Friday 4 May 2012

IMPORTANCE OF HUMAN RESOURCE PLANNING


Many organizations fail to recognize the importance of effective Human Resource planning.  Human Resource planning serves as an input to many HR function and activities. Thus failing to do an effective Human Resource planning results in poor performance of whole HR function.  Importance of HR planning can be emphasized from the following points. 

Determining the Number to be Employed:
Human Resource Planning is about determining the number of employees along with the knowledge and skills required to achieve organizational objectives.  Without Human Resource Planning organization have no or little idea about how many people to recruit, how many people to train, whom to promote, how to grouped employees and how to pay them.  Therefore Human Resource Planning is important for organization because it provides useful input into many managerial decisions such as recruitment and selection, training and development, compensation management and careers development.
Importance of Human Resource Planning by Tahir 2012

Retention of Talented Staff:
If organization has more people than required than it has to downsize or reduce the number of employees which effect the motivation and commitment level of remaining staff. Similarly if organization has less people than required, it also increases the burden on the existing staff and thus reduces their commitment. Such situation can result in loss of talented staff. If organization has a proper Human Resource planning system in place, it results in better management and retention of talented staff by guiding organization about adequate number of staff along with right knowledge and skills. 

Managing an Effective Downsizing:
Without proper Human Resource planning organization have no idea of how many people it required. In such situation organization downsize without planning which sometimes results in loss of more talented staff and retention of less talented one. With a good Human Resource planning system in place organization can downsize more effectively; that is to downsize only those employees who are under performing and retaining good performers.

Input to Management Development Program:
Human Resource planning identifies the number and type of managers that an organization requires in future. It also helps organization to identify potential candidates who can be selected for management development. Without proper Human Resource planning, organization might end up with shortage of good managers and leaders thus affecting the performance and direction of whole organization.

Input to Career Management:
Poor career management of employees results in lack of motivation and increased turnover rate.  A good Human Resource planning system increase employee’s motivation and reduce turnover rate by helping organization to better manage employee’s career. Human Resource planning system provides useful input in to career management by identifying whom to promote and how to fill different positions from internal labor market.

Input to Strategic Decision:
A good Human Resource planning system provides useful input in to strategic decisions by guiding organization which opportunities to exploit. For example if an organization has a very good internal labor market of International managers then organization can move into different international markets because it has right managers who can support such International expansion strategy. On the other hand if organization has a poor Human Resource planning system, it can result in making wrong strategic decisions for example British Airways who once tried to increase its operations but suffer big losses because of non-availability of talented staff and managers to support such strategy.

HUMAN RESOURCE PLANNING


Human Resource Planning:
Human Resource Planning is about estimating the future needs of human resource and determining how organization will fill those needs or positions.  Human Resource Planning is important because without it organization might end up recruiting too many or too little labor which can affect organizational efficiency and hinder productivity.   
Human Resource Planning by Tahir 2012
 A lot of organizations do not plan carefully and thus sometimes they have more labor as compare to what is needed for example if organization is changing its processes from human labor to machines than it means that demand for human labor will be decreased. Similarly if organization is expanding its operations and do not plan effectively than it can result in shortage of skilled labor which can effect such an expansion strategy.  Human Resource Planning also provides useful input in management development and career management activities.  
HR Planning is divided in to two main processes; demand forecasting and supply forecasting. Their details are as under.
 
Forecasting Demand for Human Resource
Forecasting demand for human resource means estimating the number and type of people required in future. This future however includes both short term and long term time horizon.  This forecasting can be based on current turnover rate, organization’s strategic decisions and broader external environment. For example if organization is experiencing high turnover rate than the number of people required in future will be higher. Similarly if organization wants to start new operations or expand rapidly which can be through area or product diversification, then it means organization need more people in future in different geographical location and if organization wants to consolidate or downsize some of its operations then it means organization might need existing level or even less people in future.  Finally if overall economy of a country or global economy is booming than it means increase in business and revenues and thus organization needs more human resource whereas if overall economy is declining it means decrease in economic activity and thus fewer revenues and less need for human resource.

