MHR 523 Chapter Notes - Chapter 3: Nominal Group Technique, Markov Chain, Delphi Method
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Chapter 3: Human Resource Planning
Relationship of Human Resource Planning and Strategic Planning
Human resource planning systematically forecasts an organization’s future demand for and supply of
employees and matches supply with demand.
Proper Staffing is Critical for Strategic Success
An organization's strategic plan, involves decisions such as an organization's primary mission, divestiture
of current business units, or new ways of doing business.
If an organization is not properly staffed with the right numbers and types of people, strategic success is
Different Strategies Require Varying Human Resource Plans
Organization's growth or expansion strategy is usually accompanied by aggressive hiring, training,
and/or promotions of employees.
Cost reduction leads to people being laid off or early retirement
Human Resource Planning Facilitates Proactive Responses
Human resource planning, by facilitating better recruitment, selection, and training strategies not only
helps companies meet their legal obligations but also allows them to face challenges proactively (aka
Successful Tactical Plans Require Appropriate Human Resource Plans
A firm’s strategic plan is often executed through a number of short-range, tactical (or operational) plans
that focus on current operations
o Ex. A recall on a defective product is a tactical plan
Several large organizations develop three- and five-year strategic plans followed by shorter, tactical
It should be noted that organization strategies and
tactics and human resource plans mutually influence
each other (this fact is recognized by the dotted
Employment planning is more common in large organizations
Large organizations can benefit from knowledge of employment planning because it reveals ways to
make the human resource function more effective.
The Demand for Human Resources
Causes of Demand
Challenges influence the demand for human resources, changes in the environment, the organization,
and the workforce are usually involved.
o Common to both short-range and long-range employment plans.
Economic Developments. Developments in the organization's environment that are difficult for human
resource specialists to predict in the short run and sometimes impossible in the long run.
Social-political-legal challenges. Changes occurring in social, political, and legal spheres are easier to
predict, but their implications are seldom clear.
Technological Changes. Normally difficult to predict, can affect both demand for and supply of human
Competitors. Competitors affect an organization's demand for human resources, though not in any
uniform manner. Employment in some of the traditional sectors barely grows because of foreign
competition and a push for productivity improvement.
Strategic Plan. These objectives determine the numbers and types of employees needed in the
o three alternate competitive strategies (focus, cost leadership, and differentiation)
o Strategic plan: involves identification of a firm's mission and objectives and plans for
achieving those objectives.
Budgets. Budget increases or cuts are the most significant short-mn influence on human resource
Sales and Production Forecast. The sales and production forecasts are less exact than budgets, but
may provide even quicker notice of short-run changes in human resource demand
o Ex. Sales decease due to recession, freeze the hiring process for new employees
New Ventures. mean new human resource demands
o When begun internally, the lead time may allow planners to develop short-run and long-run
Organizational and Job Design.
Retirements, resignations, terminations, deaths, and leaves of absence all increase the need for human
Forecasting Human Resource Needs
Forecasts: Estimates of future resource needs and changes.
Expert forecasts rely on those who are knowledgeable to estimate future human resource needs.
Nominal group technique: A focused, group discussion where members write down their ideas and
share them. All new thoughts on a topic are recorded and ranked for importance.
Delphi technique: The soliciting of predictions about specified future events from a panel of experts,
using repeated surveys until convergence in opinion occurs
o Ex. the human resource department may survey all production supervisors and managers until
an agreement is reached on the number of replacements needed during the next year.
Trend Projection Forecast
Extrapolation: Extending past rates of change into the future.
Indexation: A method of estimating future employment needs by matching employment growth with a
selected index, such as the ratio of production employees to sales. (Figure 3-5)
Other Forecasting Methods
Budget and Planning Analysis. Organizations that need human resource planning generally have detailed
budgets and long-range plans.
New-Venture Analysis. When new ventures complicate employment planning, planners can use new-
venture analysis. New-venture analysis requires planners to estimate human resource needs by
comparison with firms that already perform similar operations.
Computer based Simulation Models. Computer models are a series of mathematical formulas that
simultaneously use extrapolation, indexation, survey results, and estimates of workforce changes to
compute future human resource needs.
Listing Human Resource Requirements
Staffing table: A list of anticipated employment openings for each type of job. Aka manning table
The Supply of Human Resources
There are two sources of supply: internal and external.
o Internal supply consists of present employees who can be transferred, promoted or demoted to
meet anticipated needs.
Internal Supply Estimates
Planners audit the present workforce to learn about the capabilities of present workers. This
information allows planners to estimate tentatively which openings can be filled by present employees
Markov Analysis Forecast: of a firm's future human resource supplies, using transitional probability
matrices reflecting historical or expected movements of employees across jobs.
o Method of predicting the internal supply of human resources in the future.
Human Resource Audits
Summarize the employee's skills and abilities and generate skills and management inventories that, in
turn, facilitate the preparation of a replacement chart and replacement summaries
Skills inventories. Skills inventories: Summaries of each non-managerial worker’s skills and abilities.
o Inventories of human resources must be updated periodically. Failure to update skills
inventories can lead to present employees being overlooked for job openings within the
Management Inventories. Management Inventories: Comprehensive reports of available management
capabilities in the organization.
o Common topics include
Number of employees supervised
Relationship of human resource planning and strategic planning. Human resource planning systematically forecasts an organization"s future demand for and supply of employees and matches supply with demand. An organization"s strategic plan, involves decisions such as an organization"s primary mission, divestiture of current business units, or new ways of doing business. If an organization is not properly staffed with the right numbers and types of people, strategic success is endangered. Organization"s growth or expansion strategy is usually accompanied by aggressive hiring, training, and/or promotions of employees. Cost reduction leads to people being laid off or early retirement. Human resource planning, by facilitating better recruitment, selection, and training strategies not only helps companies meet their legal obligations but also allows them to face challenges proactively (aka employment planning) Successful tactical plans require appropriate human resource plans. A firm"s strategic plan is often executed through a number of short-range, tactical (or operational) plans that focus on current operations: ex.