Human resource planning is the process whereby organizations determine the staffing support they will need to meet business needs and customer demands.
Panning is the most important and primary function of management. It is a process of selecting the organizational objectives and taking actions to achieve those objectives.
Planning must be realistic and workable.
Planning of human resources is a major managerial responsibility. It is important because human resources provide a firm with a competitive advantage. In the age of competition, firms are focusing their attention on employee knowledge and skills.
Human resources are going to occupy the central stage of human activities, especially in the field of industry and business. Given its importance in organizational effectiveness, separate HRP departments have been set up in most of the important business organizations.
Certainly, many organizations have voiced the idea that their human resources differentiated them from their competitors.
The significance of human resources as a core competency was confirmed in a study of 293 U.S. firms. The study found that HR management effectiveness positively affected organizational productivity, financial performance, and stock value.
Definition of Human Resource Planning.
Human resource planning is the major task of HRM because it is concerned with utilizing manpower resources. An organization does not own a person as it does capital and physical assets; this HR resource is seldom given proper attention.
Many managers have failed because they have taken their human resources for granted. It is one of the most critical management undertakings of this decade.
There are a variety of factors that affect HR planning such as retirements and transitions, the availability of employees with certain skill sets and changes in the environment.
Some popular definitions of HRP are given below.
Robbins (2001) defines HRP as “the process by which an organization ensures that it has the right number and kinds of people at the right places, at the right time, capable of effectively and efficiently completing those tasks that will help the organization achieve its overall objectives”.
In the words of Coleman Bruce (1997), HRP is the process of determining manpower requirements and the means of meeting those requirements to carry out the integrated plan of the organization.
Thus HRP translates the organization’s objectives and plans into the number of people needed to meet those activities. Through planning, management makes a balance between demand for and supply of the right number and kinds of people at the right time. It is a supply and demand calculation.
Manpower is an asset; it is an asset that appreciates and grows over time (Evanceivich, 1999). Machines, on the other hand, depreciate as time goes on.
According to the above definitions, HRP consists of the following elements:
- Establishing and recognizing future job requirements,
- Identifying deficiency in terms of quantity,
- Identifying deficiency in terms of quality and specification,
- Identifying the sources of the right type of man,
- Developing the available manpower, and
- Ensuring the effective utilization of the workforce.
Characteristics of Human Resource Planning
Characteristics of effective human resource planning are as follows:
- Continuous Process.
- Optimum Utilization of Human Resources.
- Right Kinds and Numbers.
- Determination of Demand and Supply.
- Environmental Influence.
- Related to Corporate Plan.
- A Part of the Human Resource Management System.
Human resource planning is prepared to assess the future requirement of manpower in the organization. It helps identify the size and composition of resources for future purposes.
Human resource planning is a continuous process. The human resource planning prepared today may not be applicable for the future due to the ever-changing external forces of the environment. Hence, to address such changing factors, human resource planning needs to be revised and updated continuously.
Optimum Utilization of Human Resources
Human resource planning focuses on optimum utilization of resources in the organization. It checks how employees are utilized productively. It also identifies employees’ existing capabilities and future potentialities to perform the work.
Right Kinds and Numbers
Human resource planning determines the right number and kind of people at the right time and right place who are capable of performing the required jobs. It also assesses the future requirement of manpower for the organizational objective.
Determination of Demand and Supply
Human resource planning is a process of determining the demand for and supply of human resources in the organization. Then a match between demand and supply estimates the optimum level of manpower.
Human resource planning is influenced by environmental changes; hence, it is to be updated as per the change occupied in the external environment.
Related to Corporate Plan
Human resource planning is an integral part of the overall corporate plan of the organization. It can be formulated at strategic, tactical and operational levels.
A Part of the Human Resource Management System
As a part of the total human resource management system, human resource planning is regarded as a component or element of HRM which is concerned with the acquisition and assessment of manpower. It serves as a foundation for the management of human resources effectively and efficiently.
Significance or Importance of Human Resource Planning
Human resource planning aims at fulfilling the objectives of the manpower requirement. It helps to mobilize the recruited resources for productive activities.
Human resource planning is an important process aiming to link business strategy and its operation. The importance of human resource planning is as follows:
- Human resource planning determines the future needs of manpower in terms of number and kind.
- Human resource planning is important to cope with the change associated with external environmental factors such as technological, political, socio-cultural, and economic forces.
- Another purpose of HR planning is to recruit and select the most suitable personnel to fill job vacancies.
- Human resource planning/manpower planning helps find out the surplus/ shortage of manpower.
- It is helpful in employee development through various training and development campaigns to impart the required skill and ability in employees to perform the task efficiently and effectively.
- It focuses on the optimum utilization of human resources to minimize the overall cost of production.