Forecasting Demand for Human Resource by Tahir 2012
An example of how external environment affect Human resource need of businesses is the Global recession of 2008. When recession hit America and Europe during 2008, it resulted in decrease in economic activity, which forced many businesses to shut down because they had no sales or revenue to generate. Similarly many businesses forced to downsize its workforce to overcome financial difficulties.
There are several tools or methods available to a Manager to forecast demand. Some of these methods are as under.
1.       Trend Analysis:
Trend analysis as the name suggests is about looking in to historical employment data such as number of people required in particular division or department.  By looking at past data, managers can determine the level and number of people required in future. For example if a particular organization which is operating in a stable environment required 500 to 550 employees in past five years’ time than it means in near future this requirement will around 500 to 600. Trend analysis involves human judgment and some level of intuitive calculations.  It works fine with small to medium size organizations or organizations with limited number of activities and less unstable environment.
2.       Ratio Analysis:
Ratio analysis means analyzing the relationship of more than one factor or variable. These factors can be sales to people ratio or number of business unit to people ratio. For example if an organization has ten stores and on average every store employs twenty five employees, so if organization plans to open another two stores in next one year time than it means organization needs another fifty employees(twenty five employees for each store).  Ratio analysis is also suitable for small to medium size organization with operations in a relatively stable environment.
3.       The Scatter Plot:
Scatter plot is a graphical representation of relationship between two variables. It is similar to ratio analysis but the difference between ratio analysis and scatter plot is that ratio analysis shows relationship between variables in figures or in ratios while scatter plot shows such relationship in chart or graphical form. By representing information on graphical chart it is easier to understand and forecast in future.
4.       Computerized forecasting:
In practice most organization now a day’s use computer aided forecasting and use Spreadsheet software such as MS Excel or other specialized forecasting software.  Computer aided forecasting enable managers to calculate the human requirement of future based on more than one variable or factor.  Computerized forecasting enable planner to make calculations which are more accurate and reliable mainly because of freedom of using more than one variables and using advanced statistical techniques. 

Forecasting supply of Internal Human Resource
Once demand forecasting is been completed then the next stage is to forecast supply i.e. the people who will fill those positions.  Here it is worth to mention that organization simply do not need the number of people (Hard Planning), it also need people who have the right knowledge and skills (Soft Planning).  For example if organization need hundred (100) employees and there are hundred employees in organization but they do not have right knowledge and skills than this organization can-not perform effectively. However if organization needs hundred(100) employees but it only have eighty (80) employees but these employees got right knowledge and skills than such organization can grow and can manage its operations properly. The supply side of forecasting includes both internal and external forecasting.
Internal forecasting means hiring from inside the organization. Internal hiring results in a more developed and motivated workforce with better career management activities. However the disadvantage of internal hiring is that organization limits its ability to creativity and fresh ideas.   Normally internal forecasting is used to assess who will replace whom.  If for particular positions  organization have no choice of selecting internal employees than organization can turn to outside sources to fill those positions. Sometimes organizations deliberately fill positions from outside source mainly to bring new ideas or new ways of doing things in to the organization or to introduce diversity.
The internal forecasting of human resource can be through following methods.

Forecasting Supply of Internal Human Resource by Tahir 2012
1.       Human Judgment:
In small to medium organizations and departments, managers or supervisors have understanding of who will replace whom. Often this human judgment is based on an individual’s past performance, his / her education, skills inventories, and type of training attended, language skills, professional experiences and International exposure if any.  Human judgment works well with medium level managerial or supervisory level and some technical positions.

2.       Replacement charts:
Replacement charts are similar to organization’s structure charts. They show a particular positions and potential candidates who can replace or fill the particular position based on individual’s previous knowledge, education and experience etc.
3.       Computer Databases:
Computer database are similar to replacement charts. Big organizations have several hundred or even thousands of different level of employees. These organizations normally maintain a computer database, in which all the information related to an individual employee is stored. This information include education, knowledge, skills, language ability, interpersonal skills, experience of particular industry or sector, overall experience, training attended, courses completed and so on.
This database enables managers to quickly browse through employee’s individual profile and identify any potential candidates who can be groomed for higher positions.