Human Resource planning

LITERATURE REVIEW

2.0 INTRODUCTION

This literature review uses the work of other various researchers to be able to provide the theoretical context of the research. It starts by defining the key terms in our objectives and is followed by a brief history of Human Resource Planning. Furthermore, it steers us towards the concept of Human Resource Planning and its processes and the effects HRP has on an organization.

2.1 DEFINITION OF HUMAN RESOURCE PLANNING

Human Resource Planning is an outgoing process of appointing the accurate number of employees bearing the right talent and skills in the right jobs at the right time, while avoiding manpower shortages or surpluses as a means to achieve the goals of the organization.

Walker (1974) defines HRP as “the systematic analysis of present and future human resource requirements and the establishment of strategic plans and programs for the procurement, utilization, development and retention of those employees needed to achieve the organizational goals and objectives.” Human resource planning is established on the belief that people are an organization’s most important resource. Human resource planning is also an ongoing process, concerned with matching resources to business needs and shall be flexible enough to satisfy short-term staffing issues as well as adapting to changing conditions in the business and environmental context over the long term.

Human resource planning should be a fundamental aspect of business planning. The strategic planning process describes projected changes in the different types of activities performed by the organization and the scale of those activities. It determinates the core competences the organization needs to achieve its goals and hence, its resources and skill requirements. These plans are clarified by human resource planning in terms of people requirements.

Quinn Mills (1983), stated that human resource planning is a “decision-making process that combines three important activities :
1) identifying and obtaining the right number of people with the proper skills;
2) motivating them to achieve enhanced and better performance;
3) creating interactive links between business objectives and human resource planning activities.”

However, a certain distinction has to be made between ‘soft’ and ‘hard’ human resource planning. Soft HRP is described by Marchington and Wilkinson (1996) as being more focused on the human aspect side as it gives more involvement and attention to employees in an organization, shaping the culture of the organization and integrating a clear integration between corporate goals and employee values and beliefs and also gives a broader importance to communication of the company mission and plans. Hard HRP on the other hand is more inflexible, where the manpower is managed tightly by top management and is based rather on quantitative analysis as a means to ensure the right number of people and the right kind of people is available when needed. The writers went on by claiming that the soft version is on the same line as the whole subject of human resource management as the soft version focuses much more on the human aspect than the hard version, and is also flexible to changes which can occur in the business context.

Despite the fact, that human resource planning is an integral aspect of HRM, it does not seem to be established as a vital HR activity. Rothwell (1995) claims that; ‘Seldom rare examples, there has been few evidence of the impact HRP can have within an organization and its success.’ Rothwell (1995) explains that this could have arisen from:

• The impact of change and the complexity of forecasting the future,
• The ‘shifting kaleidoscope’ of policy priorities and strategies within organizations,
• The lack of trust shown by many managers of theory or planning- they often choose pragmatic adaptation over conceptualization
• The lack of attestation that human resource planning really works.

2.2 THE LABOUR MARKET

Human resource planning processes occurs within the framework of the labour market. Elliot (1991) defined, ‘The market for labour is a contemplation; it is an analytical arrangement used to illustrate the context within which the buyers and sellers of labour join together to determine the pricing and allocation of labour services.’ Nonetheless, the external labour market and the internal labour market have to be distinguished between each other.

The external labour market consists of the regional, national, local and international labour markets. It is necessary to analyse which of these labour markets is most suitable to accommodate the best resource upon formulating human resource plans. Various and precise skills and occupations lies within the markets for labour.

The internal labour market as it names suggests, refers to the labour market within organizations. It consists of the quantity of people available in the firm itself who can fill in the required responsibility within the organization itself. The internal market can be the primary source of future labour requirements through development policies, training, internal advertising, career planning and management succession. Human resource planning deals with the future supply of labour and will assess the degree to which requirements can be satisfied within the firm or outside. Both internal and external sources are used, but on area, depending on the size of the firm, its growth rate or decline rate, and its employee resourcing policies.

2.3 FROM MANPOWER PLANNING TO HUMAN RESOURCE PLANNING

Manpower planning, human resource planning, employment planning, people planning and other similar names have been used to label the planning exercise of human resource management. (Megginson, 1977: Burack and Gutteridge, 1978).

