CHAPTER 5: HUMAN RESOURCE PLANNING Copyright © 2005 South-Western. All rights reserved. Human Resource Planning (HRP) • First component of HRM strategy • All other functional HR activities are derived from & flow out of HRP process • Basis in considerations of future HR requirements in light of present HR capabilities & capacities • Proactive in anticipating & preparing flexible responses to changing HR requirements • Both internal & external focus Copyright © 2005 South-Western. All rights reserved. 1–2 Human Resource Planning (HRP) • Goes beyond simple hiring & firing • Involves planning for deployment of human capital in line with organization &/or business unit strategy • May involve: – – – – Reassignment Training & development Outsourcing Using temporary help or outside contractors • Needs as much flexibility as possible Copyright © 2005 South-Western. All rights reserved. 1–3 Key Objectives of HR Planning • Prevent overstaffing & understaffing • Ensure organization has right employees with right skills in right places at right times • Ensure organization is responsive to changes in environment • Provide direction & coherence to all HR activities & systems • Unite perspectives of line & staff managers Copyright © 2005 South-Western. All rights reserved. 1–4 Types of Planning • Aggregate Planning – Anticipating needs for groups of employees in specific, usually lower level jobs & general skills employees will need to ensure sustained high performance • Succession Planning – Focuses on ensuring key critical management positions in organization remain filled with individuals who provide best fit Copyright © 2005 South-Western. All rights reserved. 1–5 Aggregate Planning • Forecasting demand – Considers firm’s strategic plan’s effects on increases or decreases in demand for products or services – Assumptions on which forecast is predicated should be written down & revisited when conditions change – Unit forecasting (bottom-up planning) involves “point of contact” estimation of future demand for employees – Top-down forecasting involves senior managers allocating a fixed payroll budget across organizational hierarchy – Demand for employee skills requirements must also be considered Copyright © 2005 South-Western. All rights reserved. 1–6 Aggregate Planning • Forecasting supply – The level and quantities of abilities, skills & experiences can be determined using Skills Inventory. – Annually updated human resource information system (HRIS) is dynamic source of HR information – Markov analysis can be used to create transition probability matrix that predicts mobility of employees within organization Copyright © 2005 South-Western. All rights reserved. 1–7 Exhibit 5-2 Transition Probability Matrix for Restaurant Copyright © 2005 South-Western. All rights reserved. 1–8 Strategies for Managing Shortages • Recruit new permanent employees • Offer incentives to postpone retirement • Rehire retirees parttime • Attempt to reduce turnover Copyright © 2005 South-Western. All rights reserved. • Work current staff overtime • Subcontract work out • Hire temporary employees • Redesign job processes so fewer employees are needed 1–9 Strategies for Managing Surpluses • Hiring freezes • Do not replace those who leave • Offer early retirement incentives • Reduce work hours • Voluntary severance leaves of absence Copyright © 2005 South-Western. All rights reserved. • Across-the-board pay cuts • Layoffs • Reduce outsourced work • Employee training • Switch to variable pay plan • Expand operations 1–10 Succession Planning • Involves identifying key management positions the organization cannot afford to have vacant • Purposes of succession planning – Facilitates transition when employee leaves – Identifies development needs of high-potential employees & assists in career planning • Many organizations fail to implement succession planning effectively – Qualified successors may seek external career advancement opportunities if succession is not forthcoming Copyright © 2005 South-Western. All rights reserved. 1–11 Exhibit 5-4 Sample Replacement Chart Copyright © 2005 South-Western. All rights reserved. 1–12 Exhibit 5-5 Pros & Cons of Disclosing Succession Planning Copyright © 2005 South-Western. All rights reserved. 1–13 Reading 5.1 Heirs Unapparent • Experts are looking more carefully at leadership needs for 21st century, & warning of: – A shrinkage in pool of available managers – Escalating costs in recruiting outside talent – A lack of attention to developing leaders from within • Blame inattention to succession planning on corporate world’s concentration on costcutting & downsizing Copyright © 2005 South-Western. All rights reserved. 1–14 Reading 5.1 Heirs Unapparent • Old solutions to succession planning won’t work in increasingly complex world • Essential to develop executives who can cope with globalization & flourish in new corporate climate buffeted by changes Copyright © 2005 South-Western. All rights reserved. 1–15 Reading 5.2 Succession Planning Design Shifts • Key design shifts for succession systems: – Identify core strategic capabilities/competencies related to key positions & develop leadership model – Place initiative & responsibility for individual development in hands of candidate employees – Development process that aligns mastery of competencies with firm’s strategic goals & mission – Create succession process more open & less exclusive & secretive – Design succession process for ongoing & frequent review Copyright © 2005 South-Western. All rights reserved. 1–16 Reading 5.2 Succession Planning Design Shifts • A succession system must: – Make sense for & be usable by different business units, each having unique needs – Process to focus & guide development of executives to meet strategic purposes – Be aligned with other HR processes also in transition – Assure pool of potential leaders is being prepared for executive positions – Be owned by senior management – Deal with diversity issues & changing demographics – Measurably add value & contribute to business success Copyright © 2005 South-Western. All rights reserved. 1–17 Reading 5.3 Strategic Levels of HR • Long-term – Is activity conceptualized as long-term value? • Comprehensive – Does it cover entire organization or isolated components? • Planned – Is it thought out ahead of time & is it well documented? Copyright © 2005 South-Western. All rights reserved. • Integrated – Does it provide basis for integrating multifaceted activities that might otherwise be fragmented & disconnected? • High value-added – Does it focus on critical business success issues or on things that must be done but are not critical? 1–18 Reading 5.3 Strategic Levels of HR • Operationally reactive HR – Focuses on implementing day-to-day demands for HR • Operationally proactive HR – Improves upon design & delivery of existing HR basics before problems set in • Strategically reactive HR – Focuses on supporting successful implementation of business strategy • Strategically proactive HR – Focuses on creating strategic alternatives Copyright © 2005 South-Western. All rights reserved. 1–19 Reading 5.3 Strategic Levels of HR • HR becomes strategically reactive in business strategy implementation through: – Supporting execution of tactics that drive long-term strategies – Developing cultural & technical capabilities necessary for long-term success – By providing change management support for tactical activities Copyright © 2005 South-Western. All rights reserved. 1–20 Reading 5.3 Strategic Levels of HR 1. Define business unit for which HR practices are being designed 2. Specify key trends in external business environment 3. Identify & prioritize firm’s sources of competitive advantage 4. Define required culture & technical knowledge & skill areas required to support the sources of competitive advantage Copyright © 2005 South-Western. All rights reserved. 1–21 Reading 5.3 Strategic Levels of HR 5. Identify cultural characteristics that firm should reduce or eliminate if it is to optimize competitive advantage 6. Design HR practices that will have greatest impact on creating desired culture 7. With these decisions made, firm should establish action plans for detailed design of HR processes 8. Final step specifies means by which effectiveness of entire process is measured Copyright © 2005 South-Western. All rights reserved. 1–22 Reading 5.3 Strategic Levels of HR • Become proactive by: – Learning enough about other functional areas to allow HR to contribute to business – Expanding/enriching parameters of HR agendas through which strategic alternatives are define & created • Creates culture of of creativity & innovation • Involved in full breadth of mergers & acquisition activities • Creates internal capabilities based on future external environmental requirements Copyright © 2005 South-Western. All rights reserved. 1–23