Everything you need to know about the techniques of human resource planning. Human resource planning is the process of analysing and identifying the needs for and availability of human resources so that the organisation can meet its objectives.
In any enterprises, the organisational goals and objectives provide the context for HRP. The HRP process examines the implications of business strategies and goals on human requirements — the number and type of people required; the training they will require; and whether the organisation will have to employ additional employees.
At the macro level, manpower planning model is concerned more with the demand for jobs than with the supply side of the employment equation. During macro-level manpower planning, planners try to understand the number of people coming from the labour market, their education and training levels, their ages, etc.
These input information facilitate an organization to determine the induction training needs to transform the labour supply to meet the demands of the economy.
Thus, macro-level and micro-level planning are interdependent and interrelated. Macro-level HR planning is reinforced through educational planning.
In this article we will discuss about the various techniques used for human resource planning. They are:-
A: Some of the devices and techniques used for human resource planning are:- 1. Mission 2. Objectives 3. Policy 4. Procedures 5. Methods 6. Rules 7. Standards 8. Budgets and 9. Strategy.
B: Some of the well-known models and techniques used in :- 1. Social Demand Approach 2. Manpower Requirement Approach and 3. Rate of Return Approach.
C: Some of the popular techniques and methods of forecasting human resource planning:- 1. Demand Side of HR Forecasting and 2. Supply Side of Forecasting.
D: The main techniques of human resource planning are as follows:- 1. Qualitative Techniques and 2. Quantitative Techniques.
Techniques and Methods of Human Resource Planning
Techniques of Human Resource Planning – Devices and Techniques of Human Resource Planning
Human resource planning is the process of analysing and identifying the needs for and availability of human resources so that the organisation can meet its objectives. In any enterprises, the organisational goals and objectives provide the context for HRP. The HRP process examines the implications of business strategies and goals on human requirements — the number and type of people required; the training they will require; and whether the organisation will have to employ additional employees.
In the present era, due to globalisation, there are certain changes in business, trade, economy, society and environment have led to an integration of planning with HRP and as such it is long term proactive process. In the competitive business environment, human resources are part of the strategic planning process. Human resources planning is essentially the means to the end of building more competitive organisations.
Within the framework of HR planning, there are different devices and techniques to develop various parameters are stating here.
The signifying role of these techniques are briefly stated here:
1. They determine the basic guidelines to perform different aspects and tasks for HR planning;
2. They provide basic parameters to make action plans for HR programmes;
3. They provide adequate platform for HR decisions and planning; etc.;
4. They provide bases for present and future HR plans and HR strategies; and
5. They develop a comprehensive form of HR planning.
The devices and techniques of HR planning are given here:
1. Mission – A mission statement is an enduring statement of purpose that distinguishes one business from other similar firms. It identified the scope of a firms operations in different areas.
2. Objectives – Objectives are goals, aims or purposes that organisations wish over varying period of time. Objectives may be defined as those ends which the organisation seeks to achieve by its existence and operation. They are concern to determine and implement the work plan.
3. Policy – A policy is a broad, general guide to action which constrains or directs goal attainment. Policies do not normally dictate what action should be taken, but they do provide the boundaries within which the objectives must be pursued. Thus, policies serve to channel and guide the implementation of strategies.
4. Procedures – Procedures are denotes some specific manners in which a particular activity is to be performed. It develops a series of related tasks and established way of performing the work to be accomplished. It may be recognised as a system of interrelated activities of a network.
5. Methods – A method is one step of procedure. It is a prescribed manner for performing a given task with the proper considerations to the objectives and available resources. As such, it is specified how a step of procedure is followed and then developing comprehensive methods for each step in those procedures.
6. Rules – A rule is prescribed guide for conduct or action. It is a specified directional way to provide guidance to perform some actions. A rule provide definite action to be taken or not taken or not taken with respect to a situation.
7. Standards – Standards denotes the target oriented aspect towards getting the ideal form of any performing task. It is a set level of expected task and performance of an ideal task and are pre-determined by different studies, experience, research as well as pre literary sources etc.
