Items Description of Module

Subject Name Management

Paper Name HUMAN RESOURCE MANAGEMENT
Module Title HUMAN RESOURCE PLANNING
Module ID Module 12
Pre-Requisites Understanding the Concept of Human Resource Planning
Objectives To study the concept, process and factors affecting HRP
Keywords Human Resource Planning, Strategic Planning, Strategy
 QUADRANT –I

Module : 12; HUMAN RESOURCE PLANNNG

1. Learning Outcome
2. Meaning of human resource planning
3. Significance of human resource planning
4. Relationship between Strategic Planning and HRP
5. Factors affecting human resource planning
6. Process of human resource planning
7. Summary

1. Module 12: Human Resource Planning

2. Learning Outcomes:
After studying this module, you shall be able to
 Know the meaning of Human Resource Planning
 Understand the significance of Human Resource Planning
 Comprehend the relationship between Human Resource Planning and Strategic
Planning
 To know the factors affecting Human Resource Planning
 Understand the process of Human Resource Planning

3. Introduction
Human resources planning is basically a process of identifying the right person for the
right job at the right time and at the right cost. The process involves the estimate of the
future manpower needs of an organization and meeting them through the human
resources available with it. Human resource planning is the first step in the process of
recruitment and selection of employees after a job analysis has been accomplished. The
three basic objectives of HR planning are:
 Attracting, developing and retaining an efficient workforce;
 Evaluating and rewarding its performance, and;
 Inventing and controlling
 HR plans and programs to optimize the HR cost.
However, the immediate purpose of human resource planning is to investigate, forecast,
plan, control and match the demand for and the supply of manpower.
Broadly, HR planning is affected by two important factors- the HR requirements of an
organization and its availability within and outside the business. With regard to HR
requirements, the role of HR planning is the estimation of the number and nature of
people needed for the accomplishment the goals and strategies of an organization. As
regards, the HR availability, the task of human resource planning is to scan the
environment in order to identify the availability of people with appropriate characteristics
and skills.

4. Meaning of Human Resource Planning

Human resource planning is a process of identifying and then matching the human
resource requirement and availability in order to determine the future HR activities of the
organization on the basis of the overall organizational objectives. It is concerned with the
flow of people into, through, and out of an organization involving the forecast the need
for labor and the supply of labor, then planning the programs necessary to ensure that
 the organization will have the right mix of employees and skills when and where they are
needed.

5. Significance of Human Resource Planning

Until a few decades ago organizations considered human resource planning neither
essential nor inevitable. In fact, it received much less attention in the overall planning of
an organization. This is because firms, in those times, had a relatively stable external
environment. The presence of factors like manageable competition sluggish progress in
technologies, and traditional and regionally concentrated labor force created an
environmental certainty for those organizations.
However, in the subsequent period, the external environment has undergone several
changes and is thus causing a lot of uncertainty to the organizations. For instance,
developments like globalization, intensified competition, changing features of the
workforce, government interventions and plethora of laws have generated an uncertain
environment for business. The uncertainty in the environment has increased the
importance of and the need for HR planning. Contemporary HR planning is mainly
concerned with the effective deployment of the valuable human resources of an
organization. An organization first fixes its strategic goals like achieving competitive
advantage, designing expansion programs, enhancing organizational effectiveness and
job satisfaction of the employees. Depending upon the selected goals, it develops and
executes specific HR plans and program including recruitment and selection, training,
compensation, and performance management. On the whole, HR planning is now an
effective means of accomplishing the business strategies of the organization. The HR
planning is important for the following areas of human resource management:
 Assessing future recruitment requirements;
 The available human resources need be optimally utilized.
 Designing training and retraining plans and programs
 Formulating compensation policies;
 Taking a decision about management development programs
 Gaining competitive advantage; and
 Shaping future plans and strategies

