Unit - 2 : Human Resource Planning

2.1 Introduction
As told in the last chapter Human resource management has started to play a significant role in the overall
strategic development of the organization. At present HR strategies are designed in tune with the overall
business strategyof the organization. HR strategy should sub serve the interest of the organization, translating
firm’s goals and objectives into a consistent, integrated and complimentary set of programmes and policies
for managing people.
First part of Human resource strategy is HRP – Human Resource Planning. All other HR activities like
employee hiring, training and development, remuneration, appraisal and labour relations are derivedfrom
HRP.HR planning is important in a wide variety of industries and firms. HR planning affects what employers
do when recruiting, selecting, and retaining people, and of course these actions affect organizational results
and success. The challenges caused by changing economic conditions during recent year’s show why HR
workforce planning should occur.
Staffing an organization is an HR activity that is both strategic and operational in nature. As the HR
Headline indicates, HR planning is important in a wide variety of industries and firms. HR planningaffects
what employers do when recruiting, selecting, and retaining people, and, of course these actions affect
organizational results and success. Human Resources planning mean different means to different
organizations. To some companies, human resources planning mean management development. It involve
helping executives to make better decisions, communicate more effectively, and know more about the
firm. The purpose of HRP is to make the manager a better equipped for facing the present and future.
2.2 Human Resource Planning (HRP)
Human resource planning is important for helping both organizations and employees to prepare for the
future. The basic goal of human resource planning is to predict the future and based on these predictions,
implement programmes to avoid anticipated problems. Very briefly humans resource planning is the process
of examining an organization’s or individual’s future human resource needs for instance, what types of
skills will be needed for jobs of the future compared to future human resource capabilities (such as the
types of skilled employees you already have) and developing human resource policies and practices to
address potential problems for example, implementing training programmes to avoid skill deficiencies.

2.3 Definition of Human Resource Planning

According to Vetter, “HRPis the process by which management determines how the organization should
move from its current man power position to desired manpower position. Through planning, management
strives to have the right time, doing things which result in both the organization and individual receiving
maximum long run benefits”.
According to Gordon Mc Beath, “HRP is concerned withtwo things: Planning ofmanpower requirements
and Planning of Manpower supplies”.
According to Beach, “HRP is a process of determining and assuming that the organization will have an
adequate number of qualified persons, available at proper times, performing jobs which meet the needs of
the enterprise and which provides satisfaction for the individuals involved”
Simply HRP can be understood as the process of forecasting an organization’s future demands for and
supply of the right type of people in the right number. In other words HRP is the process of determining
manpower needs and formulating plans to meet these needs.
HRP is a Four-Phased Process.
  The first phase involves the gathering and analysis of data through manpower inventories and
forecasts,
 The second phase consists of establishing manpower objectives and policies and gaining top
management approval of these.
 The third phase involves designing and implementing plans and promotions to enable the
organization to achieve its manpower objectives.
 The fourth phase is concerned with control and evaluation of manpower plans to facilitate progress
in order to benefit both the organization and the individual. The long run view means that gains
may be sacrificed in the short run for the future grounds. The planning process enables the
organization to identifywhat its manpower needs is and what potential manpower problems required
current action. This leads to more effective and efficient performance.

2.4 Nature of HRP

Human resource planning is the process of analyzing and identifying the availability and the need for human
resources so that the organization can meet its objectives. The focus of HR planning is to ensure that the
organization has the right number of human resources, with the right capabilities, at the right times, and in
the right places. In HR planning, an organization must consider the availability and allocation of people to
jobs over long periods of time, not just for the next month or the next year1.

HRP is a sub system in the total organizational planning. Actions may include shifting employees to other
jobs in the organization, laying off employees or otherwise cutting back the number of employees, developing
present employees, and/or increasing the number of employees in certain areas. Factors to consider
include the current employees’ knowledge, skills, and abilities and the expected vacancies resulting from
retirements, promotions, transfers, and discharges. To do this, HR planning requires efforts by HR
professionals working with executives and managers.