8. Budgets – It is an estimated part of future plan of action. It is also a kind of single use plan of expected results expressed in numerical terms. It anticipates operating results of HR involving financial budgets that are appropriated for meeting anticipated expenses.
9. Strategy – Strategy is the pattern of objectives, purpose or goals and major policies and plans for achieving these goals stated in such a way to accomplish the targets. It is a unified and integrated device or method relating to the challenging part of overall environment.
Techniques of Human Resource Planning – Well-Known Models and Techniques: Social Demand Approach, Manpower Requirement Approach & Rate of Return Approach
At the macro level, manpower planning model is concerned more with the demand for jobs than with the supply side of the employment equation. During macro-level manpower planning, planners try to understand the number of people coming from the labour market, their education and training levels, their ages, etc.
These input information facilitate an organization to determine the induction training needs to transform the labour supply to meet the demands of the economy. Thus, macro-level and micro-level planning are interdependent and interrelated. Macro-level HR planning is reinforced through educational planning.
There are certain well-known models and techniques of human resource planning, some of which are described briefly:
1. Social demand approach
2. Manpower requirement approach (MRA)
3. Rate of return approach (RRA).
1. Social Demand Approach:
This is a leading model of HR planning that contains three major steps – (a) assessing the demand for manpower, (b) assessing the supply of manpower, and (c) balancing the supply and demand.
The demand side of the model deals with the estimation of future level of gross domestic product (GDP), estimation of structural change of the economy in terms of distribution of output by economic sector over time, and estimation of labour productivity by economic sector and its evolution over time.
The supply side refers to the estimation of population and educational level, age, and sex; the number of graduates, dropouts by age, gender, and education level; distribution of labour force with age, sex, and educational level.
Balancing Labour Supply and Demand:
The labour demand may be very different from labour supply due to poor quality of data collected during enumeration. In such cases, the planners tend to use an ad-hoc adjustment mechanism revising one or more of the key assumptions. While developing a human resource plan, if the planner is too optimistic about labour productivity, the forecasting may fall short of the actual labour demand.
On the contrary, optimistic labour force participation rate can also increase the actual supply of labour. In such paradoxical situations, reconciliation of labour supply and labour demand emerge to be imperative.
2. Manpower Requirement Approach:
National planners adopt this approach during macro-level manpower planning. A linear relationship is established between the manpower category in different industry groups and their outputs. MRA helps to project the demand for manpower at the macro-level. This approach manifests its importance for the purpose of educational planning at the national level.
3. Rate of Return Approach:
This is another well-recognized approach that planners adopt during macro-level manpower planning. RRA is based on the calculation of the net returns on educational expenditure. Earning of any individual is likely to increase on receiving education. RRA is measured considering the net increase in income on receiving education. The present value of the flow of future net income in calculated through this approach.
Educational programmes, which have positive returns, are promoted, while programmes showing negative or zero net present value (NPV) are reduced or even discontinued.
Techniques of Human Resource Planning – Popular Techniques or Methods of Forecasting HRP
A variety of techniques and processes have emerged during the course of time with regard to the forecasting of human resources’ needs. Some of these are simple, whereas others are complex and sophisticated. Quite a number of organisations rely greatly on guesses and opinions and, very often, on managerial decisions.
On the contrary, many organisations, particularly the big ones, make use of statistical analysis, mathematical tables and other forms of quantification of needs. In all cases, forecasts for future manpower requirements involve consideration of both quantity and quality of manpower, and also its demand and supply sides. In addition, forecasting may be for a short, intermediate or long period.
Some of the more popular techniques or methods of forecasting are described below:
1. Demand Side of HR Forecasting:
i. Trend Analysis:
A common forecasting procedure in forecasting human resources’ needs is based on extrapolations of the perceived trends. The emphasis in the procedure is on the current trend based on experiences of the past. Many future trends, including those relating to the number of employees, hours of work, employees’ skills and potentialities, their mobility, labour cost and compensation, can be discerned from the existing direction of change.
