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HR Planning - Lecture notes 4

Human Resource Management (Guru Gobind Singh Indraprastha University)

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Unit-2
Human Resource Management is very important for the survival and prosperity of an
organisation. Procurement of right kind and right number of employees is the first operative
function of Human Resource Management. Before selecting the right man for the right job, it
becomes necessary to determine the quality and quantity of people required in the
organisation. This is the primary function of Human Resource Planning.

Human Resource Planning

Human Resource Planning is the planning of Human Resources. It is also called manpower
planning/ personnel planning/ employment planning. It is only after Human Resource
Planning that the Human Resource department can initiate the recruitment and selection
process. Therefore Human Resource Planning is a sub-system of organisational planning.

Definition

“Human Resource Planning is a strategy for the acquisition, utilisation, improvement and
preservation of an organisation’s human resource” – Y.C. Moushell

“Human Resource Planning is a process of forecasting an organisation’s future demand for

human resource and supply of right type of people in right numbers” – J.Chennly.K

Features of Human Resource Planning

1. It is future oriented: – Human Resource Planning is forward-looking. It involves

forecasting the manpower needs for a future period so that adequate and timely
provisions may be made to meet the needs.

2. It is a continuous process: – Human Resource Planning is a continuous process

because the demand and supply of Human Resource keeps fluctuating throughout the
year. Human Resource Planning has to be reviewed according to the needs of the
organisation and changing environment.

3. Integral part of Corporate Planning: – Manpower planning is an integral part of

corporate planning because without a corporate plan there can be no manpower
planning.

4. Optimum utilisation of resources: – The basic purpose of Human Resource

Planning is to make optimum utilisation of organisation’s current and future human
resources.

5. Both Qualitative and Quantitative aspect: – Human Resource Planning considers

both the qualitative and quantitative aspects of Human Resource Management,
‘Quantitative’ meaning the right number of people and ‘Qualitative’ implying the
right quality of manpower required in the organisation.

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6. Long term and Short term: – Human Resource Planning is both Long-term and
short-term in nature. Just like planning which is long-term and short-term depending
on the need of the hour, Human Resource Planning keeps long-term goals and short-
term goals in view while predicting and forecasting the demand and supply of Human
Resource.

7. Involves study of manpower requirement: – Human Resource Planning involves

the study of manpower availability and the manpower requirement in the organisation.

Objectives of Human Resource Planning

1. Optimum utilisation of human resources currently employed in the organisation.

2. To reduce imbalance in distribution and allocation of manpower in organisation for

various activities.

3. To ensure that the organisation is well-equipped with the required Quantity

and Quality of manpower on a sustained basis.

4. To anticipate the impact of technology on jobs and resources.

5. To control cost of Human Resources employed, used and maintained in the

organisation.

6. To provide a basis for management development programmes.

7. To ensure optimum contribution and satisfaction of the personnel with reasonable

expenditure.

8. To recruit and retain human resource of required Quantity and Quality.

Need for Human Resource Planning

1. Shortage of Skills: – These days we find shortage of skills in people. So it is

necessary to plan for such skilled people much in advance than when we actually need
them. Non-availability of skilled people when and where they are needed is an
important factor which prompts sound Human Resource Planning.

2. Frequent Labour Turnover: – Human Resource Planning is essential because of

frequent labour turnover which is unavoidable by all means. Labour turnover arises
because of discharges, marriages, promotion, transfer etc which causes a constant ebb
and flow in the workforce in the organisation.

3. Changing needs of technology: – Due to changes in technology and new techniques

of production, existing employees need to be trained or new blood injected into an
organisation.

4. Identify areas of surplus or shortage of personnel: – Manpower planning is needed

in order to identify areas with a surplus of personnel or areas in which there is a

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shortage of personnel. If there is a surplus, it can be re-deployed, or if there is a

shortage new employees can be procured.

5. Changes in organisation design and structure: – Due to changes in organisation

structure and design we need to plan the required human resources right from the
beginning.

Problems with Human Resource Planning

1. Resistance by Employers: – Many employers resist Human Resource Planning as

they think that it increases the cost of manpower for the management. Further,
employers feel that Human Resource Planning is not necessary as candidates will be
available as and when required in the country due to the growing unemployment
situation.

2. Resistance by Employees: – Employees resist Human Resource Planning as it

increases the workload on the employees and prepares programmes for securing
human resources mostly from outside.

