Human Resource Planning

An auto-parts plant in Pune wins an export order that needs a second shift from April. If it starts hiring in March, the new line stands idle. If it hires a year early, it pays wages for months of no work.

HRP compares two forecasts. Demand is the number and kind of people the organisation will need. Supply is the number and kind it will actually have. Its core objective is balance between the two: the human resources available and what the organisation requires.

At the Pune plant, an illustration. The second shift needs 40 more operators by 1 April. Hiring them from industrial training institutes takes about three months, and they then need a month of training. Working backwards, the plant must start recruiting by early December and train in March.

A shortage costs lost orders and overtime. A surplus costs wages for idle people. HRP treats both as planning failures.

Don't confuse HRP with recruitment. HRP decides how many people of which kind are needed, and when. Recruitment comes after it and goes out to find them, and only for the gap that cannot be filled from inside.

Where it breaks. Every HRP figure rests on a forecast of the business: sales, technology and how many people will leave. A cancelled order or a new machine can overturn it. That is why plans are reviewed regularly, and often drawn up for more than one possible future.

For exams. Learn the phrase "the right number and the right kind of people, at the right place, at the right time"; the two sides, demand and supply; and balance as the objective. HRP comes first in staffing: recruitment, selection and training follow from it.

A regional bank in Nashik plans to open 12 new branches over two years. If it waits until each branch is ready, it hires in a hurry, puts untrained clerks at the counter, and promotes managers who have not been prepared.

What HRP aims at. The main objective is balance between the people available and the people required. Behind it sit several smaller objectives:

• to have the right number and kind of people when they are needed, so the business plan can run;
• to avoid both shortages and surpluses, and the cost of each;
• to prepare for expansion, new technology and closures before they arrive;
• to develop people, keep technical skills up to date and plan individual careers;
• to build commitment, so that people stay and give their best.

Five features. A good plan shows these features. Each is worked out for the bank, as an illustration.

Why it matters. Planning prevents sudden shortages and idle surpluses, and so controls the wage bill and the cost of rushed hiring. It gives recruitment and training a clear target, shows skill gaps early, and links to career planning and succession planning, which are separate chapters.

Don't confuse a matching headcount with a matching workforce. A plan can balance 96 posts with 96 people and still fail if the people lack the skills. This is why the plan describes quality as well as numbers.

Where it breaks. The ideal of a "humanised" work environment is a goal, not a guarantee. Under cost pressure, plans often shrink to headcount and budget. A plan cannot make people stay, so commitment depends on how the organisation actually treats them.

For exams. Expect a question that asks for the features or objectives of HRP. Link each feature to the plan's logic: goals, needs, inventory, adjustment, environment. The Vetter definition and the idea of balance are in the previous block.

A plan that starts by counting vacancies only replaces the people who left. A plan that starts from the business strategy also prepares for the work that is coming.

The HRP process runs in seven steps, from the organisation's goals to a regular review. In short: strategy, forecast, analyse, match, act, review.

The arithmetic at the heart of steps 2 to 5 is simple:

A worked example, with illustrative numbers. The Pune plant has 100 machine operators. Its business plan raises output by 20% next year, with no change in output per operator.

1. Demand (step 2): 100 × 1.2 = 120 operators.
2. Supply (step 3): records show about 10% of operators leave each year, so about 10 will go. Four will be promoted to supervisor. Supply at year-end: 100 − 10 − 4 = 86.
3. Gap (step 4): 120 − 86 = 34 operators short.
4. Action (step 6): retrain 4 people from the packing section, which needs fewer hands after automation, and recruit 30 through industrial training institutes. 4 + 30 = 34.
5. Review (step 7): check every quarter. If more than 10 operators leave, raise the hiring target.

Don't confuse forecasting demand with analysing supply. Demand asks how many people the work will need. Supply asks how many of the right people the organisation will actually have, after exits and internal moves.

Where it breaks. The steps look like a straight line, but real planning loops back. A gap too large to fill may send managers back to change the business plan itself. The numbers are also only as good as the records behind them.

For exams. Expect questions on the order of the steps, and on which step a given activity belongs to. Action plans come only after demand and supply have been matched.

Strategy, forecast, analyse, match, act, review.

Don't confuse the steps above with other lists. Books differ on the number of steps. Some add a separate step for the number of employees required, which this chapter folds into step 2. Another common list is: set objectives, analyse the present manpower inventory, forecast demand and supply, find the manpower gaps, make the employment or action plan, train and develop, and appraise the plan. It is the same flow. The inventory belongs to step 3, training is one of the actions in step 6, and appraisal is step 7. Some charts also put skill-gap analysis before demand and supply are matched. Matching first is the logical order, because only then do you know which gaps matter.

The Pune plant knows it needs 34 more operators. Before it advertises, it should ask two questions. Who inside could fill some of these posts, and how many of today's staff will still be there next year?

Four methods look at the people already there: their skills, their potential, and how they move and leave.

Turnover in numbers. The usual measure is the labour turnover rate:

An illustration: a department starts the year with 95 people and ends it with 105, and 12 people leave during the year. Average staff = (95 + 105) ÷ 2 = 100. Turnover = 12 ÷ 100 × 100 = 12%.

Looking outside. The four methods look inside the organisation. Supply analysis also looks at the outside labour market. For the Pune plant, that means how many trained machinists local institutes produce each year, and what nearby plants pay them.

Don't confuse a skills inventory with job analysis. A skills inventory describes people: what each employee can do. Job analysis describes jobs: what each job needs. HRP compares the two to find skill gaps. Job analysis supports HR planning, but it is not itself a method of supply analysis, and scenario planning belongs with demand forecasting (see the previous block).

Where it breaks. Records go stale: a skills inventory updated once in five years misses new skills and recent leavers. Past turnover may not repeat if a rival plant opens next door. Succession plans can favour people who resemble today's leaders.

In practice. Turnover analysis is most useful broken down: by department, by length of service and by reason for leaving. A high rate among first-year joiners points to hiring or induction, not pay alone.

A firm plans its staffing in a boom. A year later demand falls, rivals offer higher pay, and half the plan is out of date. Why do plans go wrong, and what can planners do about it?

Two sets of questions follow. What shapes a plan before it is made? And what stops a good plan from working?

Factors that shape the plan. A standard textbook grouping, with illustrations:

Time horizon. Books commonly speak of short-term plans (about a year), medium-term (one to three years) and long-term plans (three to five years or more). The exact limits vary by author and by industry.

Barriers to effective HRP, and remedies. These problems are widely listed in textbooks.

Don't confuse a factor with a barrier. A factor, such as the state of the labour market, is a condition the planner must account for. A barrier, such as stale records or union distrust, is a failure in how planning is carried out, and can be fixed.

Where it breaks. The remedies reduce risk but never remove it. Even a well-run plan rests on a forecast of the business, and a sudden change can still overturn it. The honest remedy is regular review.

In practice. Treat the plan as a working document. Fix a review date, name who updates the records, and let the plan record its assumptions, so the team can see which assumption failed.

For exams. Questions ask for the factors affecting HRP or the barriers to it, often as a list. Give the factors as a list, then a remedy for each barrier.