While making forecasts for the future, it is essential to take into account the current employees’ unused and undeveloped talents and capabilities.
Ratio analysis makes forecasts of human resources’ needs on the basis of the ratio between selected causal factors such as volume of sales and number of employees needed, or between quantity of output and number of employees required for the production of that quantity. Information from trend analysis is useful in working out the ratio. The method is based on the assumption that productivity will continue to remain the same.
Under this technique, a graphical representation is made to identify the relationship between two variables such as business activities and staffing levels. If the sales increase, there will be a corresponding change in the number of employees required. Such a graphic representation may be made in respect of other sets of variables also.
Regression analysis identifies the movement of two or more interrelated series. It is used to measure the changes in one variable as a result of changes in other variables. For example, if “Y” variable represents the number of employees, and “X” variable represents service deliveries, the regression analysis determines the relationships between them by actually measuring the relationships that existed in the past. The method involves the use of a series of observations.
Computer-based macroeconomic modelling programmes are often used to predict future workforce needs. This type of programme uses various economic indicators to determine how a workforce must grow or shrink in response to changes in the labour market. The programme may or may not include analysis of past economic trends.
Under this technique, the future manpower needs are determined by projecting the firm’s sales, quantity of production and the personnel needed to maintain the required volume of output using computers and software. The technique is more useful in determining personnel needs on the basis of clearly set goals such as the level of projected sales and production.
This technique is based on the volume of operation and work efficiency of personnel. It is applicable where it is possible to measure the increase or decrease in operation and the number of workers required. The planned output is determined by taking into account the standard output per hour and standard hours per person.
This technique is named after the ancient Greek oracle, Delphi. The technique involves the selection of a facilitator who solicits and collates written manpower forecasts from experts. After receiving the opinions of the experts, a summary of the opinions is developed by the facilitator, and re-distributed among the experts for revision. The experts do not meet face-to-face and they communicate through the facilitator who finalises the consensus in the end.
It is a decision-making method used among groups of different sizes in the quest for a quick decision. The decision in the method is through the process of voting. Under it, the opinion of every member of the group is considered, but the final forecasting is made on the basis of the estimate receiving the highest number of votes.
Under this method, the managers sit together, hold discussions and arrive at the figure which would be the future demand for manpower. It generally involves “bottom-to-top” and “top-to-bottom” approaches.
A few other techniques, such as HR Budget and Planning Analysis, Scenario Forecasting and Workforce Analysis, are also used in human resource forecasts.
2. Supply Side of Forecasting:
After the need for human resources has been forecasted, the next step is to identify their availability. This calls for the consideration of both the internal and external supplies.
Substantial information relating to the requirements of existing jobs can be obtained through job description, job specification, manning tables and personnel records. These provide the base for projecting future internal supplies of manpower.
The notable factors determining the future supply of manpower from internal sources comprise the following – (a) the possible movement of current employees through promotions and transfers, (b) additional skills and capabilities acquired by current employees from training and development programmes, (c) probability of utilisation of employees’ secondary and tertiary skills and their unused and undeveloped talents and aptitudes and (d) actual or estimated trend of separation resulting from superannuation, quitting, discharges and voluntary retirement.
Some of the more frequently used techniques in making forecast of internal human resources supply are described below:
a. Personnel Inventories:
Small firms usually maintain personnel inventories which compile information about employees’ educational level, company-sponsored training and courses attended, their interest in career development and the assignments desired by them. These inventories are particularly useful in short-term forecasting.
b. Skill Inventories:
Skill inventories contain data on employees’ performance, educational background, training received and employees’ suitability for promotion or transfer to projected vacancies. Big firms employing a large number of workers maintain information about qualifications of employees through computerised skill inventories using suitable software systems.