- Another importance of human resource planning is that it reduces labor costs substantially by maintaining a balance between demand for and supply of manpower.
- An effective human resource plan provides multiple gains to the employee by way of promotions, increase in salary and other fringe benefits. This boosts employee morale.
- It is useful in finding out the deficiencies in existing manpower and providing corrective training.
- Another importance of human resource planning is the safety of health. It provides for the welfare, health, and safety of its employees thus leads to an increase in productivity of the employees in the long run.
In a word, Human resource planning is helpful in the overall planning process of the organization. It is very important for businesses because of the reasons shown above that have been elaborated very effectively.
Benefits of Human Resource Planning
Human Resource Planning has assumed importance in recent years for the following reasons;
- Nature of Human Resources.
- Supply of Skilled Manpower.
- Rapid Technological Change.
- Costs of Recruitment and Hiring.
- Increased Mobility.
- Reduction of Wastage.
- Human Resources as Corporate Assets.
- Size of the Firm.
- Management Development.
Nature of Human Resources
The nature of human resources necessitates human resource planning. Human resources have four critical features.
First, for higher levels of skills, a very long time is required for workers to achieve full productivity.
Second, a person generally achieves higher productivity the longer he is on the job.
Third, a person’s mental satisfaction affects his productivity.
Lastly, investment in human beings belongs to the individual who may take his skills where he goes.
Supply of Skilled Manpower
Talented and skilled manpower has become a scarce resource and is always in short supply and manpower planning has a necessity for the long-run survival of the business firm.
Rapid Technological Change
Jobs and job requirements are changing faster than in earlier periods. The pace of technological change has accelerated.
The direction of technological change has decreased jobs for unskilled workers but has increased demand for new skills. Technological change makes re-training a must for many current jobholders.
Costs of Recruitment and Hiring
Highly skilled personnel are in short supply and it is very costly to hire and maintain them.
Recruitment and training costs, pensions, gratuity, provident funds, and other fringe benefits raise the costs of hiring a new worker. Higher recruitment costs encourage upgrading from within.
Increased mobility of human resources has created a problem for management to retain qualified employees. There is nothing to keep the worker from moving on when another job appears attractive.
As a result, individual employers face greater difficulties in holding preferred employees. Proper manpower planning will reduce the rate of turn over.
Reduction of Wastage
A proper manpower policy will reduce the wastage rate. It is also referred to as ‘labor turnover’ or ‘attrition rates’. Wastage rate is determined in a variety of ways;
- It is less among older employees,
- It is less among longer-serving employees,
- It is less among the more highly skilled because they are properly placed, and
- It is less among men than women.
Human Resources as Corporate Assets
Manpower planning stresses the value of human resources as corporate assets.
Management has learned that if it neglects the individual, he is not likely to develop into a kind of performer that the firm wants.
Size of the Firm
Interest in manpower planning is increasing because the size of the organization is continually increasing.
Manpower planning helps the company to have the manpower it needs, to achieve its objectives in the future and to use its manpower in such a way that the satisfaction of the employees is optimized.
In a profit system, the basic motivation for manpower planning like all other activities of the firm would be its contribution to profitability.
The fact that employee productivity is a major factor in profitability, has stimulated interest in the rationalization of work and incentive systems to motivate the worker.
Proper manpower planning can ensure the development of managers through proper training programs.
Requirements for Effective HRP Successful HR planning requires:
- HR personnel understand the HR planning process,
- Top management is supportive,
- The communications between HR staff and line management are healthy,
The HR plan is integrated with the organization’s strategic business plan.
Purposes of Human Resource Planning
The general purpose of human resource planning has been described, but there are specific purposes in crucia^areas of management which HR planning serves:
- Determining recruitment needs: An important prerequisite to the process of recruitment is to avoid problems of unexpected shortages, wastage, blockages in the promotion flow and needless redundancies.
- Determining training needs: Planning training programs are very important. These programs not only improve quantity but also quality in terms of the skills required by the organization.
- Management development: A succession of trained and experienced managers is essential to the effectiveness of the organization, and this depends on accurate information about the present and future requirements in all management posts.
- Balancing the cost between the utilization of plant and workforce: Cost balancing includes a comparison of costs between these two resources in different combinations and selecting the optimum. While costing projects cost balancing plays an important role.
- Industrial relations: The businesses plan will, of necessity; make assumptions about the productivity of the human resource. It will have an impact on the organization’s industrial relations strategies.
- Consider future workforce: Organizations use strategic planning to achieve goals. This relates to the organization’s vision, mission, and strategic objectives. An organization must analyze its future employment needs. If an organization decides it must increase productivity by 25 percent, it may need to grow its workforce by 2 percent. If an organization wants to increase market share by moving offices into new locations, it must consider the human resource requirements.