3. Inadequacies in quality of information: – Reliable information about the economy,

other industries, labour markets, trends in human resources etc are not easily
available. This leads to problems while planning for human resources in the
organisation.

4. Uncertainties: – Uncertainties are quite common in human resource practices in India

due to absenteeism, seasonal unemployment, labour turnover etc. Further, the
uncertainties in the industrial scenario like technological changes and marketing
conditions also cause imperfection in Human Resource Planning. It is the
uncertainties that make Human Resource Planning less reliable.

5. Time and expense: – Human Resource Planning is a time-consuming and expensive

exercise. A good deal of time and cost are involved in data collection and forecasting.

Guidelines for making Human Resource Planning effective

1. Adequate information system: – The main problem faced in Human Resource

Planning is the lack of information. So an adequate Human resource database should
be maintained/developed for better coordinated and more accurate Human Resource
Planning.

2. Participation: – To be successful, Human Resource Planning requires active

participation and coordinated efforts on the part of operating executives. Such
participation will help to improve understanding of the process and thereby, reduce
resistance from the top management.

3. Adequate organisation: – Human Resource Planning should be properly organised; a

separate section or committee may be constituted within the human resource

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department to provide adequate focus and to coordinate the planning efforts at various
levels.

4. Human Resource Planning should be balanced with corporate planning: –

Human resource plans should be balanced with the corporate plans of the enterprise.
The methods and techniques used should fit the objectives, strategies and environment
of the particular organisation.

5. Appropriate time horizon: – The period of manpower plans should be appropriate

according to the needs and circumstances of the specific enterprise. The size and
structure of the enterprise as well as the changing aspirations of the people should be
taken into consideration.

Factors affecting Human Resource Plans

External factor:

They are the factors which affect the Human Resource Planning externally. They include:-

1. Government policies: – Policies of the government like labour policy, industrial

policy, policy towards reserving certain jobs for different communities and sons-of-
the-soil etc affect Human Resource Planning.

2. Level of economic development: – Level of economic development determines the

level of human resource development in the country and thereby the supply of human
resources in the future in the country.

3. Information Technology: – Information technology brought amazing shifts in the

way business operates. These shifts include business process reengineering, enterprise
resource planning and Supply Chain Management. These changes brought
unprecedented reduction in human resource and increase in software specialists.
Example: – Computer-aided design (CAD) and computer-aided technology (CAT)
also reduced the existing requirement of human resource.

4. Level of Technology: – Technology is the application of knowledge to practical tasks

which lead to new inventions and discoveries. The invention of the latest technology
determines the kind of human resources required.

5. Business Environment: – Business environment means the internal and external

factors influencing the business. Business environmental factors influences the
volume of mix of production and thereby the supply of human resources in the future
in the country.

6. International factors: – International factors like the demand and supply of Human
resources in various countries also affects Human Resource Planning .

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Internal factors:

1. Company Strategies: – The organisation’s policies and strategies relating to

expansion, diversification etc. determines the human resource demand in terms of
Quantity and Quality

2. Human Resource policies: – Human Resource policies of the company regarding

quality of human resources, compensation level, quality of working conditions etc.
influence Human Resource Planning.

3. Job analysis: – Job analysis means detailed study of the job including the skills
needed for a particular job. Human Resource Planning is based on job analysis which
determines the kind of employees to be procured.

4. Time Horizon: – Company’s planning differs according to the competitive

environment i.e. companies with stable competitive environment can plan for the long
run whereas firms without a stable environment can only plan for short term.
Therefore, when there are many competitors entering business/ when there is rapid
change in social and economic conditions of business/ if there is constant change in
demand patterns/ when there exists poor management practice, then short term
planning is adopted or vice-versa for long-term planning.

5. Type and Quality of Information: – Any planning process needs qualitative and
accurate information about the organisational structure, capital budget, functional area
objectives, level of technology being used, job analysis, recruitment sources,
retirement plans, compensation levels of employees etc. Therefore Human Resource
Planning is determined on the basis of the type and quality of information.

6. Company’s production and operational policy: – Company’s policies regarding

how much to produce and how much to purchase from outside in order to
manufacture the final product influences the number and kind of people required.

7. Trade Unions: – If the unions declare that they will not work for more than 8 hours a
day, it affects the Human Resource Planning. Therefore influence of trade unions
regarding the number of working hours per week, recruitment sources etc. Affect
Human Resource Planning.