6. Relationship of Strategic Planning and Human Resource Planning

The human resource executives are now focusing on how human resources can provide
assistance to the organization in achieving its strategic goals. Thus, HR must now be
highly involved in the strategic planning process. Strategic plan is the process by which
top management determines overarching organizational objectives and how they can be
achieved.
When a firm’s mission is clearly defined and its guiding principles understood,
employees and managers will put forth maximum effort in accomplishing company
objectives. Corporate management expects HR activities to be in tune to strategic goals
and to add value towards achieving these goals. The advantage of strategic planning is
most obvious as firms make response to rapidly changing environments. If executive do
not get the people process right, they will never fulfill the potential of the business.
Human resource planning is systematic process of reviewing human resource
requirements to ensure that the required number of employees with the required skills,
are available as and when needed. Decisions for effective staffing commence with
human resource planning. Human resource planning involves matching the internal and
external supply of work force with job positions predetermined in the organization over a
specified period of time. The strategic planning precedes human resource planning. The
 complete issue of managing change that is where HR is converging with organizational
strategy
Specific quantitative and qualitative human resource plans are determined from the
organizational plans. There are two components of human resource planning: needs of
personnel and their availability. Forecasting human resource needs involves deciding
the number and type of employees, by skill level and location. These projections will
reflect several factors, such as plans for production and variations in productivity. For
forecasting availability, the human resource manager searches both internal and
external sources of human resources. Once employee needs and availability are
analyzed, the firm can take a decision regarding whether it will have a surplus or
shortage of employees. Ways may be found to decrease the number of employees if a
surplus is found. Restricted hiring reduced hours, early retirements and layoffs are some
of the methods. If a worker shortage is forecast, the firm must obtain the proper number
and quality of labor market. Thus, external recruitment and selection are required.
Because conditions in both external and internal environments can differ quickly the
human resource planning process must be perennial. A change in conditions could
impact the entire organization, thereby requiring extensive change of forecasts. HR
planning allows flexibility in human resource management.

7. Factors affecting Human Resource Planning

Human resource planning is an energetic and continuous process. This is because
organization performs in changeable and unforeseeable environment. HRP needs
regular updating to effectively serve the on-going strategies and objectives. The
updating is not very simple, since HRP is affected by many factors. The factors affecting
Human resources planning are shown in Fig.1. These include:

Strategy of
Organization

Quatity and Culture of the

skills level of HR organization

Current
Competitive and
organizational
Fin.Environment
situation

Fig.1 Factors affecting Human Resource Planning

7.1 Strategy of Organization:

The strategy of the organization influences its Human Resource Planning. Strategy
formulation involves the response of an organization to the developments in the
external environment. The nature and type of response would indicate the strategy of
the organization which gives a fresh direction to an organization. For example, the
 strategy of an organization may be directed at mergers, acquisitions, expansion of
the product line, and entry into a new market or revival of the product in the market.
For effective accomplishment, the organization strategies should be connected with
the functional strategies and human resource strategies. In accordance with the
business strategies, an organization need to design human resource plans for a
definite period and prepare particular HR strategies relating to recruitment and
selection, training and compensation on the basis of those HR plans. As such, the
business strategy provides the decisive inputs for the HR plans and programs of the
organization

7.2 Culture of the Organization

The organizational culture is the usually held beliefs, attitudes and values that occur
within an organization for a comparatively long duration and are shared by its
members. Within a culture, sub-cultures on the basis of age, ethnicity, gender, and
regional affiliation may also exist. These cultures, sub-cultures give the form to the
personality of the members of the organization by impacting their thoughts,
emotions, motives, attitudes and behavioral patterns.
In fact the organizational culture plays a remarkable role of in the development of
business and functional strategies by influencing the values systems and the
decision making patterns of an organization. The primary functions of the
organizational culture are formulation and adaptation of decisions, combination of
activities and ensuring employee motivation and decision implementation. Thus,
cultural change is an essential prerequisite for carrying out the strategic plans and
changes. By revamping its culture and sub-culture, an organization can create a
perfect match between the organization and its vision, mission and goals.

7.3 Competitive and Financial Environment

Before the coming of globalization and complex technologies, the external
environment of the business remained more stable and definite. Organizations
thought little about environmental factors while preparing their HR plans. In fact, the
organizational issues and objectives guided primarily HR actions and policies. The
organizations of today no longer enjoy the comfort of working in such definite
environments. The changes in the nature of technology, competition, financial and
labor markets have generated an acute instability and uncertainty in the external
environment. As a result, organizations have now known the need to develop HR
plans based on the conditions existing in the external environment.
In a competitive labor market environment, organization should undertake
environmental scanning to identify, classify and prioritize skills based on their
availability in the market. They should also estimate the time needed to acquire the
requisite skills from the labor market in the conditions of both surplus and shortage.
This is because the availability of labor at the right time has a decisive influence on
the implementation of HR plans.

