HR Planning

What is HR Planning?
 Human Resource (HR) Planning is the process of
forecasting an organization’s future human resource
needs to ensure the right number of employees with
the right skills are available at the right time.
 It involves systematically assessing the demand and
supply of labor, aligning it with the organization’s
strategic objectives to meet future staffing needs
efficiently.
Resurgence of Interest in HR
Planning
 After years of limited attention, HR planning is gaining
traction due to large-scale retirements of baby boomers
and skills shortages, especially in areas like technology.
 Brexit and technological changes have pushed
industries to reconsider workforce planning as a tool to
address gaps and ensure the availability of necessary
skills in the future.
 The Role of HR Planning
 HR planning is primarily about identifying the
organization’s labor needs in advance and
understanding the potential supply from both internal
and external sources.
• It helps organizations avoid shortages by proactively
managing workforce requirements, thus acting as a
strategic tool to align human resources with business
objectives
 Stages in HR Planning Cycle
• Stage 1: Forecast future demand for staff based on business
goals and anticipated changes.
 Stage 2: Forecast internal supply by analyzing current
employees’ skills and potential.
 Stage 3: Forecast external supply by assessing labor market
trends and availability.
 Stage 4: Develop strategies, such as recruitment or training,
to close any identified gaps between demand and supply.
 Forecasting Future Demand for
HR
 Forecasting demand involves evaluating how many
employees and what skills are needed to achieve the
organization's strategic goals, like expansion or new
product launches.
 This process also requires considering future technological
developments, which may affect the number and type of
employees needed in the coming years.
Internal Supply of HR
 Internal supply forecasting assesses the
organization's current workforce, considering
factors such as employee retention, skills
development, and internal promotions.
 By evaluating which employees are likely to stay
and grow within the company, organizations can
plan training and development to meet future
needs without extensive external hiring.
 External Supply of HR
 External supply focuses on the availability of
potential recruits from the labor market. This
involves analyzing local, national, or even
international labor trends.
• Employers assess factors such as population growth,
skill levels, unemployment rates, and educational
qualifications to understand if they can fill their
future workforce needs externally
Forecasting Techniques: Systematic
Methods
 Time-series analysis uses historical data to
predict future workforce requirements based on
patterns from past performance, suitable for stable
environments.
 Productivity trend analysis adjusts forecasts to
account for expected productivity changes,
ensuring the right number of employees is hired
without overstaffing.
 Forecasting Techniques: Managerial
Judgment
• Managerial judgment relies on the experience and
insights of managers to forecast staffing needs,
especially useful in dynamic or unpredictable
business environments.
• Techniques like the Delphi method facilitate
consensus among managers by gathering and
refining individual opinions to create more accurate
forecasts
 Delphi Method
• The Delphi Method is a forecasting technique that relies on a structured process of
gathering and refining opinions from a panel of experts or managers. It helps minimize
group dynamics and biases, resulting in more accurate and well-considered forecasts.
• Initial Survey of Experts: A group of experts is asked to provide their forecasts or
opinions on a particular issue (e.g., future staffing needs). These forecasts are usually
submitted anonymously.
• Aggregation of Responses: The responses are then collected and summarized by a
facilitator without revealing the identities of the experts. This helps to avoid bias or
influence from other participants.
• Feedback and Revisions : Summarized data is shared with the group, and the experts
are asked to review the responses and revise their forecasts, considering the feedback
from their peers.
• Consensus Building: This process is repeated through several rounds of feedback until
the group reaches a consensus or the forecasts stabilize.
 Working Back from Costs
Approach
 In this method, HR planning starts with the
organization’s financial budget, determining how
many employees can be hired within financial
constraints.
 This approach is often used in public sectors, where
planning is based on available funds rather than
historical staffing levels, making it a cost-effective
planning method.
Forecasting Internal and
External Human
Resource Supply
Understanding HR Planning Techniques
• Mid-term 8th November
 What is Internal Supply
Forecasting?
• Internal supply forecasting involves analyzing the
current workforce.

• It looks at department by department or grade by grade

analysis.

• Focus is on estimating numbers likely to remain

employed and the skills they will possess.
Techniques for Forecasting Internal
Supply
• Tools often include statistical analysis and managerial
judgment.

• Focus on turnover rates among specific groups like age or

length of service.

• Tools help estimate internal promotions, transfers, and

demotions.
Importance of Turnover Rates

• General turnover rates are less helpful; focus on specific

groups is key.

• Look at employees of particular ages or those at different

job levels.

• Consider environmental and demographic factors when

forecasting.
Reasons for Turnover (Wastage)

• Internal promotion, transfer, demotion.

• Retirement, illness, redundancy, dismissal.

• Career changes, relocations, setting up businesses, etc.

Turnover Factors to Consider

• Wastage rates decrease with increasing age.

• Wastage rates decrease with increasing service length

and responsibility.

• Wastage rates tend to be higher for female than male

staff.
 Internal Data and Staff Turnover

• Use wastage, stability, and cohort analysis.

• Track internal promotion trends over the years.

• Past data helps forecast the impact of changes on

internal supply.
Forecasting External Supply

• Focuses on the external labor market to meet demand

gaps.

• Local labor markets are critical for most vacancies.

• Skilled roles may require looking at national or

international labor markets.
Analyzing External Labor Market
• General population density and unemployment rates.

• Skill levels and proportion of higher education

graduates.

• Impact of local developments such as transport and

housing.
Challenges in External Supply
Forecasting
• National labor trends may not affect specific roles.

• Skill shortages persist despite economic conditions.

• International markets are increasingly important for

specialized roles.
Quick Quiz
1. What are the key factors to consider in internal supply
forecasting?
2. How can organizations address turnover rates
effectively?
3. What are the main challenges in forecasting external
labor supply?