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Chapter 5

BU354 Chapter 5 - Human Resources Planning.docx

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Chet Robie

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Chapter 5 – HR Planning The Strategic Importance of HR Planning  Human resources planning (HRP) – the process of forecasting future human resources requirements to ensure that the organization will have the required number of employees with the necessary skills to meet its strategic objectives o Proactive process:  anticipates and influences an organization’s future by systematically forecasting the supply of and demand for employees under changing conditions  by developing plans and activities to satisfy these needs o the following conditions create a situation of fierce labour competition, further increasing the importance of effective  as the baby boom generation begins to retire, there aren’t enough candidates to fill vacant positions  2 out of every 3 job openings over the next decade will be focused on replacing retiring workers  Fertility rates in Canada continue to decline  Key steps in the HRP process include: o Analyzing forecasted labour supply o Forecasting labour demands o Planning and implementing HR programs to balance supply and demand  Lack of or inadequate HRP within an organization can result in significant costs when unstaffed positions create costly inefficiencies and when severance pay is required for large numbers of employees being laid off  If one department is laying off employees while another is hiring individuals with similar skills, it can reduce morale or productivity and can often result in turnover  Ineffective HRP can lead to an organization’s inability to accomplish short-term operational plans or long-range strategic plans. HRP Model *pg 121 The Relationship between HRP and Strategic Planning  An HR plan doesn’t occur independently of the other departments within an organization o Must align with the overall goals of the organization as well as both the long-term and short- term strategic plans set by the organization o An organization’s strategic decision to expand, redirect, diverge, divest, partner, or merge will have an associated effect on the HR expectations and plans of the organization  Failure to integrate HRP and strategic planning can have very serious consequences. The Importance of Environmental Scanning  Environmental scanning – involves assessing factors that affect the external labour market as well as an organization’s ability to find and secure talent from outside of the organization  It is a critical component of HRP and strategic planning processes to better prepare for changes before they occur  External environmental factors frequently monitored include: o Economic conditions  Local, regional, national, international  E.g. if unemployment rate in a region is low, an organization would have to be more aggressive in recruiting talent, as selection may be more scarce o Market and competitive trends  E.eg compensation policies that lag behind competitors’ policies may result in higher turnover or more difficulties in attracting talent o New or revised laws and the decisions of courts and quasi-judicial bodies  E.g. a raise in min wage rate can inflate the cost of labour in an organization, creating budgetary pressure to reduce labour expenses o Social concerns such as healthcare, childcare, and educational priorities  E.g. a trend toward securing higher education can reduce the size of the available external workforce in the short run, but in the long run can result in retaining applicants with more specialized training o Technological changes affecting processes, products, and people o Demographic trends of an internal and external labour force Steps in HR Planning  An element of HR planning that is often taken for granted is the availability and accuracy of info regarding the current HR situation o Understanding the internal labour force in the present is the basis for a number of demand and supply estimates o Before embarking on an HR planning exercise, current HR levels must be assessed  An organization chart can provide HR planners with an understanding of the organizational structure, business units, and possible career paths  This micro-level info can be linked to more micro-level info, such as: o how many employees the company currently has at each level o What existing skill sets the employees have o The demographic info and job related info about the existing employee base  An organization must forecast future HR demand and forecast future HR supply o Can occur simultaneously or one after the other depending on the available resources o Only after demand and supply is forecast can an organization identify potential labour imbalance issues Forecasting the Availability of Candidates (Supply)  There are two sources of supply: o Internal – present employees who can be trained, transferred, or promoted to meet anticipated needs o External – people in the labour market not currently working for the organization, including those who are employed elsewhere and those who are unemployed who can be expected to join the firm to meet anticipated needs  Can aid an organization in identifying challenges that may occur with expected recruitment of candidates into the internal labour force such as:  number of graduates in a specific program that acts as a significant source of talent  literacy levels of the local or target population & general economic trends Forecasting the Supply of Internal Candidates  Management must then determine how many candidates for projected openings will likely come from within the firm. This is the purpose of forecasting the supply of internal candidates. a) Skills Inventories and Management Inventories  Skills inventories – contain comprehensive info about the capabilities of current employees o Data gathered for each employee include name, age, date of