8. Organisational Growth Cycles: – At starting stage the organisation is small and the
need of employees is usually smaller, but when the organiisation enters the growth
phase more young people need to be hired. Similarly, in the
declining/recession/downturn phase Human Resource Planning is done to re-trench
the employees.

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Steps of HR Planning

Human resource planning is a process through which the company anticipates future business
and environmental forces. Human resources planning assess the manpower requirement for
future period of time. It attempts to provide sufficient manpower required to perform
organizational activities. HR planning is a continuous process which starts with identification
of HR objectives, move through analysis of manpower resources and ends at appraisal of HR
planning. Following are the major steps involved in human resource planning:

1. Assessing Human Resources: The assessment of HR begins with environmental

analysis, under which the external (PEST) and internal (objectives, resources and
structure) are analyzed to assess the currently available HR inventory level. After the
analysis of external and internal forces of the organization, it will be easier for HR
manager to find out the internal strengths as well as weakness 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 and a
comprehensive job analysis.
2. Demand Forecasting: HR forecasting is the process of estimating 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 need 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.
3. Supply Forecasting: Supply is another side of human resource assessment. It is
concerned with the estimation of supply of manpower given the analysis of current
resource and future availability of human resource in the organization. It estimates the
future sources of HR that are likely to be available from within an outside the
organization. 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.
4. 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

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shortages and over staffing position will be solved. In case of shortages an

organization has to hire more required number of employees. Conversely, in the case
of over staffing 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.
5. Action Plan: It is the last phase of human resource planning which is concerned with
surplus and shortages of human resource. Under it, the HR plan is executed through
the designation of 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
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
conditions.

Demand and Supply Forecasting: Factors and Methods

Demand Forecasting: Demand forecasting is a quantitative aspect of human resource

planning. It is the process of estimating the future requirement of human resources of all
kinds and types of the organisation.

Factors:

Forecasting of demand for human resources depends on certain factors such as:

(1) Employment trend in the organisation for at least last five years to be traced
to determine the future needs.
(2) Organisation has to find out the replacement needs due to retirement, death,
resignation, termination etc.
(3) Improvement in productivity is yet another factor. To improve productivity
organisation needs better employees with skills and potential. Productivity
leads to growth but depends on the demands for the product of the enterprise
in the market. Higher demand may lead to more employment of skilled
personnel’s.
(4) Expansion of the organisation leads to hiring of more skilled persons. The
base of human resource forecast is the annual budget. Manufacturing plan

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depends upon the budget. Expansion in production leads to more hiring of

skills and technology.

Methods of Demand Forecasting

There are three major methods of demand forecasting. They are as follows.

(1) Executive Judgment: Executive or Managerial Judgment method is the most

suitable for smaller enterprises because they do not afford to have work study
technique. Under this method the executives sit together and determine the
future manpower requirements of the enterprise and submit the proposal to the
top management for approval. This approach is known as ‘bottom up’
approach. Sometimes the members of top management sit together and
determine the needs on the advice of personnel department. The forecasts so
prepared sent for review to the departmental heads and after their consent
approved the need. This is known as ‘top down’ approach. The best way is the
combination of the two approaches. Executives at both levels equipped with
guidelines sit together and determine the human resources need of the
organization.
(2) Work Load Forecasting: It is also known as work load analysis. Under this
method the stock of workload and the continuity of operations are determined.
Accordingly the labour requirement is determined. The workload becomes the
base for workforce analysis for the forthcoming years. Here due consideration
is given to absenteeism and labour turnover. This method is also known as
work study technique. Here working capacity of each employee is calculated
in terms of man-hours. Man-hours required for each unit is calculated and
then number of required employees is calculated.

The example is given below:

(a) Planned annual production = 2, 00,000 units
(b) Standard man-hours required for each unit = 2 Hours
(c) Planned man-hour needed for the year (a x b) = 4, 00,000 hrs.
(d) Planned annual contribution of an employee = 2000 hrs.
(e) No. of employees required ————- (c/d) = 4, 00,000/2000 = 200
This method is useful for long term forecasting.

