The steps to HR Planning start with forecasting the number and type of employees needed in the future. This requires a good understanding of the internal and external environment of the enterprise.
The major aspects of the internal environment that affect HR Planning include short-term and long-term organizational plans and strategies, and the status of the organization's human resources. The major aspects of an enterprise’s external environment that impacts HR planning include the general status of the economy, developments in technology, level of competition, labor market trends and regulations, demographic trends and the like.
For instance, an organization planning to launch a new product would require additional marketing staff, and an organization looking to open a new branch would require more office staff. An organization looking to close down unprofitable branches might look to retrench workers. Similarly, technological developments might prompt the organization to shift to reliance on fewer numbers of technically skilled workers rather than depend on a large pool of manual labor.
Correct forecasting of human resource requirements contributes significantly to the competitiveness of the enterprise. Organizations forecasting more workers than required retain surplus or under-utilized staff, and organizations that fail to grasp the full extent of human resources required find themselves overstretched and unable to seize opportunities.
The two major methods of forecasting are judgmental methods such as Delphi technique or managerial estimates, and various mathematical models such as time series, personnel and productivity ratios, regression analysis, and the like.