Human Resource Planning - Research Proposal Example

Introduction Additional Asian Examples and some changes are in colored Blue. A table has been added to show the advantages/disadvantages of each technique. Human Resource Planning (HRP) is an essential part of the overall company’s strategy which is closely connected to the business objectives of the company. The planning process entails (i) an analysis of the present employees’ skill sets, (ii) the determination of future workforce needs, (iii) forecasting new requirements, and (iv) eliminating any excess human resource. A significant part of this planning process also includes attracting and keeping people who can make positive contributions towards the desired end goals of the company. An effective plan looks at several strategies and methods which have been successfully utilized by companies in the past and judges which methods are best suited for its company. Often, it is not one single approach which can be utilized to fulfill the HR needs of businesses. Rather, it is a combination of approaches depending on the environment and the requirements of the company. The plan must also take into account the internal HR situation of the company as well as the external factors which influence the recruitment process. Finally, a good plan serves to strategically advice senior management why certain actions outlined in the plan must be undertaken. The Planning Process The planning process can simply be defined as a manpower needs assessment method by which a company can predict with some certainty its future HR needs (Boxall & Purcell, 2003). A part of the planning is to create policies which help attract and retain the best talent in the market. The end result of this process is to derive a projected figure for certain positions within the company. Fundamentally, the planning process could be very different depending on the company or the organization which is creating the plan. For example, the model seen below is recommended by the US Navy for Strategic HR management. It begins with setting a strategic direction, designing an HRM system, planning the workforce requirements, generating the required workforce, developing underdeveloped skills and finally maintaining the competence of the developed employees (US Navy, 2000). It can be seen quite clearly that planning the total workforce is not only a complex process in its fullness. It is also an essential element of strategic management. Indeed, business strategies and HR have become intertwined to such an extent that management strategy is often seen as an integral new role of HR (Meceda & Justice, 2000). The key to any planning process remain the same i.e. to optimize the Human Resource levels of the company. Figure 1: A Sample Strategic Human Resource Planning Model Source: US Navy. 2000. A guide to strategic human resource planning. Workinfo.com. http://www.workinfo.com/free/Downloads/176.htm (accessed January 20, 2006) Although Optimization itself is a mathematical concept, its application to HR planning can be summarized as a two-fold approach. First, optimization requires the maximization of the talent pool which is currently available to the company in terms of present employees. Second, optimization demands that the company should make itself attractive to candidates who are ideal for performing their given duties in the most effective manner. Fundamentally, optimization is based on identifying the current gaps and the future organization’s needs in terms of HR and then bridging those gaps effectively. Optimization itself is a mathematical concept which seeks to maximize the potential returns on any given input. The field of economics also gives us the idea of diminishing marginal returns and an HR plan must be optimized to ensure that the right number of people would be working for an organization at any given time (Armstrong, 1999). For example, if a given task requires 3 workers, it would probably not be a good idea to have 7 employees working on it at the same time. On the other hand, if a task requires 7 workers, it would be unrealistic for a manager to say that 2 workers would be able to complete the same task in the same time with the same level of quality. HR experts make a key point when they say that while recruitment and having an optimal number of people working on projects undertaken by a company is essential, having too many workers will only harm the goals and objectives of a company (Beardwell & Holden, 1997). It must be kept in mind that every person whom the HR manager recommends for recruitment costs the company a significant amount in terms of salary, training and management costs. Therefore, knowing what value a person will bring to the company and how that value will be utilized by the organization is an essential part of the manpower planning process. There are several techniques and tools used by HR managers to create and access a manpower plan and some of them are discussed below. The Delphi Technique The Delphi Technique is a form of evaluation which entails getting initial opinions and estimates for HR requirements from expert sources and consultants. The same estimates are then used to get more approximation until enough information is gathered to allow a final evaluation to be made. Expert opinions and estimates given by consultants are not shared between them in order to avoid the problem of group thinking setting in or people accepting the word of senior managers at face value (Beardwell & Holden, 1997). The Delphi Technique Example An example of the use of this technique can be found in the case of Embrapa, which was founded in 1973 and it is the Brazilian government central organization for