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Human resource planning is a systematic analysis of HR needs to ensure the availability of the correct number of employees with the necessary skills at the right time. The increased competitive nature of business that makes workforce flexibility an imperative need has raised the importance of human resource planning.
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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.
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Inventory Analysis and Supply Forecasting
The second step in HR planning is inventory analysis or keeping track of the current employees in the organization to determine the extent to which this meets the forecast.
The HR inventory analysis entails
- Skill inventory, or keeping track of the number of employees, and the age, locations, qualifications, and skills of each employee to determine the specific role each employee would fill in the short term and long term
- Forecasting resignations and recruitment and understanding their impact on the skill inventory levels
- Forecasting leaves, transfers, dismissals, sabbaticals, prolonged illness, and deaths of employees and their impact on inventory levels
The ways to forecast the internal supply of human resources include methods such as Markov analysis, transitional matrices, replacement schedules, succession planning, and the like.
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The third step in HR planning is audit, which includes reconciling inventory with forecast through a systematic analysis of demand and supply forecasting, and identifying areas where shortages and surpluses exist.
The audit phase also involves, among other tasks:
- Identifying reasons for resignations, the cost of such resignations such as recruitment and training costs of new hires, cost of lost experience, skills and knowledge of the departing employee, and the like, and devise retention plans to retain key talent, if required
- Review the effectiveness of the recruitment activities, training and development initiatives, career planning exercises, succession planning, and other interventions
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The next step in HR Planning is developing action plans to bridge the gap between forecast and supply.
The various alternatives include:
- Strategy to recruit new employees
- Retrenchment of downsizing strategy to shed excess workforce
- Training and Development plans to right-size the workforce
- Career Planning and Succession Planning to identify key personnel
- Changes in work regulations such as timings, overtime policy and the like
The basic considerations when undertaking the planning process is compliance and impact of labor legislation. Laws that govern overtime and retrenchment for instance can have a significant impact on the strategy adopted. The other consideration is the availability of resources such as financial, physical, and technical for implementation of the plans.
Once approved, such plans become part of the company’s strategic objectives. Strategic HR Planning entails aligning such HR Plans with the overall strategic goals of the organization.
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The last step in HR Planning is monitoring and controlling implementation of the HR plan. This entails ensuring implementation proceeds in accordance with the plan and taking timely course corrections.
The external and internal environment of an enterprise always remains in a state of flux, and a good HR Plan incorporates mechanisms to make timely revisions in accordance with such changes.
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- Human Resource Planning: an Introduction, Reilly P. Report 312, Institute for Employment Studies, 1996. ISBN: 978-1-85184-238-4. Retrieved from http://www.employment-studies.co.uk/pubs/summary.php?id=312
- IBS Center for Management Research. Human Resource Planning. www.icmrindia.org/courseware/Intro%20to%20Hrm/hrm-DS4.htm