2.5 Objectives of Human Resource Planning

1. To ensure optimum utilization of human resources currently available in the organization.
2. To assess or forecast the future skill requirement of the organization.
3. To provide control measures to ensure that necessary resources are available as and when required.
4. A series of specified reasons are there that attaches importance to manpower planning and
forecasting exercises. They are elaborated below:
 To link manpower planning with the organizational planning
 To determine recruitment levels.
 To anticipate redundancies.
 To determine optimum training levels.
 To provide a basis for management development programs.
 To cost the manpower.
 To assist productivity bargaining.
 To assess future accommodation requirement.
 To study the cost of overheads and value of service functions.
  To decide whether certain activity needs to be subcontracted, etc.
HRP exists as a part of planning process of business. This is the activity that aims to coordinate the
requirements for the availability of the different types of employers. The major activities are theforecasting,
(future requirements), inventorying (present strength), anticipating (comparison of present and future
requirements) and planning (necessary program to meet the requirements).

The HR forecasts are responsible for estimating the number of people and the jobs needed byan organization
to achieve its objectives and realize its plans in the most efficient and effective manner.

HR needs are computed by subtracting HR supplies or number of the employees available from expected
HR demands or number of people required to produce a desired level of outcome. The objective of HR
is to provide right personnel for the right work and optimum utilization of the existing human resources.
The objectives of human resource planning may be summarized as below:
 Forecasting Human Resources Requirements: HRP is essential to determine the future needs
of HR in an organization. In the absence of this plan it is very difficult to provide the right kind of
people at the right time.
 Effective Management of Change: Proper planning is required to cope with changes in the
different aspects which affect the organization. These changes need continuation of allocation/
reallocation and effective utilization of HR in organization.
 Realizing the Organizational Goals: In order to meet the expansion and other organizational
activities the organizational HR planning is essential.
 Promoting Employees: HRP gives the feedback in the form of employee data which can be
used in decision-making in promotional opportunities to be made available for the organization.
 Effective Utilization of HR: The data base will provide the useful information in identifying
surplus and deficiency in human resources. The objective of HRP is to maintain and improve the
organizational capacity to reach its goals bydeveloping appropriate strategies that will result inthe
maximum contribution of HR.

2.6 Need for HRP in Organizations

Major reasons for the emphasis on HRP at the Macro level:
1) Employment-Unemployment Situation: Though in general the number of educated
unemployment is on the rise, there is acute shortage for a variety of skills. This emphasizes on the
need for more effective recruitment and employee retention.
2) Technological Change: The changes in production technologies, marketing methods and
management techniques have been extensive and rapid. Their effect has been profound on the job
contents and job contexts. These changes have caused problems relating to redundancies, retention
and redeployment. Allthese suggest the need to plan manpower needs intensively and systematically.

3) Demographic Change: The changing profile of the work force in terms of age, sex, literacy,
technical inputs and social background has implications for HRP.

4) Skill Shortage: Unemployment does not mean that the labour market is a buyer’s market.
Organizations generally become more complex and require a wide range of specialist skills that
 are rare and scare. A problem arises in an organization when employees with such specialized
skills leave.

5) Governmental Influences: Government control and changes in legislation with regard to

affirmative action for disadvantages groups, working conditions and hours of work, restrictions
on women and child employment, causal and contract labour, etc. have stimulated the organizations
to be become involved in systematic HRP.

6) Legislative Control: The policies of “hire and fire” have gone. Now the legislation makes it
difficult to reduce the size of an organization quickly and cheaply. It is easy to increase but difficult
to shed the fat in terms of the numbers employed because of recent changes in labour law relating
to lay-offs and closures. Those responsible for managing manpower must look far ahead and thus
attempt to foresee manpower problems.