Computerised skill inventories contain detailed data relating to work experience of employees, their product knowledge, level of their familiarity with the organisation’s product lines or services, formal education received, experience with industry and their capabilities to assume new assignments.
c. Transition Matrix:
Many organisations make use of transition matrix which is an arrangement of numbers, symbols and similar indicators in rows and columns that can be used to model the internal flow of human resources. The matrix shows probabilities in respect of the average rate of historical movement from one job to another.
d. Succession Analysis:
This technique is generally used to forecast the supply of people to top positions. It lays emphasis on preparation of replacement charts which are “succession plans developed to identify potential personnel changes, select back-up candidates, promote individuals and keep track of attribution (resignations and retirements) for each department in an organisation.”
Forecast for internal supply of manpower is facilitated by the adoption of human resource information systems which is a systematic procedure for collecting, storing, maintaining and validating data about human resources in an organisation. As a matter of fact, an HR information systems constitutes a part of the larger management information systems.
In many cases, especially when there is a substantial increase in the expected vacancies, it is very difficult to fill the anticipated openings through internal sources. Under such situations, forecasts for the external sources remain the only option left. When an employment situation is not bleak, it is not difficult to locate these sources. However, under the conditions of scarce availability of suitable manpower, forecasting the supply becomes a difficult task.
While making forecasts for the supply of various categories of personnel through external sources, it is necessary to consider a number of factors. These include the following – (a) labour force estimates of the governmental agencies, (b) industrial trends, (c) changes in the composition of labour force, (d) net migration position, (e) mobility of labour, (f) the state of educational and training facilities, (g) technological changes, (h) extent of competition in the product and labour markets and (i) nature and extent of governmental intervention in the domain of labour.
Although several sophisticated mathematical and statistical techniques and models have emerged during the course of time, forecasting of human resources’ needs of organisations continues to be a combination of both quantitative methods and subjective judgements. The facts are required to be evaluated and weighed by managers and experts who can use the mathematical techniques as a tool rather than relying on them blindly.
Techniques of Human Resource Planning – 2 Important Techniques: Qualitative and Quantitative Techniques
In the past a number of estimation techniques were used to assess the demand and supply of manpower within and outside an organization. Some of these techniques can be considered as quantitative oriented because they generally use a simplified model to estimate demand and supply of manpower in terms of numbers. Quantitative techniques, e.g., Markov method, attrition analysis models, renewal models, operation research techniques, regression method were quite popular in the past.
However, due to increasing volatility of the economic environment and fast-changing composition of manpower both in internal and in external markets, many of these techniques lost their relevance and utility. Further, most of these techniques have been found to be useful only in big organizations which are increasingly becoming a rarity in most industries.
With progressive reduction of organizational size due to technological change and also due to change is structure of the economy, many of these techniques can no longer be used with very high degree of confidence. Apart from quantitative techniques there are a few popular qualitative methods also.
Some of these techniques are described here:
Technique # 1. Qualitative:
i. Replacement Chart:
The fundamental principle here is to identify a potential candidate who would replace another candidate either because he/she would be retiring or he/she would be given different assignment as a matter of routine transfer. A chart is developed for each of the important positions along with a list of potential candidates one of who may replace him/her. Against each of those potential candidates, it lists out their promotion potentials along with required developmental needs if any.
It is a judgmental exercise and is prepared after discussing with the chief executive. Replacement chart assumes that required candidates are already there in company’s internal ranks. All that is needed now is to identify them and prepare an appropriate developmental and selection plan for them.
It is similar to replacement chart except that it is long-term oriented and is well linked with the career planning for individual development. It balances the organizational top management needs with the career aspiration of individual candidates. Succession planning is focused more on development. As opposed to individual identification for a replacement chart, it tries to develop a pool of potential replacements irrespective of their current potentials.
It is by far one of the easiest and quickest estimation techniques. It asks the managers in charge of various departments to come out with their own assessment of manpower requirements for their respective departments given that the organization has adopted certain business plan. The technique relies on a manager’s intuitive understanding of strategic goal and the job requirements of the company.
Technique # 2. Quantitative:
i. Span of Control Method:
In manufacturing organizations where a lot of workers work on similar types of machine-oriented jobs with similar hazards and constraints, the supervisory requirements can be estimated based on number of workers that a manager can supervise called the span of control. This method relies on the fact that managers are needed for supervising lower level employees and workers.