7.4 Current Organizational Situation

Outwardly, organizations may seem to have general feature but, in reality, every
organization is distinct and dissimilar to others. Organizations differ in terms of
capabilities, adaptability, stage of development, managerial styles, order
acquisitions, change management process and workforce competencies. Thus, it is
necessary for the HR managers to consider the current situation and capabilities of
the individual organization while devising HR plans. For instance, HR planners
 should ponder the training capabilities of the organization before deciding the
recruitment strategy for filling the job vacancies. If the organization has a strong
training infrastructure, it can choose employees directly from the campuses and train
them well through its extensive training programs. But in the absence of training
facilities, it must recruit only skilled and experienced people, perhaps for a higher
salary. Likewise, the financial capabilities of the organization need be given due
consideration for determining the compensation packages of the existing employees
as well as the new recruits.

7.5 Quantity and Skills Levels of Required Human Resources

The number and nature of job vacancies existing in the organization should also be
considered while determining the HR plans of the firm. Factors like the need for
human resources in terms of the number of personnel required, location of these
vacancies in the organizational structure, skills and competency requirements, and
the degree of difficulty in getting suitable persons must be considered at the time of
devising HR plans. Similarly, the corporate policy towards seniority and merit in
promotions, the proportion of internal sources in recruitment to external ones, and
agreements with the unions, if any, must also be reckoned. For instance, job
vacancies at the lower levels of the organizational structure may require fewer skills
and, as such, it is relatively easy to fill those vacancies at a short notice. On the other
hand, when the vacancies involve a high degree of technical and managerial
competencies, the time required for filling up such positions could become relatively
longer. Thus, the skills and competencies requirement of the human resources also
affect the HR plans.

8. Human Resource Planning Process

The human resource planning process begins with the gathering of information. HR
planning requires two types of information: data from the outside environment and data
from inside the organization. Data from the outside environment include information on
present conditions and foretold changes in the general economy, and the economy of
the particular industry, the relevant technology, and the competition. Any of these factors
may influence the organization’s business plans and thus the requirement for human
resources. The second type of information is available in the organization. Inside
information contains both short and long-term plans and strategies of the organization,
current state of human resources in the organization. Once the information from the
outside and inside sources is accumulated, planners can forecast the future demand for
employees, supply of labor from internal and external sources.
The final step in HR planning is to plan particular programs to make sure that supply will
fit demand in the future. The feedback allows for learning from past planning efforts. For
example, if the demand or supply forecasts have not been free from error as desired,
forecasting processes can be improved in subsequent years.
HR planning is usually initiated and managed by the HR department. However, line
managers must take part in the HR planning process. Strategic HR planning involves top
management and HR experts. Usually, an organization mounts a major planning effort
once a year, but modifications can be made on the basis of new input throughout the
year.
Human resource planning is a process through which the company foresees future
business and environmental influences and assesses the manpower requirements for
future. It makes an effort to provide sufficient manpower required to perform
organizational activities. HR planning is a continuous process which begins with
identification of HR objectives, goes move through analysis of manpower resources and
finishes at appraisal of HR plans. Following are the major steps involved in human
resource planning: The process of Human Resource Planning is shown in Fig.2.

Assessing Human Resources

HR Demand Forecasting

Supply Forecasting

Matching Demand and Supply

Action Plan

Fig.2 Process of Human Resource Planning

8.1 Assessing Human Resources
The evaluation of HR begins with the analysis of environment- external and internal,
outside environment contains the political, economic, social and technological
variables and internal environment consists of objectives, resources and structure to
assess the currently available HR inventory. Once the analysis of external and
internal forces of the organization is done, HR manager finds out the internal
strengths and weakness of the organization on the one hand and opportunities and
threats for the organization on the other. It also consist an inventory of the workforce
and skills at hand within the organization and a broad job analysis.