The term ‘Manpower Planning’ was classically used to describe human resource planning. Nonetheless, in modern trends, the term “human resource planning” has prevailed. This has been the case since in HRP, the managers are concerned with motivating people – a process in which expenses, numbers, control and systems interact and play a part whereas that in Manpower planning the managers focuses mainly on the numerical elements of forecasting supply, demand matching and control, in which people are a part and also as a means to minimize the sexist connotation of the term “manpower”.

4. HR PLANNING V/S MANPOWER PLANNING

1. Human resource planning utilizes more qualitative techniques for evaluating future manpower requirements.

Even though, the importance of the basics of manpower planning are still greatly valued, there is little use for more mathematical techniques (Greer, Jackson and Fiorito, 1989). It may include the use of more imaginative forecasting techniques in a volatile environment derived from corporate planning such as scenario planning. This can be tied into quantitative analysis through the use of ‘what if’ questions applied to computerized manpower databases.

2. Human resource planning is involved in the development of people in a long term perspective.

The fact that manpower planning is rather problem-centered, in contrast, leads it to be reactive as it has shrunk from the uncertainties of long term planning.

3. Human resource planning provides flexibility to business strategy.

This has two facets:

Firstly, the head of the HR function is part of the top team. This ensures a dialogue about people and strategy.

Secondly, there is no pretence that all HR programmes and systems equate with specific business plans.

FIGURE 1.2 PROCESS OF HR PLANNING

Source: (Armstrong Michael: A handbook of Human Resource Management Practice.

5. AIMS OF HUMAN RESOURCE PLANNING

The aims of human resource planning are to ensure that the organization:

• Makes the best and optimum use of its human resources

• Is able to foresee and anticipate the issues of potential excess or shortages of people

• Focuses on recruiting internally than externally when key skills are in short reply- it involves formulating retention, as well as employee development strategies.­

• Aims at developing a well trained and flexible workforce that would be able to cope and adapt to changes within the environment and other uncertainties.

2.6 ACHIEVING THE AIMS

HRP is believed to consist of four clear steps, namely:

1. Forecasting future needs;
2. Analysing the availability and supply of people;
3. Drawing up plans to fit supply and demand;
4. Monitoring the implementation of the plan

As Casson (1978) mentioned, this traditional belief represents human resource planning as an “all-embracing, policy-making activity producing, on a rolling basis, accurate forecasts using technically sophisticated and highly integrated planning systems.’ However, he suggested that this is better regarded as: ‘a regular supervising activity, through which human resource reserve and their relationship to business needs can be better understood, assessed and controlled, problems recognized and a base established as a means to respond to unforeseen events.

The aims of Human Resource Management can be achieved through the following activities:

6. (a)- Resource Strategy

6. (b)- Turning broad strategies into action plans

2.6 (c)- Demand Forecasting

2.6 (d)- Supply Forecasting

2.6 (e)- Forecasting requirements

2.6 (f)- Flexibility

2.6 (g)- Productivity and costs analysis

2.6 (h)- Action planning

2.6 (i)- Control

2.4 (a) (i) EMPLOYEE RESOURCING STRATEGY

Employee resourcing strategy helps both in the formulation and implementation of business strategies.

2.4 (a) (ii) Formulation of business strategies

Resourcing strategies participates greatly in the formulation of business strategy by identifying opportunities to take the best out of existing human resources and by showing how human resources limitations may affect the implementation of the proposed business plan unless action is taken. Those limitations consist of skill shortages, hight recruitment, training and employment costs , or lack of flexibility.

2.4 (a) (iii) Implementation Strategies

These consist of:

• acquisition strategies which describe how the resources required to meet forecast needs will be obtained
• retention strategies, which consists of those strategies that the organization will make use of so as to keep people they intend to at the organization
• development strategies, which indicates what needs to be done to extend and improve skills to enable people to fill for greater responsibility, and also defines the outputs required from training programmes
• utilization strategies, which indicate intentions to improve productivity and cost effectiveness

2.4 (a) (iv) The basis of employee resourcing strategies

The ground for employee resourcing strategies is provided by longer-term business plans shorter-term budgets and competences and willingness ‘to minimize cost of the business’ by diminish the size of the workforce, delayering or relying more on part timers.