7) Impact of the Pressure Group: Pressure groups such as unions, politicians and persons displaced
from land by location of giant enterprises have been raising contradictory pressure on enterprise
management suchas internal recruitment and promotion, preference to employees’ children, displace
person, sons of soil etc.
8) Systems Approach: The spread of system thinking and advent of the macro computer as the
part of the on-going revolution in information technology which emphasis planning and newer
ways of handling voluminous personnel records.
9) Lead Time: The log lead time is necessary in the selection process and training and deployment
of the employee to handle new knowledge and skills successfully.

2.7 Importance of HRP

HRP is the subsystem in the total organizational planning. Organizational planning includes managerial
activities that set the company’s objective for the future and determines the appropriate means for achieving
those objectives. The importance of HRP is elaborated on the basis of the key roles that it is playing in the
organization.
1. Future Personnel Needs: Human resource planning is significant because it helps to determine
the future personnel needs of the organization. If an organization is facing the problem of either
surplus or deficiency in staff strength, then it is the result of the absence of effecting HR planning.
All public sector enterprises find themselves overstaffed now as they never had any planning for
personnel requirement and went of recruitment spree till late 1980’s. The problem of excess staff
has become such a prominent problemthat manyprivate sector units are resorting to VRS ‘voluntary
retirement scheme’. The excess of labor problem would have been there if the organization had
good HRP system. Effective HRP system willalso enable the organization to have good succession
planning.
2. Part of Strategic Planning: HRP has become an integral part of strategic planning of strategic
planning. HRP provides inputs in strategy formulation process in terms of deciding whether the
organization has got the right kind of human resources to carry out the given strategy. HRP is also
necessary during the implementation stage in the form of deciding to make resource allocation
decisions related to organization structure, process and human resources. In some organizations
HRP play as significant role as strategic planning and HR issues are perceived as inherent in
business management.
3. Creating Highly Talented Personnel: Even though India has a great pool of educated
unemployed, it is the discretion of HR manager that will enable the company to recruit the right
person with right skills to the organization. Even the existing staff hope the job so frequently that
organization face frequent shortage of manpower. Manpower planning in the form of skill
development is required to help the organization in dealing with this problem of skilled manpower
shortage
4. International Strategies: An international expansion strategy of an organization is facilitated to
a great extent by HR planning. The HR department’s ability to fill key jobs with foreign nationals
and reassignment of employees from within or across national borders is a major challenge that is
being faced by international business. With the growing trend towards global operation, the need
for HRP will as well will be the need to integrate HRP more closely with the organizations strategic
plans. Without effective HRP and subsequent attention to employee recruitment, selection,
placement, development, and career planning, the growing competition for foreign executives
may lead to expensive and strategically descriptive turnover among key decision makers.
5. Foundation for Personnel Functions: HRP provides essential information for designing and
implementing personnel functions, such as recruitment, selection, training and development,
personnel movement like transfers, promotions and layoffs.
6. Increasing Investments in Human Resources: Organizations are making increasing investments
in human resource development compelling the increased need for HRP. Organizations are realizing
that human assets can increase in value more than the physical assets. An employee who gradually
develops his/ her skills and abilities become a valuable asset for the organization. Organizations
can make investments in its personnel either through direct training or job assignment and the
rupee value of such a trained, flexible, motivated productive workforce is difficult to determine.
Top officials have started acknowledging that quality of work force is responsible for both short
term and long term performance of the organization.
7. Resistance to Change: Employees are always reluctant whenever they hear about change and
even about job rotation. Organizations cannot shift one employee from one department to another
without any specific planning. Even for carrying out job rotation (shifting one employee from one
department to another) there is a need to plan well ahead and match the skills required and
existing skills of the employees.
8. Uniting the Viewpoint of Line and Staff Managers: HRP helps to unite the viewpoints of line
and staff managers. Though HRP is initiated and executed by the corporate staff, it requires the
input and cooperation of all managers within an organization. Each department manager knows
about the issues faced by his department more than anyone else. So communication between HR
staff and line managers is essential for the success of HR Planning and development.
9. Succession Planning: Human Resource Planning prepares people for future challenges. The
‘stars’ are picked up, trained, assessed and assisted continuously so that when the time comes
such trained employees can quickly take the responsibilities and position of their boss or seniors
as and when situation arrives.
10. Other Benefits: (a) HRP helps in judging the effectiveness of manpower policies and programmes
of management. (b) It develops awareness on effective utilization of human resources for the
overall development of organization. (c) It facilitates selection and training of employees with
adequate knowledge, experience and aptitudes so as to carry on and achieve the organizational
 objectives (d) HRP encourages the company to review and modify its human resource policies
and practices and to examine the way of utilizing the human resources for better utilization.