8.2 HR Demand Forecasting

HR demand forecasting is the process of anticipating demand for and supply of
human resources in an organization. These forecasts are rooted in information about
the past and the present and in assumptions about the future. Some of the most
usual premises are that past trends and relationships of variables will remain the
same in the future, the productivity follows a specified curve and the business plans
of the organization, sales forecasts, and so on will actually happen. In a highly
unstable business, these premises may not be valid for long.
Demand forecasting is a process of ascertaining future needs for human resources.
It is carried out to fulfill the future personnel requirements of the organization to
obtain the desired level of output. Future human resource needs can be estimated
with the help of the organization's current human resources and analysis of
organizational plans and procedures. It will be essential to conduct an analysis for
every significant level and type of personnel every year.
Demand forecasting methods can be split into two parts: managerial judgment
methods and quantitative methods. Managerial judgment methods include unit
forecasting of bottom up forecasting, top-down forecasting and Delphi technique.
 Mathematical methods consist of productivity ratio, learning curves, multiple
regression and linear programming.

8.3 Supply Forecasting

Once the demand for labor is predicted, it is essential to anticipate the supply of
labor the organization will have available to meet the demand. Supply is another side
of human resource assessment concerned with the estimation of supply of
manpower given the analysis of prevalent resources and probable availability of
future human resources in the organization. It estimates the future sources of human
resources on transfer, on enlargement of job and job enrichment, whereas outside
sources include recruitment of fresh candidates capable of doing well in the
organization.
Human resource supply forecasting is the process of anticipating availability of
human resources followed after demand for testing of human resources. For
forecasting supply of human resources we need to take into account internal and
external sources of supply. Internal supply of human resources is available by way of
transfers and promotions of existing employees, retired employees & calling laid-off
employees, etc. To keep tract of the current internal supply and to predict the future
supply, planners need some sort of supply information system. Increasingly
employee information is being maintained on computers into two commonly used
systems i.e. skills inventories and human resource information system.
Sources of external supply of human resource consist of labor force at hand in the
market and the pool of labor force available for new recruitment. External supply of
human resource depends on some factors including supply and demand of jobs,
literacy rate of nation, rate of growth of population, technological development,
compensation systems based on education, experience, skill and age. The most
prevalent techniques for forecasting of human resource supply from the external
source are Succession analysis and Markov analysis.

8.4 Matching Demand and Supply

Another step of human resource planning is related with starting the forecast of
future demand and supply of HR. The corresponding process refers to bring demand
and supply to a position of equilibrium so that shortages and surplus position will be
avoided. In case of shortages an organization has to recruit more employees. On the
other hand, in the case of over staffing it has to bring down the existing employment.
Therefore, this matching process gives knowledge about requirements and sources
of HR.

8.5 Action Plan

The final phase of human resource planning is concerned with finding out the surplus
and shortages of human resource. In this phase the HR plan is implemented through
the designation of different HR activities. The main activities required to bring into
action the HR plan are recruitment, selection, induction, training and development
and socialization etc. Finally, the control and evaluation of performance of HR to
check there are fit between HR planning and the HR objectives and policies follows.
This action plan need be updated with the change in time and conditions.

Summary
 Human resources planning is a process of identifying the appropriate person for the job
at the right time and cost.
 It is concerned with the flow of people into, through, and out of an organization involving
the forecast the need for labor and the supply of labor, then planning the programs
necessary to ensure that the organization will have the right mix of employees and skills
when and where they are needed.
 The HR planning is important for several areas of human resource management like
assessing future recruitment needs, optimization of available human resources,
developing training and retraining programs, formulating policies for compensation,
determining programs for management development and gaining competitive
advantage; and, shaping future plans and strategies.
 The human resource executives are now focusing their attention on how human
resources can help the organization achieve its strategic goals. Thus, HR must now be
highly involved in the strategic planning process. Strategic plan is the process by which
top management determines overall organizational purposes and objectives and how
they are to be achieved.
 There are several factors influencing the human resource planning of an organization.
These factors include the strategy of the organization, culture of the organization,
competitive and financial environment, current organization situation and quality and
skills of required human resources.
 The process of human resource planning follows a process involving certain steps.
These steps are assessing human resources, HR demand forecasting, HR supply
forecasting, matching demand and supply and the action plan