agricultural research. It has 39 research stations located all over the country and recruits research scientists from around the world. In 1999, the company wanted to get a better idea about their strategic and future personnel needs into the next century. To judge future need for researchers in specific areas, Embrapa used the services of more than 150 consultants and asked them to judge their present HR competency in 19 different areas (Guimaraes, 2001). In my opinion this method could only be useful when a very large company which has a lot of time and money available to make HR related decision. Or in the case where a company must have close to pinpoint accuracy for their HR needs plans. I agree with the opinion that the Delphi Technique worked successfully in recruitment drive for Embrapa, but I do not think it could work successfully for every R&D organization in every situation since it is based on long term analysis and requires several cycles for it to be effective and conclusive. Figure 2: The Delphi Technique Markov Analysis Considerably more useful for short term estimates is the Markov Analysis which is a mathematical system applied to forecast the workforce needs of a company. Wagner (2000) reports that this approach was successfully applied in estimating the need for doctors in acute care hospitals since it is a supply ‘push’ approach. To be successful, the approach relies on having a large number of employees, a stable and foreseeable career path for workers, and most importantly, a consistent iteration ratio. The iteration ratio can be calculated by: Markov Analysis Example In terms of practical application, one example was found in the use of the Markov Technique in the game of cricket at the international level. The game has a fixed number of players which are considered as employees in the study, and the career path is taken as the average score a player has in past games. The iteration ratio is taken to be constant through players getting out or retiring from the game. This system was used with some success by the Indian cricket team to ascertain their batting order and lineup (Swartz, et. al. 2006). In my opinion, This process could function as a subsidiary to another system of forecasting and planning HR requirements but on its own it appears to be quite weak. Schak (1997) discusses the predicament of Taiwanese factory owners who have established their businesses in china and are facing constant turnover, in this case, they could use the Markov Analysis to predict their future HR needs. Skills Inventories Internal recruitment and fulfilling the HR needs of a company through internal supply is one of the strategic plans of GTE. The company took the initiative by creating an inventory of skills which employees had in various departments and by grooming and training not only enhanced their skills but also made them able to fulfill additional roles within the company (Huselid, 2001). The skills inventory allows an HR manager to see what skills the various employees of the company have with them so they can be earmarked and used in situations where the company needs those skills (Neo, 2000). For example, GTE knew that certain members of their staff had high leadership skills. Thus, when they had leadership positions vacant within the company; preference was given to internally recruit those employees who possessed leadership skills (Huselid, 2001). It is also possible to increase the skill inventory of employees while creating the HR needs plan, as is done in China by Taiwanese factory owners through employee training and education (Schak, 1997). However, as suggested by Wong (1998) such enhancements in skills may be difficult for companies which employ manual workers. Turnover and Trend Analysis Both turnover and trend analysis techniques look at the numerical change in employment figures. The difference is that the turnover approach looks at the number of people who left a company in a given time period, while the trend analysis looks at the number of people added to a company in a given year. Beardwell and Holden (1997) allow for a quarter of the employees to leave a large company without raising any eyebrows but any higher percentages should be a cause for concern. Turnover and Trend Analysis Example The example of GE can be used here where high turnover was seen in the international communications department of the company. Even though the department was relatively small, there was a high level of turnover at the junior levels which, when investigated, turned out to be due to a boss who the people of the department did not like working with. Although GE kept recruiting other communication officers to replace those who left the company, the department was not stabilized until the boss himself was taken out of the picture (Welch, 2005). Schak (1997) discusses the results of HR situation related interviews with forty Taiwanese factory managers in China and shows that due to high turnover rates, the HR planning demands an awareness of the turnover to predict how many workers will be required in the future to maintain output levels. Replacement Charts Records which indicate which employees are ready for a promotion or which employees are ready to retire are essential for any HR plan since there is a high probability that a person about to retire or a person who is to be given a promotion will accept the new position. Thereafter, someone will have to be brought in from the outside or promoted from within as a replacement (Armstrong, 1999). GE is one company which uses these charts extensively since they encourage promotions to higher positions from within the company and rarely recruit from the outside. Other than