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(3) Statistical Techniques:

Long range demand forecasting for human resources is more responsive to statistical
and mathematical techniques. With the help of computers any data is rapidly
analyzed.
The following are the methods of forecasting used under this category:
(a) Ratio Trends Analysis:
Under this method the ratios are calculated for the past data related to number of
employees of each category i.e. production, sales and marketing levels, work load
levels. Future production and sales levels, work load, activity levels are estimated
with an allowance of changes in organization, methods and jobs. The future ratios are
estimated. Then future human resources requirement is calculated on the basis of
established ratios. This method is easy to understand. Value depends upon accuracy of
data.
(b) Econometric Models:
Econometric models are built up on the basis of analysis of past statistical data
establishing the relationship between variables in a mathematical formula. The
variables are those factors such as production, sales, finance and other activities
affecting human resource requirement. Econometric model is used to forecast human
resource requirements based on various variables.
(c) Bureks Smith Model:
Elmer Bureks and Robert Smith have developed a mathematical model for human
resource forecasting based on some key variables that affects overall requirement for
human resources of the organisation. They have given an equation.
En = (Lagg + G) 1/x/ y
Where En = Estimated level of demand for employees
Lagg = Turnover or overall current business activity
G = Total growth in business activity anticipated thought period ‘n’ in term of rupees
x = Average productivity improvement from today thought planning period.
y = Conversion figure relating today’s overall activity to required employees.
This method is used when the values of G, x and y are accurate. To obtain the values
of G, x and y different statistical techniques are used.
(d) Regression Analysis:
Regression analysis is used to forecast demand for human resources at some point of
time in future by using factors such as sales, production services provided etc. This

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method is used when independent and dependent variables are functionally related to
each other. Nowadays computers are used to solve regression equations for demand
forecasting.

Supply Forecasting:
Supply forecasting means to make an estimation of supply of human resources taking
into consideration the analysis of current human resources inventory and future
availability.
Existing Inventory:
The first step in supply forecasting is to take a stock of existing HR inventory as
follows.
(a) Head Count:
Count of the total number of people available department-wise, sex- wise,
designation-wise, skill-wise, pay roll-wise etc.
(b) Job Family Inventory:
It consists to number and category of employees of each job family i.e. the jobs
related to same category like office staff, sales and marketing staff, production staff,
maintenance and industrial engineers, quality control engineers etc.
(c) Age Inventory:
It consists of age-wise number and category of employees. This gives us age
composition of human resources. Dynamism, creative abilities innovativeness is
present in young employees while making of proper judgment and display of maturity
is shown by elderly employees. Organisations prefer both young and old employees.
Human resource planning should give due consideration to age-wise human resource
mixing young and old employees in due proportions.
(d) Inventory of skill, experience, values and capabilities:
Organisation should take a stock of present inventory of skill, employees with number
of years of experiences (10 yrs, 15-yrs, 20 yrs and more etc.), values and capabilities.
(e) Inventory of Qualifications and Training:
This consists of educational qualifications of the employees academic and technical
and special qualifications if any and the training received by the employees.
(f) Inventory of Salary grades:
This includes pay and allowance-wise and total emoluments-wise stock taking.

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(g) Sex wise Inventory:

Inventory of male and female employees of the organisation.
(h) Local and Non-Local-wise Inventory:
It includes the stock of local employees and the employees belonging to other areas
such as different states of India.
(i) Inventory of Past Performance and Future Potentialities:
There are several human capacities or potentials required for performing jobs at the
workplace. Requirement of these along experience need to be taken into consideration
while taking stock of human resource inventory.

Labour Wastage:
Labour wastage should be taken into account while making future forecast and find
out the reasons of people leaving the organisation. Action can be taken to arrest the
labour wastage and replacement of uncontrollable losses. HR manager must know
how to make wastage analysis. For measuring permanent total loss due to labour the
following labour turnover formula is used.
Labour Turnover Rate = Number of Employees left specified period (Say one year)/
Average Number of Employees during the same period x 100
HR Managers have to calculate the rate of labour turnover, conduct exit interviews
etc. This helps them forecast, the rate of potential loss, causes of loss etc. The steps
can be taken to reduce loss. HR Manager can calculate labour stability index by using
the formula given below.
Labour Stability Index = Number of Employees with one year’s service or more /
Number of Employees one year ago x 100
By knowing all these labour instability can be arrested and labour turnover can be
minimised.
The potential losses can be classified as permanent total loss, permanent partial loss,
Temporary total loss and Temporary partial loss. Let us analyse these losses.
(a) Permanent Total Loss:
Permanent total loss is due to deaths, voluntary quits retirement, dismissals,
retrenchment, and promotions out, demotions and transfers out. This can be filled in
by new recruits, promotions in and transfers in.