- Analyze Current Workforce: With future workforce needs to be considered, human resource planning must analyze the competency of the present workforce. Comparing future needs with current workforce strengths and abilities will identify gaps or surpluses.
- Future Preparation: Considering workforce surpluses and deficits, human resources must prepare action plans for the workforce. This includes identifying the type and number of employees needed, employee competency, budget considerations, recruiting and retaining measures, and the development and training of employees.
- Evaluation Process: Ensuring objectives are being met by the future workforce requires an evaluation process. This will determine if the workforce is adequate to satisfy strategic goals. Planning for this process now will more easily and quickly identify future workforce gaps or surpluses.
In practice, HR planning is concerned with the demand for and supply of labor and problems arising from the process of reconciling these factors. Plans and decisions of any system follow the analyses of demand and supply.
Factors that affect Human Resource Planning (Determinants)
Human resource planning can be defined as the process of identifying the number of people required by an organization in terms of quantity and quality.
All human resource management activities start with human resource planning.
So we can say that human resource planning is the primary activity of human resource management.
A manager should consider the following factors when he or she makes human resource planning:
- Technological changes.
- Organizational changes.
- Demographic changes.
- Shortage of skill due to labor turnover.
- Pressure groups.
- Economic factors
- Social factors.
- Environmental factors.
- Political and Legal System.
HRP is affected by the employment situation in a country. In countries where there is greater unemployment; there may be more pressure on the company from the government to appoint more people.
For example, public sector enterprises are highly overstaffed in some countries, while few private enterprises are understaffed.
Similarly, some companies may have a shortage of skilled labor and they may have to appoint people from other companies.
Technical changes in society
Technology changes at a very fast speed and new people having the required knowledge are required for the company.
In some cases, the company may retain existing employees and teach them the new technology and in some cases, the company has to dismiss existing people and appoint fresh people.
Changes take place within the organization from time to time.
For example, a company may diversify into new products or close down businesses in some areas, etc. In such cases, a company may hire or dismiss people according to the situation.
How much money is available for salaries, training and equipment is the most immediate concern in human resource planning.
However, external economics plays an equally critical role.
For example, people do not have much money to spend in an economic recession and tend to be much more selective in what they buy or the services they use. This means some industries, such as those producing luxury items or non- essential services, sell less and may even have to lay off some staff.
This, in turn, makes the local economy even more difficult.
Social factors may influence the organization’s HR planning. Where there is a clear discrepancy of one social group, it’s a good idea to build in ways of opening up new opportunities.
New technology brings new skills requirements, so companies always need to be aware of proficiencies and training needs when planning human resources.
New products and services also may require recruiting highly skilled employees or training existing employees to meet the need.
Employment law is the most significant sector of the legal system that affects human resource planning, and it changes all the time.
HR managers must keep themselves up to date, and have an employment law specialist available to consult if necessary. Employment law changes must be reflected in company policy.
Environmental factors might include where the business is located about finding sufficient appropriate staff or changes to the environment that mean a need for more or fewer employees.
A simple example of environmental factors affecting human resource planning is the consideration of how the employees get to work safely during extreme weather; the Firm’s plan may need to include the possibility of telecommuting to keep everything going.
The labor market comprises people with skills and abilities that can be tapped as and when the need arises. Although in many 3rd countries with surplus labor, there is a shortage of skilled people. We should take measures to make more skilled workers available in the country.
When one talks about labor supply, the following deserve due consideration: the size, age, gender and educational composition of the population, the demand for goods and services in the country, the nature of production technology and the employability of the people.
Stages of Human Resource Planning
1. First Stage
The first stage of manpower planning is to integrate it with corporate planning. All manpower plans stem from business plans to a corporate strategy. There are mainly three types of business plans:
- Plans to change the level of activity,
- Plans to change the nature of the activity, and
- Plans to change the organization of activity.
2. Second Stage
The second stage in HR planning is to forecast or assess the gross manpower requirements anticipating the future program of the company and to translate these into talent and skill requirements.
Most of the companies plan for the future growth of the business.
The manpower forecast is concerned with anticipating the number of replacements required due to;
- transfers, and
Determining the company’s manpower requirements involves two projections for each functional area;
- The incremental number of positions needed as a result of growth, and
- The number of vacancies created by retirements and terminations.
3. Third Stage
The third stage is to draw up a phased program for recruitment and training. The phasing has to be related to the phasing of the construction and operation of the various units of a plant.
People must be provided with opportunities to develop themselves. People change jobs for definite reasons such as higher pay-packet, better chances of promotion or better job satisfaction.
Generally, the right types of people are attracted to firms that offer opportunities for development to the individual.
4. Fourth Stage
The fourth stage of manpower planning is concerned with the allocation of human resources within an organization over time – in other words, with assigning individuals to jobs that are appropriate to their talents and needs and the requirements of the organization.