2.8 Factors Affecting HRP

HRP is influenced by several factors. The most important of the factors that affect HRP are (1) type and
strategy of organization (2) organizational growth cycles and planning (3) environmental uncertainties (4)
time horizons (5) type and quality of forecasting information (4) nature of jobs being filled and (5) off
loading the work.

Figure 2.1 : Factors Affecting HRP.

Figure 2.1 summarizes the five factors that influence an organization while framing its strategic HRP.

Organizationa
l Growth
cycle and

Type and Environmenta

Strategy of l
Organizatio

HR
Time Outsourcin

Type and
quality of
forecastin N ature of
g jobs being

1. Type and Strategy of the Organization: Type of the organization determines the production processes
involve, number and type of staff needed and the supervisory and managerial personnel required. HR
need is also defined by the strategic plan of organization. If the organization has a plan for organic growth
then organization need to hire additional employees. On the other hand If the organization is going for
mergers and acquisition, then organization need to plan for layoffs, as mergers can create, duplicate or
overlap positions that can be handled more efficiently with fewer employees.
Organization first decides whether to be reactive or proactive in HRP. Organizations either carefully
anticipate the needs and systematically plan to fill the need in advance (proactive) or can simply react to
the needs as they arise (reactive). Likewise, the organization must determine the width of the HR plan.
Organization can choose a narrow focus by planning in only one or two HR areas like recruitment and
selection or can have a broad perspective by planning in all areas including training and remuneration.
The nature of HR plan is also decides upon the formality of the plan. It can decides to have an informal
plan that lies mostly in the minds of the managers and personnel staff or can have a formal plan which is
properly documented in writing
The nature of HR plan is also depended upon the flexibility that is practiced in the organization. HR plan
should have the ability to anticipate and deal with contingencies. Organizations frame HRP in such a way
that it can contain many contingencies, which reflect different scenarios thereby assuring that theplan is
flexible and adaptable.

2. Organizational Growth Cycles and Planning: All organizations pass through different stages of
growth from the day of its inception. The stage of growth in which an organization is determines thenature
and extends of HRP. Small organizations in the earlier stages ofgrowth may not have well defined personnel
planning. But as the organization enters the growth stage they feel the need to plan its human resource. At
this stage organization gives emphasis upon employee development. But as the organization reaches the
mature stage it experience less flexibility and variability resulting in low growth rate. HR planning becomes
more formalized and less flexible and less innovative and problem like retirement and possible retrenchment
dominate planning.
During the declining stage of the organization HRP takes a different focus like planning to do the layoff,
retrenchment and retirement. In declining situation planning always becomes reactive in nature towards
the financial and sales distress faced by the company.
3. Environmental Uncertainties: Political, social and economic changes affect all organizations and the
fluctuations that are happening in these environments affect organizations drastically. Personnel planners
deal with such environmental uncertainties by carefully formulating recruitment, selection, training and
development policies and programmes. The balance in the organization is achieved through careful succession
planning, promotion channels, layoffs, flexi time, job sharing, retirement, VRS and other personnelrelated
arrangements.
4. Time Horizons: HR plans can be short term or long term. Short term plans spans from six months to
one year, while long term plans spread over three to twenty years. The extent of time period depends
upon the degree of uncertainty that is prevailing in an organizations environment. Greater the uncertainty,
shorter the plan time horizon and vice versa.
Table 2.1 : Degree of Uncertainty and Length of Planning Period

