs, competencies, skills, reporting structure, pay, benefits, training, and any other information that would aid in determining future staffing needs. Other information should also be housed in the HRIS: employee data, such as age, gender, length of service, equal employment opportunity information, promotions and positions held, awards, potential retirement dates, and so on. All of this information used together can be of great importance when trying to determine staffing gaps in the organization or future organization. It can also be used for succession planning and career development.

Evaluating HR Planning

An organization’s HR plan will be successful if and when the personnel decisions made align with the business needs. Once an organization has executed a human resource plan, the evaluation stage begins. Questions to ask during the evaluation phase are as follows: What worked about the plan? What did not? What can be changed so that the plan is more effective? Did the plan allow the organization’s leaders to better understand why HR planning is vital to the business? Did the plan help lower the organization’s costs? Did the plan assist the organization in identifying talent, skill gaps, and career-development opportunities? These types of questions and others relevant to the organization should be answered during the evaluation phase, and changes to the plan should be made accordingly.

Conclusion

Human resource planning is essential to any organization, regardless of size. An HR plan is an important way for a company to prepare for the future and is one of the most important elements HR professionals should have in their toolkits. An HR plan should aid the organization in filling its needs for talent in an effective and efficient way and should be directly linked to the business strategy.

See also:

• Human resource information systems (HRIS)
• Human resource support systems
• Personnel selection
• Strategic human resource management (SHRM)
• Succession planning

References:

1. Bechet, T. P. 2002. Strategic Staffing: A Practical Toolkit for Workforce Planning. New York: AMACOM.
2. Caruth, D. L. and Handlogten, G. D. 1997. Staffing the Contemporary Organization: A Guide to Planning, Recruiting, and Selecting for Human Resource Professionals. New York: Quorum Books.
3. Goodstein, L. D., Nolan, T. M. and Pfeiffer, J. W. 1993. Applied Strategic Planning: How to Develop a Plan That Really Works. New York: McGraw-Hill.
4. Gubman, E. 2004. “HR Strategy and Planning: From Birth to Business Results.” Human Resource Planning 27(1):13-23.
5. Macaleer, B. and Jones, S. 2003. “Does HR Planning Improve Business Performance?” Industrial Management 45(1):15-20.
6. Rothwell, R. J. and Kazanas, H. C. 2002. Planning and Managing Human Resources: Strategic Planning for Personnel Management. Amherst, MA: HRD Press.
7. Walker, J. 1980. Human Resource Planning. New York: McGraw-Hill.
8. Ward, D., Bechet, T. P. and Tripp, R., eds. 1994. Human Resource Forecasting and Modeling. New York: Human Resource Planning Society.
9. Wolfe, R. L. 1996. Systematic Succession Planning: Building Leadership from Within. Menlo Park, CA: Crisp.