Once an individual is on the job, he can be developed. He may be rewarded for good performance as an incentive for future good performance and development.
5. Fifth Stage
The last stage of manpower planning is to locate the sources from where personnel required will be available. Broadly the sources can be divided into two:
- recruitment from outside and
- recruitment from within the organization.
Organizations can hire personnel from internal and external sources. The skill inventories method is one of the techniques used to keep track of internal supply. Skill inventories are manual or computerized systems that keep records of employee experience, education, and special skills.
A forecast of the supply of employees projected to join the organization from outside sources, given current recruitment activities, is also necessary.
Steps of HR Planning Process
Human resource planning is a process through which the company anticipates future business and environmental forces. Human resource planning assesses the manpower requirement for a future period. It attempts to provide sufficient manpower required to perform organizational activities.
HR planning is a continuous process which starts with the identification of HR objectives, move through analysis of manpower resources and ends at the appraisal of HR planning.
Following are the major steps involved in human resource planning:
Integration of HR planning with corporate planning
The HR planning process begins with considering organizational objectives and strategies. The first stage of HR planning is to integrate it with corporate planning. All manpower planning stems from business plans with a corporate strategy.
Assessment of environmental factors
The second stage in HR planning is to forecast or assess the internal and external environmental factors that affect demand and supply of labor.
Some of the most significant environmental factors are government influences; economic environment, geographic and competitive conditions; technological factors, workforce composition, management philosophy, and work patterns. There are several techniques now available for doing HR forecast.
The most important techniques, among others, are the Delphi technique, Brain Storming, Nominal technique, Committee Board, Expert opinion, Consultancy, Trend analysis, Regression and Correlation Analysis.
Assessment of human resources
The assessment of HR begins with environmental analysis, under which the external and internal (objectives, resources, and structure are analyzed to assess the currently available HR inventory level.
After the analysis of the external and internal forces of the organization, it will be easier for an HR manager to find out the internal strengths as well as weaknesses of the organization in one hand and opportunities and threats on the other.
Moreover, it includes an inventory of the workers and skills already available within the organization.
HR forecasting is the process of estimating the demand for and supply of HR in an organization.
Demand forecasting is a process of determining future needs for HR in terms of quantity and quality. It is done to meet the future personnel requirements of the organization to achieve the desired level of output.
Future human resource needs can be estimated with the help of the organization’s current human resource situation and analysis of organizational plans and procedures. It will be necessary to perform a year-by-year analysis for every significant level and type.
Forecasts of demand may be either judgmental or mathematical. The HR forecast is concerned with anticipating the number of replacements required due to resignations, retirements, death, dismissals, transfer and promotions, and technological changes resulting in increased productivity.
This highlights shortage and overstaffs positions.
Supply is another side of human resource assessment.
It is concerned with the estimation of the supply of manpower given the analysis of current resources and future availability of the human resource in the organization. It estimates the future sources of HR that are likely to be available from within and outside the organization.
The internal source includes promotion, transfer, job enlargement and enrichment, whereas external source includes recruitment of fresh candidates who are capable of performing well in the organization.
Matching demand and supply
It is another step of human resource planning. It is concerned with bringing the forecast of future demand and supply of HR.
The matching process refers to bring demand and supply in an equilibrium position so that shortages and overstaffing position will be solved. In case of shortages, an organization has to hire the more required number of employees.
Conversely, in the case of overstaffing, it has to reduce the level of existing employment. Hence, it is concluded that this matching process gives knowledge about requirements and sources of HR.
It is the last phase of human resource planning which is concerned with a surplus and shortages of human resources. Under it, the HR plan is executed by designing different HR activities.
The major activities which are required to execute the HR plan are recruitment, selection, placement, training, and development, socialization, etc.
Finally, this step is followed by control and evaluation of the performance of HR to check whether the HR planning matches the HR objectives and policies.
This action plan should be updated according to change in time and condition. HRP is concerned with the allocation of human resources within an organization over time.
Human resource planning is the process of determining its human resource needs and optimum use of an organization’s human resource.
Human resource planning is one of the most important elements in a successful human resource management program because it is a process by which an organization ensures that it has the right number and kinds of people, at the right place, at the right time, capable of effectively and efficiently completing those tasks that will help the organization to achieve its overall strategic objectives.
Human resources planning then ultimately translate the organization’s overall goals into the number and types of workers needed to achieve those goals.
Without clear cut planning and a direct linkage to the organization’s strategic direction, estimation of an organization human resource needs are reduced to mere guesswork. This means that human resource planning cannot exist in isolation. It must be linked to the organization’s overall strategy.
So for achieving optimum use of an organization’s human resources a systematic process human resource planning is essential.