Process of Human Resource Planning – HRM

HRP was traditionally restricted to responding to only business needs. However, with the business growth, up-gradation in technology and innovation in the management system, the HRP has become proactive and important in the current scenario of business. HRP is the method of forecasting human resource requirements and availability as well as bridging the gap between supply and demand. The human resource planning process is shown in the figure:

• Environmental Scanning
• Organisational Objectives and Policies
• Demand Forecasting
• Supply Forecasting

Environmental Scanning

The human resource planning process is based on analysing the various aspects of the business environment in which it is operating. It provides a clearer picture of the expected problems, threats, and opportunities of the organisation and thereby is the basic step for HRP.

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HRP requires scanning of all the factors existing in the internal (technology, culture, strategy, etc.) as well as external environment (competitors, regulations, etc.) of the firm. The analysis of the internal factors helps in identifying the strengths and weaknesses of the firm and on the other hand, external factors highlight the threats and opportunities for the firm.

Organisational Objectives and Policies 

After analysis of the environment, plans and policies regarding the different aspects (which may include marketing, production, finance, technology, diversification and expansion) are examined, to forecast the labour movement in near future. The time-bound schedule for human resource planning is to be prepared accordingly. Exact manpower requirements can only be assessed after considering the changes in the organisational structure and job design. A comprehensive study of the plans of business is essential as all the human resource plans originate from business plans which are associated with the nature, level and organisational activities.

Demand Forecasting 

HR demand forecasting is a procedure of defining the expected manpower requirements in terms of specified quantity and quality within the organisation. It is required to meet the expected manpower needs of the organisation so that desired level of performance can be achieved. The expected requirement of human resources is assessed based on the current human resources and the analysis of the organisational plans and procedures. It is true to a large extent that in a particular time duration, demand forecasting is dependent on the scale of operations in the company. 

However, human resource requirements are not directly proportional to the size of the company’s operations. While conducting an HR requirements forecast, those components should be considered that influence the relationship between the size of the operation and the number of employees. Human. resource planning gives an accurate figure of personnel needed in future.

Demand Forecasting Techniques

Various demand forecasting techniques are as follows: 

1. Managerial Judgement
2. Ratio Analysis
3. Trend Analysis
4. Scatter Plot
5. Computerised Forecast
6. Work-Study Techniques
7. Delphi Technique
8. Econometric Models

1) Managerial Judgement

In this technique, the managers of different departments sit together to assess the demand for labour in the future. It may follow the bottom-up or top-down approach. In the bottom-up approach, the departmental heads submit their requirements to the top management and estimates are prepared by them only. 

Whereas, as in the top-down approach, top managers determine the manpower requirement. After that, forecasts are analysed with departmental heads for joint approval. However, none of these approaches is a perfect-only combination of these two approaches that produce effective results.

2) Ratio Analysis

It is the procedure of computing the ratio between a particular business factor and the number of required employees. For example, the requirement of faculty in an educational institute will depend upon the number of students. Suppose, a university has 20,000 students and 1000 lecturers; the student-lecturer ratio is 20,000:1000 or 20:1. 

This ratio shows that the university needs 1 lecturer for every 20 students. If it is expected that 500 additional students will be enrolled in the next year, then the university would require to recruit 25 (500/20) additional lecturers (assuming that all the 1000 current lecturers will not leave before next year), It gives a clearer picture than trend analysis. 

Despite being a good technique for forecasting demand, it has the demerit of avoiding some crucial elements such as upgraded technology and improved employee effectiveness.

3) Trend Analysis

The requirement for manpower resources is based on the trends of the organisation in the past. The past relationship between a business factor and manpower requirement is analysed. The proper business factor that relates considerably to employment levels varies across industries. 

For example, for an educational institution, the suitable factor can be the total number of students enrolled; for a marketing company, it can be sales volume; and for a manufacturing company, it can be the total units produced. The trend analysis method is best for the preliminary assessment of human resource demand. The reason for this is that human resource forecasting is affected by some factors and the past trend is one of them.

4) Scatter Plot

It is a method that uses graphs to find out the relationship between the two variables. The human resource planner can make use of this method to determine the relationship between the two factors, i.e., the degree of business actions and the requirement of the staff to handle them. If there is a relationship, then the question arises, if an HR planner can predict the measure of business activity and forecast human resources requirements.

5) Computerised Forecast

Computerised forecasting uses computers and software packages to determine the prospective manpower needed, by estimating sales of the firm, production volume and the human resources required to keep up the estimated quantity of output.

6) Work-Study Techniques

This technique analyses the relationship between the volume of the work and the efficiency of the employees. The data regarding the volume of the work are derived from the organisational documents and an increase/decrease in operations can be determined. Efficiency level is measured by time and motion study which ensures standard output per unit of time or per hour. 

Thus, the number of operatives required to complete a specified volume of operations is Planned OutputStandard Output per Hour Standard Hours per Person, Therefore, standard output per hour is not at all times a stable factor, but it increases with time due to learning, which may be through examination, observing others and communication.

7) Delphi Technique

It is the technique that focuses on the qualitative aspect and also tries to reduce subjectivity by involving the people from the group already chosen for it and defining the judgements for the same. Therefore, a collective decision-making procedure is necessary which in turn, requires a commitment towards growth to increase cooperation and coordination for reasonable forecasts. 

This technique is best in situations where the environment is subjected to various changes on account of technological upgrades. Here, there is very minimum scope for subjectivity in the decision-making because experts do not meet face-to-face. This would be more cost-effective if they are assigned to diverse locations. It can recover the decision-making class by reducing personality conflicts and restricting the dominating group members from controlling the decision process.

8) Econometric Models

In this model, the statistical data related to the history of the organisation is analysed. It is expected to figure out the relationship between the different variables in statistical or mathematical terms, Variables like measures of profits, investments, complexity, quality, and sales of the product are correlated with the manpower requirements to draw a single equation, which describes the exact relationship between the manpower requirement and other variables (measurable by econometric models) within the organisation.