time based natural retirement for some employees, the key method for their creation of replacement chart comes from performance evaluations. GE uses a system of 20-70-10 which means 20% of their people are top performers and should be rewarded, 70% are average performers and should be encouraged to perform better and 10% need to be replaced based on performance (Welch, 2005). In my own opinion, this process may be seen as unfair by some standards but I think this is an ideal solution to match the HR requirements of a company, performance and time based replacement charts are quite possibly the best method for forecasting future HR needs. In Singapore, companies using replacement charts were affected negatively when the retirement age was extended to provide jobs for older workers. However, employers saw them as being less useful and more expensive than the people expected to replace them (Chwee-Huat, 1996). Ratio Analysis Ratio Analysis is a method of forecasting the workforce requirements by taking a direct relationship between production and the number of people working on a given task. For example, in a computer assembly shop, if 10 workers can assemble 10 computers in one day, then 20 workers should be able to assemble 20 computers in one day as well. If the company is selling 10 computers per day then 10 employees should suffice. However, if the demand rises to 12 computers daily, the company will need to hire 2 more workers for an optimized level of human resource. Graphically, it can be represented as: Application of Ratio Analysis This approach is very successfully used by the Global Health Trust which applies ratio analysis to show the dire need for medical staff and support personnel in various countries like Niger, Benin, Ghana, Cameroon, Togo and the Ivory Coast. All of which have a ratio of less than 10 physicians per 100,000 people as compared to the United States which has 279 physicians per 100,000 people (Rockefeller Foundation, 2003). Advantages and Disadvantages of the Techniques Each of the techniques mentioned can not be considered applicable in universal terms to every organization. This is because there are relevant pros and cons for using each method as listed in the table below. Method Advantages Disadvantages Applicable Cases The Delphi Technique Eliminates Group Think effect on manpower planning. All ideas/opinions can be anonymous, therefore; they can be freely considered for implementation. Requires several rounds of discussions and consultations between the company and HR experts so this method of planning requires much more time and money. Companies which need to make long term HR plans or predict their future manpower need depending on expected technological changes e.g. research based companies. Markov Analysis Useful for short-term estimates of HR needs. It is a mathematical concept therefore the predictions are largely accurate Relies on a company having a large number of employees, a stable and foreseeable career path for workers, and most importantly, a consistent iteration ratio. Difficult to find the many constants which are needed for the analysis. HR Planning for industries where there is a high and constant iteration ratio e.g. Waiters in a large hotel. Replacement Charts Motivates and rewards top performers in the company. Highly accurate in terms of determining positions which will open up in the future. Suitable external candidates may be ignored. Useful for a company seeking to replace employees who may be retiring or in line for promotion to higher positions. Skills Inventories Makes room for internal hiring and promotions. Creates multiple career paths for workers. Allows one person to take multiple roles. Chance of overburdening the people with multiple roles. Company may turn a blind eye to more suitable external candidates. Difficult to apply in labor intensive situations. Useful for a company seeking to promote people from the inside or to combine HR planning with employee rewards. Turnover and Trend Analysis Easy to apply to many different companies. Predictions for manpower needs are based on current data, not future speculation. The external or internal factors for turnover/recruitment trends could be ignored. Dangerous to continually apply the technique without understanding the root causes of turnover. Considered to be applicable in High-Tech firms and IT based companies. Ratio Analysis Useful for rough estimates of manpower needs. Assumes a direct relationship between people and production which could be inaccurate. Needs to be combined with other techniques for accurate predictions. Situations where additional workers would keep more or less the same average output e.g. assembly floors. Conclusion Planning in itself has become an art, a science, and a recognized profession. In this aspect, there are well recognized principles, techniques, and steps to the planning process which organizations can adopt. The human resource management and manpower planning for any organization cannot be fulfilled with the application of just one of the methods mentioned above. While all of the approaches are useful and have their applications for certain situations and setup, the universality of any particular approach is highly debatable. No single strategy can be said to be the best. It is only with a combination of strategies and examination of external and internal factors that a good HR manager will be able to find the closest, if not the perfect, solution for their company’s Human Resource Plan. References 1. Armstrong, M. 1999. A Handbook of Human Resource Management Practice. New York: Kogan Page. 2. Beardwell, I. and Holden, L. 1997. 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