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(b) Permanent Partial Loss:

Permanent partial loss is due to loss of some skills, potentials and capabilities because
of ill health or accidents. To get rid of this loss organisation can acquire new skill,
knowledge, values, and aptitudes among the existing employees by providing
adequate and necessary training.
(c) Temporary Total Loss:
Temporary total loss is due to loss of aptitudes, values, change in outlook and attitude
of existing employees towards their jobs, department and organisation. Absenteeism
is also a reason for this. This can be prevented by taking steps to minimize
absenteeism to forecast loss of human resources due to it. Attitude of the employees
towards organisation can be improved by knowing the causes of change and making
efforts to remove those causes.
(d) Temporary Partial Loss:
This loss is due to consultancy or advice offered by the employees of the organisation
to others. This loss of labour hours has to be there because many organisations
encourage this practice as there is revenue to the organisations also.
If you think of revenue obtained by the organisations this loss to some extent is
subsided. But these organisations not claiming from the fees or commission received
by the employees, this loss is cognizable. After forecasting potential loss, potential
additions are also to be taken into account.

Potential Additions:
Potentials added to the present inventory of human resources minimize the
impact of potential losses.
Potential additions are of following types:
(1) Permanent total:
Permanent total additions are due to new recruitment, promotions granted to juniors,
transfer effected from one department to another.
(2) Permanent Partial Additions:
These consist of acquisitions of new skills, knowledge, by the present employees.
This will increase the stock of human resources in the organisation.
(3) Temporary Total Additions:
These consist of deputation of employees from other organisations. This will
temporarily make additions to the stock of human resources.

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(4) Temporary Partial Additions:

These come to the organisation through the consultancy and advice by the employees
of other organisations.
Sources of Supply:
Estimation of supply of human resources depends upon internal and external
sources.
Internal Factors:
Internal source of supply of human resources include the output from established
training programme for employees and management development programmes for
executives and the existing reservoirs of skills, potentials, creative abilities of the
organisation.
External Factors:
External factors can be grouped into local and national factors.
(a) Local Factors:
Local factors include the following:
(1) Population densities within the reach of enterprise.
(2) Current and future wage and salary structure from other employers.
(3) Local unemployment level.
(4) Availability of employees on part time, temporary and casual basis.
(5) The output from local educational institutions and training institutions managed by
government and private establishments.
(6) Local transport and communication facilities.
(7) Availability of residential facilities.
(8) Traditional pattern of employment locally and availability of human resources
with requisite qualifications and skills.
(9) The pattern of migration and immigration.
(10) The attraction of the area as a better place to reside.
(11) The attraction of a company as a better workplace and company as a good
paymaster.
(12) The residential facilities, educational health and transport facilities.
(13) The regulations of local government in respect of reservation of backward and
minorities communities.
(b) National Factors:

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National factors include the following:

(1) Trends in growth of working population of the country.
(2) National demands for certain categories of human resources such as technical and
management professionals, computer professionals, medical practitioners, technicians,
secretaries, craftsmen, graduates etc.
(3) The output from universities, technical and professional institutions.
(4) Impact of changes in educational patterns.
(5) Cultural patterns, social norms and customs.
(6) Impact of government training schemes.
(7) Impact of government policies in respect of employment regulations.
(8) Migration and immigration patterns.
(9) Impact of national educational facilities.

The net human resource requirement depends upon the human resource requirement of the
organization for future i.e. demand forecasting and the total supply of human resources
available.

Levels of HR planning
Human resource planning is done at various levels for their own purposes by various
institutions. There are various levels of human resource planning in an industrial enterprise:
 National Level
 Sectoral Level
 Industry Level
 Unit Level
 Departmental Level
 Job Level

National Level: Generally, central government plans for human resources for the entire
nation. It anticipates the demand for and supply of human requirements at the national level.

Sectoral Level: Central and state governments also plan human resource requirements at
sectoral level. It tries to satisfy needs of some particular sectors like Agriculture Sector,
Industrial Sector and Service Sector.

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Industry Level: This level of planning is done to suit manpower needs of a particular
industry such as Engineering, Heavy Industries, Paper Industry, Consumer Goods Industries.
Public Utility Industries, Textile, Cement/Chemical Industries etc.

Departmental Level: This level of planning is done to suit the manpower needs of a
particular department in a company e.g. Marketing Department, Production Department.
Finance Department, etc.

Job Level: This level of planning fulfills the human resource needs of a particular job family
within department. For example, the requirement of number of sales executes in the
marketing department.

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