employment, current position, present duties and responsibilities, educational background, previous work history, skills, abilities, and interests o Info about current performance and readiness for promotion is generally included as well  Management inventories – records summarizing the background, qualifications, interests, and skills of management employees, as well as info about managerial responsibilities and management training, are used to identify internal candidates eligible for promotion or transfer opportunities  skills and management inventories must be updated regularly  failure to do scan lead to present employees being overlooked for job openings  Updating every two years is generally adequate if employees are encouraged to report significant qualification changes (e.g. new skills learned) to HR department. b) Replacement Charts and Replacement Summaries  Replacement charts – visual representations of who will replace whom in the event of a job opening. o It assumes that the organization chart will remain static for a long period of time o usually identifies three potential candidates for a top-level position, should it become vacant o such charts typically indicate:  the age of potential internal candidates (cannot be used in making selection or promotion decisions)  current performance level of the employee  his or her promotion potential o the latter is based on the employee’s future career aspirations and a supervisory assessment of readiness for promotion o to provide more objective estimate of future potential this info may be supplemented by results of psychological tests, interviews, and other selection techniques  replacement summaries – lists of likely replacements for each position and their relative strengths and weaknesses, as well as info about current position, performance, promotability, age and experience o these data can be extremely helpful to decision makers, although caution must be taken to ensure no discrimination occurs c) Succession Plans  succession planning – refers to the plans a company makes to fill its most important executive positions o it extends beyond the replacement chart by focusing on developing people rather than simply identifying potential replacements o there is a stronger focus on skills development for a specific list of potential successors within an organization  back in the days: o succession was often straightforward; staff climbed the ladder one rung at a time o although this is still possible employee turnover and flatter structures mean that the lines of succession are no longer direct  because succession planning requires balancing the organization’s top management needs with the potential career aspirations of available candidates, succession should include: o analysis of the demand for managers and professionals in the company o audit of existing executives and projection of likely future supply o planning of individual career paths based on objective estimates of future needs, performance appraisal data, and assessments of potential o career counselling and performance-related training and development to compare individuals for future roles o accelerated promotions, with development targeted at future business needs o planned strategic recruitment aimed at obtaining people with the potential to meet future needs as well as filling current openings d) Markov Analysis  Markov analysis – a method of forecasting internal labour supply that involves tracking the pattern of employee movements through various jobs and developing a transition probability matrix.  Such analysis shows the actual number and percentage of employees who remain in each job from one year to the next, as well as the proportions promoted, demoted, transferred and leaving the organization  These properties (probabilities) are used to forecast HR supply Forecasting the Supply of External Candidates  Some jobs cannot be filled with internal candidates because no current employees are qualified or they are jobs that experience significant growth. o Firms looks for external candidates o Employee growth is primarily responsible for the number of entry-level openings o A key factor in determining the number of positions that must be filled externally is the effectiveness of the organization’s training, development, and career-planning initiatives o If employees aren’t encouraged to expand their capabilities, they may not be ready to fill vacancies as they arise, and external sources must be tapped General Economic Conditions  Economic conditions – the impact of natural fluctuations in economic activity  Includes factors such as: o Interest rates o Wage rates o Inflation rates o Unemployment rates  The lower the rate of unemployment, the smaller the labour supply and the more difficult it will be to recruit employees  Unemployment rates vary by occupation and geographic location Labour Market Conditions  Labour market conditions – demographics of those in the population.  Includes: education levels, age, gender, marital status, etc.  Demographic conditions remain stable and can be forecast with high degree of accuracy Occupational Market Conditions  Organizations also generally want to forecast the availability of potential candidates in specific occupations for which they will be recruiting  The mining industry, the construction industry, the electricity industry, the manufacturing industry and non-profit sector are experiencing labour shortages  A shortage of info technology workers is projected to cost the Canadian economy $10 billion per year until it’s resolved  Shortages of civil service workers, accountants, lawyers, engineers, meteorologists, funeral directors, and hospitality industry workers are also expected. Forecasting Future HR Needs (Demands)  Managers should consider several factors when forecasting the number and type of people needed to meet objectives.  In manufactu
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