Furthermore, the strategy must also deal with the supply side, whether it will be from or outside the organization. Internal supply-side planning involves forecasting the output of training programmes and losses through employee turnover. Absenteeism’s impact has also to be considered.

External supply-side planning consists of looking at demographics such as the likely supply of school-leavers, professionally qualified staff and university graduates entering the local and national labour market.

2.4(b) TURNING BROAD STRATEGIES INTO ACTION PLANS

Resourcing strategies indicates the analysis of business strategies and demographic trends. They are translated into action plans summed up on the outcome of the following interrelated planning activities:

• Scenario Planning- executing an environmental scan on the problems that most affect markets for labour which concerns the organization;
• Demand forecasting- estimating future needs for people and skills in relation to corporate and functional plans and forecasts of future activity levels;
• Supply forecasting- estimating the supply of manpower in allusion to analyses of current resources and future availability, after allowing for waste;
• Forecasting requirements- analyzing the demand and supply forecasts to find future deficits or surpluses with the help of models where suitable;
• Productivity and cost analysis- analyzing productivity, capacity, utilization and costs so as to identify the need for improvements in terms of productivity or costs’ reduction.
• Action planning- setting up a series of plans to deals with forecasts deficits or surplus of people, to improve utilization, flexibility and productivity or to reduce costs;
• Budgeting and control- setting human resource budgets and standards and monitoring the implementation of the plan against them

2.4 (b) (i) SCENARIO PLANNING

Scenario planning can be defined as an assessment of all the environmental changes that are likely to have certain effects on the organization so that a forecast can be made of the possible situations that may have to be dealt in the future. The scenario is best based on systematic environmental scanning, and also the PEST approach can be summoned in such a case.

2.4 (c) DEMAND FORECASTING

Demand forecasting is the process of estimating the future number of people required and the exact aptitudes and competences they will need to bear. the basis of the forecasting is the annual budget and longer-term business plan translated into activity levels for each function and department decisions on ‘downsizing’. Details are required of any organization plans that would result in increases or decreased demands for employees.

2.4 (c) (i) (a) DEMAND FORECASTING METHODS

There are four basic demand forecasting methods for forecasting the number of people required:

1. Managerial Judgment
2. Ratio- trend analysis
3. Work study techniques
4. Modeling

2.4 (c) (i) (a) MANAGERIAL JUDGMENT

Managerial judgment is the most common method of forecasting. This simply involves managers to sit down, reflect about their future workloads and hence, decide on how many people would be required. This process can be done on a “bottom-up” basis, with line managers submitting proposals for agreement by senior management.

A “top-down” approach can be used alternatively, in which the company and department forecasts are prepared by top management, possibly acting on advice from the personnel department. These forecasts are reviewed and agreed with department managers.

Eventually, the best way of using managerial judgment may to be adopt both the “bottom-up” and “top-down” approach. Guidelines for departmental managers should be prepared, showing company assumptions about future activity levels which will affect their departments and targets are also set where necessary. Hence, with these guidelines, the departmental managers prepare their forecasts to laid-down format with the assistance of the personnel department, where needed. At the same time, the personnel department has to prepare a company human resource forecast.

2.4 (c) (i) (b) RATIO-TREND ANALYSIS

Ratio-trend analysis is carried out by analyzing and studying past ratios, for instance, the number of direct (production) workers and (support) workers in a manufacturing plant, and forecasting future ratios, having made some room for changes in organization or in methods. Activity level forecasts are afterwards used to determine direct labour requirements and the number of indirect workers needed.

2.4 (c) (i) (c) WORK STUDY TECHNIQUES

Work study techniques can be used when it is possible to apply work measurement to calculate how long operations should take and the number of people required to do so. The starting point in a manufacturing company is the production budget prepared in terms of volumes of saleable products for the company as a whole, or volumes of output for individual departments. The budgets of productive hours are then drawn together by the use of standard hours for direct labour, if standard labour times have been established by work measurement. The standard hours per unit of output are then multiplied by the planning volume of units to be produced to give the total planned hours for the period. This is divided by the number of actual working hours for an individual operator to show the number of operators needed. Work study techniques for direct workers can be combined with ratio-trend analysis to calculate the number of indirect workers needed.

2.4 (c) (i) (d) MODELING

Mathematical modeling techniques using computers and spreadsheets can help in the formulation of demand and supply forecasts.