Short Planning period- uncertainty/ Long planning period- certainty/ stability

instability
Many new competitors Strong competitive position
Rapid changes in social and economic Evolutionary, rather than rapid social,
Conditions political and technological change
Unstable product/ service demand patterns Stable demand patterns
Small organizational size, poor management Strong management practices.
practices (crisis Management)

Source: Elmer H. Burack and Nicholas J. Mathis, Human Resource Planning- A Pragmatic approach
to manpower Staffing and development, Illinosis, Brace- Park Press, 1987, p. 129.
5. Type and Quality of information: The information used to forecast personnel needs originates from
a multitude of sources. The forecast depends to a large extent upon the type of information and thequality
of data that is available to personnel planners. The quality and accuracy of information depend upon the
clarity with which the organizational decision makers have defined their strategy, structure, budgets,
production schedule and so on.

Table 2.2 : Levels of HRP Information

 Strategic Information General Organizational Specific Information
Information Necessary for HRP
Product m ix Organizational structure Job analysis
Customer mix Information flows Skills inventories
Competitive emphasis Operating and capital Mana gement inventories
budgets
Functional area objectives
Geographic limits of Production schedules Available training and
Market Distribution channels developm ent programmes
Sales territories Recruitment sources
Production processes
Level of technology Planning Labour market analysis
horizons Compensation programmes
Constitutional provisions
and labour laws
Retirement plans Turnover
data.

Source: Leap& Crino, Personnel/ Human Resource Management, p. 161.

6. Nature of Jobs Being Filled: Personnel planners need to be really careful with respect to the nature
of the jobs being filled in the organization. Employees belonging to lower level who need very limited skills
can be recruited hastily but, while hiring employees for higher posts, selection and recruitment need to be
carried out with high discretion. Organization need to anticipate vacancies far in advance as possible, to
provide sufficient time to recruit suitable candidate.
7. Outsourcing: Several organizations outsource part of their work to outside parties in the form of
subcontract. Outsourcing is a regular feature both in the public sector as well as in the private sector
companies. Many of the organizations have surplus labour and hence instead of hiring more people they
go for outsourcing. Outsourcing is usually done for non critical activities. Outsourcing of non- critical
activities through subcontracting determines HRP.
2.9 HRP Process
HRP effectively involves forecasting personnel needs, assessing personnel supply and matching demand–
supply factors through personnel related programmes. The HR planning process is influenced by overal
organizational objectives and environment of business.