They are responsible not only to help and guide workers to do technical jobs but also to meet organizational control requirement of measuring their performance. Past practices in the same function or the current practices of a competitor organization could be used as a benchmark to estimate the manpower requirements.
This method relies on the assumption that ratio between manpower in different functions remains more or less constant over time. Unless there is any drastic change in management technology, the ratio of total employees engaged in different functional departments remain constant. So if there is any increase in total activity in any department, there will be a corresponding increase in number of employees in other departments.
One of the advantages of this method is that it is relatively easy to implement particularly in unionized environment. Another advantage is that sometimes an organization may be able to benchmark its inter-departmental manpower distribution with the best organization in that industry.
It is a sophisticated statistical technique to estimate manpower requirements based on projected requirements of outputs or renewals. It is based on the assumption that total organizational output is statistically related with employment of manpower in different departments and a few other managerial actions. In this technique, a statistical relationship is to be established first based on past output, departmental employment, and managerial actions, e.g., purchase and financial expenditure.
Once a regression model is established the future output is used to estimate manpower requirements for different major functions. Though this estimation method is very sophisticated but because of its huge data requirements and the fundamental assumption of constancy of relationship between output on the one hand and interdepartmental relationship on the other hand it is not very popular among managers.
It is another statistical technique which is useful only in big organizations. This technique is used to estimate manpower availability in higher levels due to their movement through a hierarchy of levels through internal promotion. It is based on the assumption that in a big organization, on average the promotion probability in any level does not change much from year to year.
Every year, almost the same percentage of eligible candidates gets promoted to the next higher level. The model can also include possibility of voluntary quit if it is a major concern and if a constant fraction of manpower is also leaving the organization every year.
Example – Suppose in a company there are three managerial levels of Assistant Manager, Deputy Manager, and Manager. The rates of promotions are 0.6, and 0.2 for promotion from Assistant Manager to Deputy Manager and from Deputy Manager to Manager, respectively.
This means if there are 10 Assistant Managers who are all eligible for promotion in a particular year, then out of 10 Assistant Managers, six are likely to get promotion to Deputy Manager Positions during the year and four are likely to remain as Assistant Manager until the next promotion round. Similarly, if there are 10 Deputy Managers who are all eligible for promotion, then two are likely to get promotion and eight are likely to remain as Deputy Managers.
We assume the quit rates are 0.3, 0.2 and 0.1 for Assistant Managers, Deputy Managers, and Managers, respectively. This means if there are 10 Assistant Managers in a year, then at the end of the year three of them are likely to leave while seven are likely to stay back.
Assuming that there is no double promotion, the transition matrix for this organization may be written as shown below in Table 7.1:
Assuming these rates are constant, it is possible to estimate the number of managers that will be available in different ranks in any future years. Even if the organization decides to recruit managers in different years, this could be incorporated into the calculation.
Let us assume in 2004, the company had 200 Assistant Managers, 100 Deputy Managers, and 30 Managers. Let us assume, out of 200 Assistant Manager only 150 were eligible for promotion to next higher level of Deputy Manager, out of the 100 Deputy Managers only 50 were eligible for promotion.
Let us assume in 2005 the organization recruited 10 Deputy Managers and five Managers from outside. Then using the above transition matrix for promotion and quit rate, we can get the available number of managers in different levels in 2005 is as shown in Table 7.2.
We assumed that among the quitters there were a proportionate number of potential promotes also.
Note how the distribution of managers in different ranks changed due to promotion and quit from different ranks. In 2004, they had 61% managers as Assistant Managers, 30% as Deputy Managers, and 9% as Managers. But in 2005, this percentage in different ranks changed to 31.8% as Assistant Managers, 60% as Deputy Managers, and 16% as Managers. This usually happens in most big organizations which experienced fast growth in the past and made all their recruitment’s only in lower levels.
As time passes the distribution moves from higher concentration at lower levels to higher and higher concentration at upper levels. Unless the organization grows in size, this may cause serious problems of having too many employees at upper levels who may be doing the same type of job that they were doing in the lower levels.