Figure 2.2 : The HRP Process

Environmental Scanning:
It refers to the systematic monitoring of the external forces influencing the organization. The following
forces are essential for pertinent HRP.
 Economic factors, including general and regional conditions.
 Technological changes
 Demographic changes including age, composition and literacy,
 Political and legislative issues, including laws and administrative rulings
 Social concerns, including child care, educational facilities and priorities.
By scanning the environment for changes that will affect an organization, managers can anticipate their
impact and make adjustments early.
Organizational Objectives and Policies: HR plan is usually derived from the organizational objectives.
Specific requirements in terms of number and characteristics of employees should be derived from
organizational objectives
Once the organizational objectives are specified, communicated and understood by all concerned, the HR
department must specify its objective with regard to HR utilization in the organization.
HR Demand Forecast:
Demand forecasting is the process of estimating the future quantity and quality of people required to meet
the future needs of the organization. Annual budget and long-term corporate plan when translated into
activity into activity form the basis for HR forecast.
For eg: in the case of a manufacturing company, the sales budget will form the basis for production plan
giving the number and type of products to be produced in each period. This will form the basis uponwhich
the organization will decide the number of hours to be worked by each skilled category of workers. Once
the number hours required is available organization can determine the quality and quantity of personnel
required for the task.
Demand forecasting is influenced by both internal factors and external factors: external factors include-
competition, economic climate, laws and regulatory bodies, changes in technology and social factors
whereas internal factors are budget constraints, production level, new products and services, organizational
structure and employee separations.
Demand forecasting is essential because it helps the organization to 1. Quantify the jobs, necessaryfor
producing a given number of goods, 2. To determine the nature of staff mix required in the future, 3. To
assess appropriate levels in different parts oforganization so as to avoid unnecessary costs to theorganization,
4. To prevent shortages of personnel where and when, they are needed by the organization. 5. To monitor
compliances with legal requirements with regard to reservation of jobs.
Techniques like managerial judgment, ratio- trend analysis, regression analysis, work study techniques,
Delphi techniques are some of the major methods used by the organization for demand forecasting.
HR Supply Forecast:
Supply forecast determines whether the HR department will be able to procure the required number of
workers. Supply forecast measures the number of people likely to be available from within and outside an
organization, after making allowance for absenteeism, internal movements and promotions, wastage and
changes in hours, and other conditions of work.
Supply forecast is required because it is needed as it 1. Helps to quantify the number of people and
positions expected to be available in future to help the organization realize its plans and meet its objectives
2. Helps to clarify the staff mixes that will arise in future 3. It assesses existing staffing in different parts of
the organization. 4. It will enable the organization to prevent shortage of people where and when they are
most needed. 5. It also helps to monitor future compliance with legal requirements of job reservations.
Supply analysis covers the existing human resources, internal sources of supply and external sources of
supply.
HR Programming:
Once an organization’s personnel demand and supply are forecasted the demand and supply need to be
balanced in order that the vacancies can be filled by the right employees at the right time.
HR Plan Implementation:
HR implementation requires converting an HR plan into action. Aseries of action are initiated as apart of
HR plan implementation. Programmes such as recruitment, selection and placement, training and
development, retraining and redeployment, retention plan, succession plan etc when clubbed together
form the implementation part of the HR plan.
Control and Evaluation:
Control and evaluation represent the final phase of the HRP process. All HR plan include budgets, targets
and standards. The achievement of the organization will be evaluated and monitored against the plan.
During this final phase organization will be evaluating on the number of people employed against the
established (both those who are in the post and those who are in pipe line) and on the number recruited
against the recruitment targets. Evaluation is also done with respect to employment cost against the
budget and wastage accrued so that corrective action can be taken in future.

2.10 Requisites for Successful HRP

1. HRP must be recognized as an integral part of corporate planning
2. Support of top management is essential
3. There should be some centralization with respect to HRP responsibilities in order to have
co-ordination between different levels of management.
4. Organization records must be complete, up to date and readily available.
5. Techniques used for HR planning should be those best suited to the data available and
degree of accuracy required.
6. Data collection, analysis, techniques of planning and the plan themselves need to be constantly
revised and improved in the light of experience.

2.11 Barriers to HRP

Human Resource Planners face significant barriers while formulating an HRP. The major barriers are
elaborated below:
1) HR practitioners are perceived as experts in handling personnel matters, but are not experts in
managing business. The personnel plan conceived and formulated by the HR practitioners when
enmeshed with organizational plan, might make the overall strategic plan of the organization
ineffective.
2) HR information often is incompatible with other information used in strategy formulation. Strategic
planning efforts have long been oriented towards financial forecasting, often to the exclusion of
other types of information. Financial forecasting takes precedence over HRP.
4) Conflict may exist between short term and long term HR needs. For example, there can be a
conflict between the pressure to get the work done on time and long term needs, such as preparing
people for assuming greater responsibilities. Many managers are of the belief that HR needs can
be met immediately because skills are available on the market as long as wages and salaries are
competitive. Therefore, long times plans are not required, short planning are only needed.
5) There is conflict between quantitative and qualitative approaches to HRP. Some people view
HRP as a number game designed to track the flow of people across the department. Others take
a qualitative approach and focus on individual employee concerns such as promotion and career
development. Best result can be achieved if there is a balance between the quantitative and
qualitative approaches.
6) Non-involvement of operating managers renders HRP ineffective. HRP is not strictly an HR
department function. Successful planning needs a co-ordinated effort on the part of operating
managers and HR personnel.